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

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  • Anthony J Culyer

    (Emeritus Professor, Centre for Health Economics, University of York, UK. Adjunct Professor, University of Toronto, Canada)

Abstract

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 these -  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 (positive) weighting of beneficiaries’ health gains may increase 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

Suggested Citation

  • Anthony J Culyer, 2015. "Cost-effectiveness thresholds in health care: a bookshelf guide to their meaning and use," Working Papers 121cherp, Centre for Health Economics, University of York.
  • Handle: RePEc:chy:respap:121cherp
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    References listed on IDEAS

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    1. repec:spr:pharme:v:36:y:2018:i:1:d:10.1007_s40273-017-0566-5 is not listed on IDEAS
    2. Jessica Ochalek & Karl Claxton & Paul Revill & Mark Sculpher & Alexandra Rollinger, 2016. "Supporting the development of an essential health package: principles and initial assessment for Malawi," Working Papers 136cherp, Centre for Health Economics, University of York.
    3. repec:spr:aphecp:v:15:y:2017:i:3:d:10.1007_s40258-016-0298-2 is not listed on IDEAS
    4. Daniel Howdon & James Lomas, 2017. "Pricing implications of non-marginal budgetary impacts in health technology assessment: a conceptual model," Working Papers 148cherp, Centre for Health Economics, University of York.

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