A new pneumonia vaccine has been developed which is a little more effective but more expensive to produce than the old vaccine. Medicare covers 100% of the cost of pneumonia vaccinations for everyone in Hahnemann County who is age 65 or older. Now that a new and better vaccine is available Medicare would like to perform a cost-utility analysis to determine the opportunity cost of covering 100% of the cost for the new vaccine. The old vaccine used to cost $16 per dose to produce. The new vaccine costs $35 per dose to produce. But the cost of catching pneumonia is very high. If either vaccine fails, the cost of treating an infected elderly person is, on average, $1870.
The following are the conditional probabilities of success and failure for both vaccines:
Old Vaccine: Success Rate = 0.84
Old Vaccine: Failure Rate = 0.16
New Vaccine: Success Rate = 0.85
New Vaccine: Failure Rate = 0.15
1. What is the expected value benefit of the old vaccine? What is the expected value benefit of the new vaccine?
2. What is the expected value cost of the old vaccine? What is the expected value cost of the new vaccine?
3. Show the cost-utility ratio for the opportunity cost of continuing 100% coverage for the new vaccine.