Health Care Costs and Financing
Exploring the Role of Cost-Benefit Analysis in Government Regulations
Research Report
Drew Laughland, Eastern Research Group, Inc.
A. Myrick Freeman, III, Eastern Research Group, Inc.
Calvin Franz, Eastern Research Group, Inc.
Aylin Sertkaya, Eastern Research Group, Inc.
Keith Lind, AARP Public Policy Institute
September 2007
Learn More
- Report Home
- Full Report (PDF)
- In Brief (HTML)
- In Brief (PDF)
This AARP Public Policy Institute Issue Paper is a primer on the often complicated tools – cost-benefit and cost-effectiveness analysis – that are used to evaluate proposed government regulations. Specifically, these tools are used to figure out if the total gains for those who benefit from a specific regulation are greater than the total losses suffered by those who are harmed. This understanding can be crucial for evaluating the economic and political implications of environmental, health and safety regulations and in developing policy positions for lobbying the administration and Congress on substantive policy issues of concern to older Americans.
What role, if any, should the results of cost-benefit analysis and economic considerations in general play in public policy and regulatory decision making, especially when health and safety issues are involved? That is the core of the ongoing debate about the value of cost-benefit analysis. Some argue cost-benefit analysis should play a dominant role while others think cost-benefit analysis is a seriously flawed basis for policy making. Critics argue political decisions are different from market decisions; that reducing life, health and the environment to monetary values is misguided; that cost-benefit analysis ignores equity issues and is hard for the public to understand. Proponents have responded to critics with progressive refinements to cost-benefit techniques.
This paper identifies strengths and weaknesses of each technique, and highlights key factors, including age, among others, that can substantially influence the results of an analysis. This paper also addresses a series of questions that will give policy and decision-makers a clearer idea of the role cost-benefit analysis has in today’s environment. (78 pages)
Pub ID: 2007-14