Estimating Cost Functions for Resource Allocation Using Transmission Models: A Case Study of Tuberculosis Case Finding in South Africa

Abstract Objective Cost functions linked to transmission dynamic models are commonly used to estimate the resources required for infectious disease policies. We present a conceptual and empirical approach for estimating these functions, allowing for nonconstant marginal costs. We aim to expand on the current approach which commonly assumes linearity of cost over scale. Methods We propose a theoretical framework adapted from the field of transport economics. We specify joint functions of production of services within a disease-specific program. We expand these functions to include qualitative insights of program expansion patterns. We present the difference in incremental total costs between an approach assuming constant unit costs and alternative approaches that assume economies of scale, scope and homogeneous or heterogeneous facility recruitment into the programme during scale-up. We illustrate the framework’s application in tuberculosis, using secondary data from the literature and routine reporting systems in South Africa. Results Economies of capacity and scope substantially change cost estimates over time. Cost data requirements for the proposed approach included standardized and disaggregated unit costs (for a limited number of outputs) and information on the facilities network available to the program. Conclusions The defined functional form will determine the magnitude and shape of costs when outputs and coverage are increasing. This in turn will impact resource allocation decisions. Infectious diseases modelers and economists should use transparent and empirically based cost models for analyses that inform resource allocation decisions. This framework describes a general approach for developing these models.