You are responsible for allocating a fixed budget across a variety of health care programs. The following programs are available to you:
Program Net resource cost per patient
(dollars) Net health effectiveness per
patient (QALYs)
A 15,000 1.0
B 20,000 2.0
C 50,000 2.5
These are costs and effects per patient. Each program has a target population of 100 patients maximum, but a program may be funded to serve less than 100 patients. These programs are not mutually exclusive; that is, more than one may be implemented.
a. Assume that you have a fixed budget of $3,500,000, and that your goal is to achieve the largest possible gain in health. Which programs should you fund? Which programs would you fund if you had a budget of $4,000,000?
b. Now suppose that program A and B are mutually exclusive; that is, both cannot be funded at the same time. (Program C is still independent of A and B). Assume a budget of $4,000,000. Which programs would you fund and for how many patients? Again, your goal is to achieve the largest possible gain in health.