Outcomes in cost-effectiveness analysis (CEA) are usually measured in terms of number of
life years saved as a result of implementation of a new intervention. For interventions with
multiple health endpoints (e.g., hospitalization, treatment, death, etc) an outcome measure
needs to combine information on both morbidity (a measure of clinical illness) and
mortality (the number of deaths in the population under consideration). The best known of
these is the quality-adjusted life year or QALY. In principle, QALYs are based on the
preferences or “utilities” of respondents reflecting tradeoffs among different health states
(e.g., total cure, partial cure, disability, death). A preference or utility weight or score of 1.0
represents perfect health and 0 represents death. The number of QALYs is calculated as the
sum of the duration spent in each health state times the utility weight for that health state.
For example, if the utility weight for a chronic condition is 0.6, and an individual remains
in that health state for 1 year and then dies, the number of QALYs is 0.6. QALYs provide a
common currency that permits comparisons among different people and across different
kinds of conditions. QALYs permit comparisons of diseases that are rapidly fatal with those
that do not produce death but instead produce years of severe disability.
The results of a CEA may be interpreted to determine whether an intervention yields good
value for the investment. An intervention can be considered more or less cost-effective
relative to either another intervention or to a benchmark value. Cost-effectiveness (CE)
ratios are usually expressed in dollars per QALY. The lower the number, the more costeffective
the intervention.
It is commonly said that an intervention that costs more than $50,000 or $100,000 per
QALY is not cost-effective, but a substantial number of healthcare interventions generally
accepted in the United States have higher CE ratios.18 The use of a fixed cost-effectiveness
threshold to define cost effectiveness ignores other determinants of social value such as
perceptions of risk. Further, the Partnership for Prevention has estimated ranges of CE ratios
using standardized methods for 25 clinical preventive services recommended for the general
population by the U.S. Preventive Services Task Force (USPSTF).19 The investigators used a
utility weight of 0.7 for chronic conditions, along with other simplifying assumptions that
make the results difficult to compare with the published CE ratios from studies that are
reported in the Purchaser’s Guide. The investigators found that one-fifth of all recommended
clinical preventive services had CE ratios between $165,000 and $450,000 per QALY in
year 2000 dollars.
life years saved as a result of implementation of a new intervention. For interventions with
multiple health endpoints (e.g., hospitalization, treatment, death, etc) an outcome measure
needs to combine information on both morbidity (a measure of clinical illness) and
mortality (the number of deaths in the population under consideration). The best known of
these is the quality-adjusted life year or QALY. In principle, QALYs are based on the
preferences or “utilities” of respondents reflecting tradeoffs among different health states
(e.g., total cure, partial cure, disability, death). A preference or utility weight or score of 1.0
represents perfect health and 0 represents death. The number of QALYs is calculated as the
sum of the duration spent in each health state times the utility weight for that health state.
For example, if the utility weight for a chronic condition is 0.6, and an individual remains
in that health state for 1 year and then dies, the number of QALYs is 0.6. QALYs provide a
common currency that permits comparisons among different people and across different
kinds of conditions. QALYs permit comparisons of diseases that are rapidly fatal with those
that do not produce death but instead produce years of severe disability.
The results of a CEA may be interpreted to determine whether an intervention yields good
value for the investment. An intervention can be considered more or less cost-effective
relative to either another intervention or to a benchmark value. Cost-effectiveness (CE)
ratios are usually expressed in dollars per QALY. The lower the number, the more costeffective
the intervention.
It is commonly said that an intervention that costs more than $50,000 or $100,000 per
QALY is not cost-effective, but a substantial number of healthcare interventions generally
accepted in the United States have higher CE ratios.18 The use of a fixed cost-effectiveness
threshold to define cost effectiveness ignores other determinants of social value such as
perceptions of risk. Further, the Partnership for Prevention has estimated ranges of CE ratios
using standardized methods for 25 clinical preventive services recommended for the general
population by the U.S. Preventive Services Task Force (USPSTF).19 The investigators used a
utility weight of 0.7 for chronic conditions, along with other simplifying assumptions that
make the results difficult to compare with the published CE ratios from studies that are
reported in the Purchaser’s Guide. The investigators found that one-fifth of all recommended
clinical preventive services had CE ratios between $165,000 and $450,000 per QALY in
year 2000 dollars.
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