Cost-effectiveness analysis (CEA) is an analytical tool used in healthcare decision-making to compare the costs and health outcomes of different interventions. CEA helps determine which interventions provide the best value for money by measuring the cost required to gain a unit of health outcome, typically expressed as cost per quality-adjusted life year (QALY) or cost per disability-adjusted life year (DALY) averted.

CEA is particularly valuable in settings with limited healthcare resources, as it enables policymakers and healthcare providers to prioritize interventions that maximize health benefits within budgetary constraints. The analysis considers both direct medical costs (such as medication, hospitalization, and outpatient care) and indirect costs (such as productivity losses and informal caregiving).

The results of CEA are often presented as an incremental cost-effectiveness ratio (ICER), which represents the additional cost required to gain one additional unit of health outcome when comparing one intervention to another. Interventions with lower ICERs are generally considered more cost-effective. Many countries have established cost-effectiveness thresholds to guide resource allocation decisions, although these thresholds vary widely depending on economic factors and societal values.

When conducting CEA, analysts must address several methodological challenges, including selecting appropriate comparators, determining the relevant time horizon, accounting for uncertainty, and handling discounting of future costs and benefits. Despite these challenges, CEA remains a cornerstone of evidence-based healthcare decision-making and health technology assessment around the world.