Determining Value from Healthcare Spending: The Role of Cost-Effectiveness Thresholds

Healthcare systems in low- and middle-income countries (LMICs) face considerable population healthcare needs with markedly fewer resources than those in high income countries. The way in which available resources are allocated across competing priorities is crucial in affecting how much health is generated overall, who receives healthcare interventions and who goes without. The tools of economic evaluation (e.g. cost-effectiveness analysis (CEA)) can assist policy-makers in resource allocation. The central concern is whether the health gains offered by an intervention are large enough relative to its costs to warrant adoption. This requires some notion of the value that must be realized by an intervention, which is most frequently represented using a cost-effectiveness threshold.

Cost-effectiveness thresholds should be based on estimates of the forgone benefit associated with alternative priorities which consequently cannot be implemented as a result of the commitment of resources to an intervention. However, thresholds that have historically been applied to inform resource allocation decisions in LMICs, particularly those previously posited by the World Health Organization (WHO) equal to between 1 and 3 times a country’s gross domestic product (GDP) per capita, are not based upon this kind of assessment. They fail to acknowledge that interventions should only be deemed cost-effective if they generate more health benefits than they forgo as a result of limited resources being unavailable for other priorities – i.e. the perennial economic problem of whether the benefits outweigh the opportunity costs.

Researchers from the Centre for Health Economics (CHE) at the University of York have helped to clarify the role of cost-effectiveness thresholds in health policy deliberations and suggested what thresholds may more reasonably reflect the realities of resource constraints. Distinction can be drawn between research on:

Conceptualization of cost-effectiveness thresholds
Estimation of cost-effectiveness thresholds reflecting resource constraints