Cost-Effectiveness Threshold for Healthcare: Justification and Quantification

Abstract

Every public health expenditure, including the one that saves lives or extends life expectancy of particular persons (target population), bears a cost. Although cost-effectiveness analysis (CEA) is routinely performed in health policy, ethical justification of CEA is rarely discussed. Also, there is neither consensus value nor even consensus method for determining cost-effectiveness threshold (CET) for life-extending measures. In this study, we performed ethical analysis of CEA by policy impact assessment based on connection of health and wealth (poorer people have statistically shorter life expectancies) and concluded that CEA is not only a practical but also an ethical necessity. To quantify CET, we used three independent methods: (1) literature survey of analyzing salaries in risky occupations, (2) utilizing Prospect Theory suggesting that people value their lives in monetary terms twice more than their lifetime earnings, and (3) literature survey of the U.S. current legal practice. To the best of our knowledge, nobody applied method (2) to determine CET. The three methods yielded rather similar results with CET about 1.0 ± 0.4 gross domestic product per capita (GDPpc) per quality-adjusted life-year. Therefore, a sum of not higher than 140% GDPpc is statistically sufficient to “purchase” an additional year of life—or, alternatively, to “rob” one year of life if taken away. Therefore, 140% GDP per capita per quality-adjusted life-year should be considered as the upper limit of prudent and ethically justified expenditure on life extension programs.