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 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.