Amoria Phlebitis is a fictional illness fromThe Simpsons that causes sharp stabbing pains to the stomach and arms and temporary loss of vision. A 35-year-old patient diagnosed with this condition has an expected lifespan of 30more years, during which they will continue to deal with these symptoms. Two new treatments (surgery and medication) have recently been proposed as alternatives to the current solution (no treatment).

Medication prevents the disease from getting worse and will extend the patient's expected lifespan to 40 more years, and the pain and disability are reduced to a moderate level. The cost of medicine is estimated to be $30,000 for each additional year of life.

Surgery can completely cure the disease, but it also provides additional risks. The mortality rate of surgery is 4%. Of those who survive, it is estimated that 50% are fully cured of the disease. Doctors are able to tell if the patient is cured immediately after surgery. The cost of surgery is $150,000. If an individual is not cured, it is expected that they will immediately begin taking the medication for the rest of their life.

Surgery also comes with a 20% risk of serious infection. The infection is not life threatening, but it does increase expected costs by $100,000 and come with lifetime consequences, lowering a survivors utility values by 0.1 for each year of remaining life (regardless of whether or not the surgery was successful). All survivors have an expected lifespan of 40 years.

Individuals with Amoria Phlebitis have stated that, without treatment, each year of life is equivalent to 0.6 years in normal health (utility value of 0.6). The medication is expected to improve the value of each year with Amoria Phlebitis to 0.7. Individuals who are cured and do not get the severe infection are returned to excellent health (Utility value of 0.80).

a. Perform a cost-effectiveness analysis of these two treatments. This includes calculating the expected costs, life years, and QALYs from each of the three potential options.

b. Calculate all ICERs in terms of costs/QALY. If the government has an expected ICER threshold of $50,000 per QALY, what will the preferred treatment be?

c. Calculate the present value of the lifetime costs of Medication and Surgery using a 5% discount factor. Assume that the costs of surgery occur at the beginning of the year while the costs associated with an infection and medication occur at the end of the year.