The Once and Future Application of Cost-Effectiveness Analysis

Abstract

Cost-effectiveness analysis (CEA) is used by payers to make coverage decisions, by providers to make formulary decisions, and by large purchasers/employers and policymakers to choose health care performance measures. However, it continues to be poorly utilized in the marketplace because of overriding financial imperatives to control costs and a low apparent willingness to pay for quality. There is no obvious relationship between the cost-effectiveness of life-saving interventions and their application. Health care decision makers consider financial impact, safety, and effectiveness before cost-effectiveness. WHY IS CEA NOT MORE WIDELY APPLIED? Most health care providers have a short-term parochial financial perspective, whereas CEA takes a long-term view that captures all costs, benefits, and hazards, regardless of to whom they accrue. In addition, a history of poor standardization of methods, unrealistic expectations that CEA could answer fundamental ethical and political issues, and society's failure to accept the need for allocating scarce resources more judiciously, have contributed to relatively little use of the method by decision makers. HOW WILL CEA FIND GREATER UTILITY IN THE FUTURE? As decision makers take a longer-term view and understand that CEA can provide a quantitative perspective on important resource allocation decisions, including the distributional consequences of alternative choices, CEA is likely to find greater use. However, it must be embedded within a framework that promotes confidence in the social justice of health care decision making through ongoing dialogue about how the value of health and health care are defined.