Working Papers, Department of Economics, Rutgers, The State University of New Jersey 2014-06
Despite spending far more on medical care, Americans live shorter lives than the citizens of other high-income countries. The situation has been getting worse for at least three decades. This paper describes the main scientific methods for guiding the allocation of resources to health - cost-effectiveness analysis (CEA) and cost-benefit analysis (CBA), sketches their methodological progress over the last several decades, and presents examples of how medical practice in other high-income countries, where people live longer, follows the priorities indicated by cost-effectiveness analysis. CEA and CBA support democratic decision-making processes, which have themselves benefited from scientific inquiry; these are touched on at the end of the paper.