Enter the cost and effectiveness of two different treatments or projects into the calculator to determine ICER.
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The following formula is used to calculate the incremental cost-effectiveness ratio of a project or treatment.
ICER = (CA – CB) / (EA – AB)
- Where ICER is the incremental cost-effectiveness ratio ($/effect)
- CA is the cost of implementation A ($)
- CA is the cost of implementation B ($)
- EA is the effectiveness of implementation A
- EB is the effectiveness of implemenation B
The units for effectiveness are determined by the analysis being done. For example, if you are looking at the ICER of two different health treatments with respect to life-span added, the effectiveness units would be years added.
What is ICER?
ICER, which stands for incremental cost-effectiveness ratio, is a relative measure of the ratio of cost to effectiveness of two different treatments or plans.
This is calculated by dividing the difference between the cost by the difference between the effect.
Most often this term is used in fields such as health care when analyzing the cost-benefits of different treatments on a patient’s outcome. It’s also used often in economics to determine how differing projects would affect the health and the economy of an area.
How to calculate ICER?
- First, determine the cost of plan A.
In this example, we are looking at the difference between two different clean water projects and the effects on the health of those it’s being built for. Plan A has a cost of $50,000.00.
- Next, determine the cost of plan B.
Plan B has a project cost of $30,000.00.
- Next, determine the effect of plan A.
Plan A is expected to increase life expectancy by 3 years.
- Next, determine the effect of plan B.
Plan B is expected to increase the life expectancy of habitants of the area by 1 year.
- Finally, calculate the ICER.
Using the formula above, the ICER is calculated to be:
ICER = ($50,000 – $30,000) / (3 – 1)
ICER = $10,000 / year of life expectancy