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Estimating the Reference Incremental Cost-Effectiveness Ratio for the Australian Health System

Author

Listed:
  • Laura Catherine Edney

    (University of Adelaide)

  • Hossein Haji Ali Afzali

    (University of Adelaide)

  • Terence Chai Cheng

    (University of Adelaide)

  • Jonathan Karnon

    (University of Adelaide)

Abstract

Background Spending on new healthcare technologies increases net population health when the benefits of a new technology are greater than their opportunity costs—the benefits of the best alternative use of the additional resources required to fund a new technology. Objective The objective of this study was to estimate the expected incremental cost per quality-adjusted life-year (QALY) gained of increased government health expenditure as an empirical estimate of the average opportunity costs of decisions to fund new health technologies. The estimated incremental cost-effectiveness ratio (ICER) is proposed as a reference ICER to inform value-based decision making in Australia. Methods Empirical top-down approaches were used to estimate the QALY effects of government health expenditure with respect to reduced mortality and morbidity. Instrumental variable two-stage least-squares regression was used to estimate the elasticity of mortality-related QALY losses to a marginal change in government health expenditure. Regression analysis of longitudinal survey data representative of the general population was used to isolate the effects of increased government health expenditure on morbidity-related, QALY gains. Clinical judgement informed the duration of health-related quality-of-life improvement from the annual increase in government health expenditure. Results The base-case reference ICER was estimated at AUD28,033 per QALY gained. Parametric uncertainty associated with the estimation of mortality- and morbidity-related QALYs generated a 95% confidence interval AUD20,758–37,667. Conclusion Recent public summary documents suggest new technologies with ICERs above AUD40,000 per QALY gained are recommended for public funding. The empirical reference ICER reported in this article suggests more QALYs could be gained if resources were allocated to other forms of health spending.

Suggested Citation

  • Laura Catherine Edney & Hossein Haji Ali Afzali & Terence Chai Cheng & Jonathan Karnon, 2018. "Estimating the Reference Incremental Cost-Effectiveness Ratio for the Australian Health System," PharmacoEconomics, Springer, vol. 36(2), pages 239-252, February.
    • Handle: RePEc:spr:pharme:v:36:y:2018:i:2:d:10.1007_s40273-017-0585-2
    DOI: 10.1007/s40273-017-0585-2
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Opportunity costs, marginal productivity, and cost-effectiveness thresholds: what are they and how are they related?
      by Rita Faria, Jessica Ochalek, jameslomas88 in The Academic Health Economists' Blog on 2020-09-23 06:00:00

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    9. James Lomas & Jessica Ochalek & Rita Faria, 2022. "Avoiding Opportunity Cost Neglect in Cost-Effectiveness Analysis for Health Technology Assessment," Applied Health Economics and Health Policy, Springer, vol. 20(1), pages 13-18, January.
    10. Cathrine Mihalopoulos & Yong Yi Lee & Lidia Engel & Long Khanh‐Dao Le & Eng Joo Tan & Mary Lou Chatterton, 2021. "The Productivity Commission Inquiry Report into Mental Health—A Commentary from a Health Economics Perspective," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(1), pages 119-129, March.
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    13. Claxton, Karl & Asaria, Miqdad & Chansa, Collins & Jamison, Julian & Lomas, James & Ochalek, Jessica & Paulden, Mike, 2019. "Accounting for Timing when Assessing Health-Related Policies," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 10(S1), pages 73-105, April.
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