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health econ Suppose the following prescription medications are used to treat a terminal disease. The costs and quality-adjusted life years associated with each medication are
health econ Suppose the following prescription medications are used to treat a terminal disease. The costs and quality-adjusted life years associated with each medication are listed below: Treatment No Treatment Drug A Drug B Drug C Drug D Drug E Drug F Drug G Drug H Drug! Drug Total Cost SO $5,000 $7,000 $10,000 $25,000 $27,000 $30,000 $31,000 $48,000 $50,000 $60,000 QALY 0.2 1.4 0.6 1.2 1.8 0.8 3.5 1.7 3 4 3.3 a. Plot the various treatment options and draw the cost-effectiveness frontier (CEF). Which treatment options are dominated? Which are potentially cost-effective treatments? 25 points. b. Calculate the ICER values between the non-dominated treatments and indicate these values on the CEF. 25 points. c. Assume that we value a QALY at $20,000 and that our marginal rate of substitution between QALYs and drug costs is constant. Draw an indifference curve on your graph to indicate which treatment would be chosen. How would this choice change if we valued a QALY at $4,000 instead of $20,000? 25 points. d. Now suppose that we can buy an insurance policy that covers 90% of our prescription expenditures. Draw a new CEF that reflects the addition of insurance. Assuming that we still value a QALY at $4,000, which treatment will we choose? 25 points
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