Cost-effectiveness thresholds in health care: a bookshelf guide to their meaning and use

There is misunderstanding about both the meaning and the role of cost-effectiveness thresholds in policy decision making. This article dissects the main issues by use of a bookshelf metaphor. Its main conclusions are as follows: it must be possible to compare interventions in terms of their impact on a common measure of health; mere effectiveness is not a persuasive case for inclusion in public insurance plans; public health advocates need to address issues of relative effectiveness; a ‘first best’ benchmark or threshold ratio of health gain to expenditure identifies the least effective intervention that should be included in a public insurance plan; the reciprocal of this ratio – the ‘first best’ cost-effectiveness threshold – will rise or fall as the health budget rises or falls (ceteris paribus); setting thresholds too high or too low costs lives; failure to set any cost-effectiveness threshold at all also involves avertable deaths and morbidity; the threshold cannot be set independently of the health budget; the threshold can be approached from either the demand side or the supply side – the two are equivalent only in a health-maximising equilibrium; the supply-side approach generates an estimate of a ‘second best’ cost-effectiveness threshold that is higher than the ‘first best’; the second best threshold is the one generally to be preferred in decisions about adding or subtracting interventions in an established public insurance package; multiple thresholds are implied by systems having distinct and separable health budgets; disinvestment involves eliminating effective technologies from the insured bundle; differential weighting of beneficiaries’ health gains may affect the threshold; anonymity and identity are factors that may affect the interpretation of the threshold; the true opportunity cost of health care in a community, where the effectiveness of interventions is determined by their impact on health, is not to be measured in money – but in health itself.