A study in the May 4 2004 issue of the Annals of Internal Medicine considered the cost-effectiveness and cost-benefit of screening people with hypertension (blood pressure of 140/90 or higher) for Type 2 Diabetes among people with hypertension. Assume - 5 % of people with hypertension have undiagnosed diabetes. - Early diagnosis of diabetes saves 0.2 years of life per person with previously undiagnosed diabetes. - A year of life is valued at $100,000. - Early diagnosis of diabetes increases health costs (due to treatment of diabetes for a longer period of time) by $10,000 per person with previously undiagnosed diabetes. We consider the costs and benefits of diabetes screening for 10,000 people with hypertension who have not been screened for diabetes. In parts (a) and (b) assume that there are no direct costs for the actual screening tests, the only cost is the indirect cost of receiving more health care, and that the screening detects all cases of undiagnosed diabetes.

(a) Perform a cost-benefit analysis of diabetes screening for this group. Does it favor screening?

(b) What is the cost of screening per life-year saved?

(c) Suppose that the costs of screening each individual are $120. How would this affect your answer from part a? For this cost-benefit analysis, what is the break-even price that would favor screening (At what value would the costs and benefits be equal)?