Cost-effectiveness thresholds in health care: a bookshelf guide to their meaning and use

Research output: Working paperDiscussion paper


There is misunderstanding about both the meaning and the role of cost-effectiveness thresholds in policy decision making. This article dissects the main issues by use of a bookshelf metaphor. Its main conclusions are these:
 It must be possible to compare interventions in terms of their impact on a common measure of health.
 Mere effectiveness is not a persuasive case for inclusion in public insurance plans.
 Public health advocates need to address issues of relative effectiveness.
 A ‘first best’ benchmark or threshold ratio of health gain to expenditure identifies the least effective intervention that should be included in a public insurance plan.
 The reciprocal of this ratio – the ‘first best’ cost-effectiveness threshold – will rise or fall as the health budget rises or falls (ceteris paribus).
 Setting thresholds too high or too low costs lives.
 Failure to set any cost-effectiveness threshold at all also involves avertable deaths and morbidity.
 The threshold cannot be set independently of the health budget.
 The threshold can be approached from either the demand-side or the supply side – the two are equivalent only in a health-maximising equilibrium.
 The supply-side approach generates an estimate of a ‘second best’ cost-effectiveness threshold that is higher than the ‘first best’.
 The second best threshold is the one generally to be preferred in decisions about adding or subtracting interventions in an established public insurance package.
 Multiple thresholds are implied by systems having distinct and separable health budgets.
 Disinvestment involves eliminating effective technologies from the insured bundle.
 Differential (positive) weighting of beneficiaries’ health gains may increase the threshold.
 Anonymity and identity are factors that may affect the interpretation of the threshold.
 The true opportunity cost of health care in a community, where the effectiveness of interventions is determined by their impact on health, is not to be measured in money – but in health itself.
Original languageEnglish
Place of PublicationYork, UK
PublisherCentre for Health Economics, University of York
Number of pages22
Publication statusPublished - Dec 2015

Publication series

NameCHE Research Paper
PublisherCentre for Health Economics, University of York

Cite this