Objectives, Budgets, Thresholds, and Opportunity Costs—A Health Economics Approach: An ISPOR Special Task Force Report [4]

P. Danzon, M.F. Drummond, A. Towse, Markus Pauly

Research output: Contribution to journalArticlepeer-review


The fourth section of our Special Task Force report focuses on a health plan or payer’s technology adoption or reimbursement decision, given the array of technologies, on the basis of their different values and costs. We discuss the role of budgets, thresholds, opportunity costs, and affordability in making decisions. First, we discuss the use of budgets and thresholds in private and public health plans, their interdependence, and connection to opportunity cost. Essentially, each payer should adopt a decision rule about what is good value for money given their budget; consistent use of a cost-per-qualityadjusted life-year threshold will ensure the maximum health gain for the budget. In the United States, different public and private insurance programs could use different thresholds, reflecting the differing generosity of their budgets and implying different levels of access to technologies. In addition, different insurance plans could consider different additional elements to the quality-adjusted life-year metric discussed elsewhere in our Special Task Force report. We then define affordability and discuss approaches to deal with it, including consideration of disinvestment and related adjustment costs, the impact of delaying new technologies, and comparative cost effectiveness of technologies. Over time, the availability of new technologies may increase the amount that populations want to spend on health care. We then discuss potential modifiers to thresholds, including uncertainty about the evidence used in the decision-making process. This article concludes by discussing the application of these concepts in the context of the pluralistic US health care system, as well as the “excess burden” of tax-financed public programs versus private programs.
Original languageEnglish
Pages (from-to)140 - 145
JournalValue in Health
Issue number2
Publication statusPublished - 23 Feb 2018

Bibliographical note

© 2017 International Society for Pharmacoeconomics and Outcomes Research (ISPOR). This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.


  • budgets
  • cost-effectiveness
  • opportunity cost
  • thresholds

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