Supply-Side Cost-Effectiveness Thresholds: Questions for Evidence-Based Policy

Abstract

There is growing interest in cost-effectiveness thresholds as a tool to inform resource allocation decisions in health care. Studies from several countries have sought to estimate health system opportunity costs, which supply-side cost-effectiveness thresholds are intended to represent. In this paper, we consider the role of empirical estimates of supply-side thresholds in policy-making. Recent studies estimate the cost per unit of health based on average displacement or outcome elasticity. We distinguish the types of point estimates reported in empirical work, including marginal productivity, average displacement, and outcome elasticity. Using this classification, we summarise the limitations of current approaches to threshold estimation in terms of theory, methods, and data. We highlight the questions that arise from alternative interpretations of thresholds and provide recommendations to policymakers seeking to use a supply-side threshold where the evidence base is emerging or incomplete. We recommend that: (1) policymakers must clearly define the scope of the application of a threshold, and the theoretical basis for empirical estimates should be consistent with that scope; (2) a process for the assessment of new evidence and for determining changes in the threshold to be applied in policy-making should be created; (3) decision-making processes should retain flexibility in the application of a threshold; and (4) policymakers should provide support for decision-makers relating to the use of thresholds and the implementation of decisions stemming from their application.

A Model-Based Estimate of the Cost-Effectiveness Threshold in Germany

“…Finally, the analysis is restricted to capturing contemporaneous health gains and savings (within the same year of health spending) but not delayed health gains and savings (which would require the addition of multiple lags of health gains and savings, respectively). While a more recent analysis of the NHS in England produced “similar results” in terms of the elasticity of all-cause mortality with respect to health expenditure despite “a very different approach to identification” [ 12 ], I refer readers to Sampson et al [ 4 ] for a comment on this study. An overview of the empirical estimates of the ICER threshold in various countries was provided by Edney et al [ 8 ].…”

“…A policy threshold may or may not reflect the health opportunity costs of adopting cost-increasing technologies [ 3 ]. Cost-effectiveness thresholds that reflect health opportunity costs are called supply-side thresholds [ 4 ]. Health opportunity costs exist independently of whether a health care budget is exogenous or endogenous to the decision-making body [ 3 ].…”

Buruli-RifDACC: Evaluation of the efficacy and cost-effectiveness of high-dose versus standard-dose rifampicin on outcomes in Mycobacterium ulcerans disease, a protocol for a randomised controlled trial in Ghana

“…Results of the cost-effectiveness analysis will include mean costs and effects (with distributions for each) under each strategy compared. If one strategy is both more costly and more effective than another, the incremental cost-effectiveness ratio will be presented and compared against relevant cost-effectiveness thresholds 30,31 . Deterministic and probabilistic sensitivity analyses will be conducted to explore the sensitivity or robustness of findings to uncertainty and heterogeneity in key parameter values.…”

The Price of Cost-Effectiveness Thresholds

“…which is the value of the health plan's outside option (awarding the exclusive contract to the incumbent instead of the new potential entrant). In contrast, if the health plan uses an inclusion criterion based on a CE threshold, the maximum surplus that can be achieved is found by inserting the equilibrium price under constrained entry deterrence, (28), into (35), yielding…”

“…which implies that, if the incumbent wants to deter entry, the optimal price is given by b p d I in (28). Thus, if k b k, the incumbent chooses between constrained entry accommodation and constrained entry deterrence.…”