Healthcare rationing by proxy: cost-effectiveness analysis and the misuse of the $50,000 threshold in the US

Abstract

The application of cost-effectiveness analysis in healthcare has become commonplace in the US, but the validity of this approach is in jeopardy unless the proverbial $US50,000 per QALY benchmark for determining value for money is updated for the 21st century. While the initial aim of this article was to review the arguments for abandoning the $US50,000 threshold, it quickly turned to questioning whether we should maintain a fixed threshold at all. Our consideration of the relevance of thresholds was framed by two important historical considerations. First, cost-effectiveness analysis was developed for a resource allocation exercise where a threshold would be determined endogenously by maximizing a fixed budget across all possible interventions and not for piecemeal evaluation where a threshold needs to be set exogenously. Second, the foundations of the $US50,000 threshold are highly dubious, so it would be unacceptable merely to adjust for inflation or current clinical practice. Upon consideration of both sides of the argument, we conclude that the arguments for abandoning the concept for maintaining a fixed threshold outweigh those for keeping one. Furthermore, we document a variety of reasons why a threshold needs to vary in the US, including variations across payer, over time, in the true budget impact of interventions and in the measurement of the effectiveness of interventions. We conclude that while a threshold may be needed to interpret the results of a cost-effectiveness analysis, that threshold must vary across payers, populations and even procedures.