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Cost-effectiveness thresholds or how broad public health coverage can be


Giancarlo romano
Economist and candidate for a Master's in Economics
Health Economics Area Director

Health systems face the tension between growing demands for access to more and better health services and their institutional and financial capacity to satisfy them. In this context, determining the conditions of incorporation and reimbursement of new health technologies that maximize the health gains of the population are crucial. Such conditions are usually framed in the cost-effectiveness (ACE) or cost-utility (ACU) * analysis of health technologies, one of whose central elements are the cost-effectiveness thresholds (UCE). However, little is understood about the rationale and use of these thresholds in decision-making for the incorporation and reimbursement of health technologies. In this blog post, we explain what UCE is and how it is determined.

* From an extended solecism, we will refer to both types of analysis as cost-effectiveness.


Tanzania is a country on the east coast of Africa. With a GDP per capita of USD 2,920 purchasing power parity (PPP) in 2017, the Tanzanian health benefits plan covers health technologies than in the United Kingdom, a country with a GDP per capita of USD 42,560 PPP (World Bank , International Comparison Program), are not available (1). This divergence in the coverage of health services between the two countries seems to indicate that Tanzania as a society is willing for its citizens to have access to health technologies that a society like the British one, 14.6 times richer, cannot afford to finance from public funds. Behind these situations there is, apparently, a divergence in what counts as cost-effective in each country and the health technologies that are considered to be available to citizens in a society. The question is what is the extent of public health coverage that maximizes health outcomes in a society that has limited resources and cannot meet all health needs. The answer is linked to cost-effectiveness thresholds, a central concept in health technology assessment.


Actualix and Novum are two drugs for the treatment of longi taedia. Actualix is the standard treatment while Novum is a promising new technology. To decide whether to incorporate or reimburse Novum to the health insurance plan, the cost-effectiveness analysis specifically considers the evidence on the additional costs (if any) that the health system or society would incur to obtain health benefits additional (if any) of this new medicine compared to Actualix. The situation can be summarized in a decision matrix like the following one, which corresponds to the well-known cost-effectiveness plane:



matriz de decision


These additional costs and benefits are summarized in the metric known as the Incremental Cost Effectiveness Ratio (RICE), in which the additional costs are divided by the additional health gains (measured, for example, in QALYs) that Novum produces relative to Actualix (). However, when a health alternative is located in the northeast quadrant of the decision matrix, whether it is considered cost-effective and its inclusion or reimbursement is approved depends, in addition to the comparative RICE between Novum and Actualix, on assessing what benefits in health, it will be renounced as a consequence of the higher costs of the new technology in exchange for the greater benefits obtained from it. That is, it is necessary to establish the opportunity cost to include Novum as part of the health insurance. Assessing this opportunity cost is what is known as the cost-effectiveness threshold (UCE), which is compared to Novum's RICE in relation to Actualix.


Let us suppose that a) Novum's RICE compared to Actualix is $20,000 USD / 2 QALY, that is, obtaining an additional QALY with Novum implies assuming an additional cost of $10,000 USD in relation to Actualix per QALY earned; and b) the UCE = $20,000 / QALY, that is, the opportunity cost of increasing health resources by $20,000 USD for the introduction of a technology to public health insurance is equivalent to displacing the benefit of an associated QALY to some other technology in the health system, on the basis that health resources have a limited or fixed amount. On this basis, determining whether Novum offers net additional health benefits is equivalent to establishing whether Novum's RICE is less than the CE threshold. In the case of Novum, RICE <UCE ($10,000USD / QALY <$20,000USD / QALY) generates more health benefits for a given amount of resources than the health benefits that would have to be waived. Novum is cost-effective compared to Actualix since the health benefits of having it within the insurance are greater than the health benefits that have been renounced, Novum's opportunity cost is favorable given a threshold of $USD20,000 / QALY.


Thus, without a threshold, it is not possible to determine whether a technology is cost-effective and, therefore, whether or not it is worth including it in an assurance plan, to the extent that without it it is not possible to know the opportunity cost. to incorporate it or not. Ultimately, a CE threshold establishes the availability –social or of the health authorities in a country or in a jurisdiction– to exchange benefits that were not obtained in some sector of the health system for the benefits to be obtained in other sectors of the system.


However, until now we have taken a threshold for granted, the question is how is this determined. There are two perspectives, one for demand and the other for supply. The demand perspective consists of inferring the threshold from the coverage or reimbursement decisions already made, comparing the RICE of the technologies that have been incorporated with the RICE of those that have not entered public coverage. From this comparison, it is possible to estimate what the implicit threshold has been compatible or consistent with those decisions.


The supply perspective calculates how many QALYs on average the health system produces. With a fixed budget and a new healthcare technology at the gates of the system waiting to be incorporated, it is necessary for another to leave public coverage, so that the investment in the new technology should compensate in health gained for the health that is lost with disinvestment in moving technology. In other words, the RICE of the technology that enters must be less than the RICE of which it leaves.


Ultimately, cost-effectiveness thresholds are a central piece (not the only one, of course) in the definition and extension of public insurance plans, of how broad or narrow, in principle, public health coverage can be .


NOTE: If you want to know a different and very interesting conceptual approach to what the CE thresholds are and how they are determined, we recommend Culyer's article cited in the references.


Para leer esta información actualizada, lo invitamos a visitar esta entrada: Colombia, primer país de renta media que cuenta con su propia estimación de Umbral de Costo-efectividad

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