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The Value of Health in a Cost-Effectiveness Analysis: Theory Versus Practice

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Listed:
  • Bram Wouterse

    (Erasmus University Rotterdam)

  • Pieter Baal

    (Erasmus University Rotterdam)

  • Matthijs Versteegh

    (Erasmus University Rotterdam)

  • Werner Brouwer

    (Erasmus University Rotterdam)

Abstract

A cost-effectiveness analysis has become an important method to inform allocation decisions and reimbursement of new technologies in healthcare. A cost-effectiveness analysis requires a threshold to which the cost effectiveness of a new intervention can be compared. In principle, the threshold ought to reflect opportunity costs of reimbursing a new technology. In this paper, we contrast the practical use of this threshold within a CEA with its theoretical underpinnings. We argue that several assumptions behind the theoretical models underlying this threshold are violated in practice. This implies that a simple application of the decision rules of CEA using a single estimate of the threshold does not necessarily improve population health or societal welfare. Conceptual differences regarding the interpretation of the threshold, widely varying estimates of its value, and an inconsistent use within and outside the healthcare sector are important challenges in informing policy makers on optimal reimbursement decision and setting appropriate healthcare budgets.

Suggested Citation

  • Bram Wouterse & Pieter Baal & Matthijs Versteegh & Werner Brouwer, 2023. "The Value of Health in a Cost-Effectiveness Analysis: Theory Versus Practice," PharmacoEconomics, Springer, vol. 41(6), pages 607-617, June.
    • Handle: RePEc:spr:pharme:v:41:y:2023:i:6:d:10.1007_s40273-023-01265-8
    DOI: 10.1007/s40273-023-01265-8
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    References listed on IDEAS

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    1. Garber, Alan M. & Sculpher, Mark J., 2011. "Cost Effectiveness and Payment Policy," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 471-497, Elsevier.
    2. Karl Claxton & Simon Walker & Steven Palmer & Mark Sculpher, 2010. "Appropriate Perspectives for Health Care Decisions," Working Papers 054cherp, Centre for Health Economics, University of York.
    3. Bev Dahlby, 2008. "The Marginal Cost of Public Funds: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042509, December.
    4. Drummond, Michael F. & Sculpher, Mark J. & Claxton, Karl & Stoddart, Greg L. & Torrance, George W., 2015. "Methods for the Economic Evaluation of Health Care Programmes," OUP Catalogue, Oxford University Press, edition 4, number 9780199665884.
    5. Meltzer, David O. & Smith, Peter C., 2011. "Theoretical Issues Relevant to the Economic Evaluation of Health Technologies," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 433-469, Elsevier.
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