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Thresholds in Cost-Effectiveness Analysis—More of the Story
Blackwell Science, LtdOxford, UKVHEValue in Health1098-30152005 ISPOR818687Letter to EditorTo the EditorTo the Editor
Volume 8 • Number 1 • 2005 VALUE IN HEALTH
Thresholds in Cost-Effectiveness Analysis—More of the Story
To The Editor—Thanks are due to Eichler et al. [1] for their excellent overview of the history and issues concerning the various thresholds used as a benchmark in many cost-effectiveness studies. The international picture they present is especially welcome. I offer the following to complement what Eichler and colleagues reported:
had witnessed a completed procedure [3,4]. Two items related to Laupacis et al.’s [5] recommended guidelines for technology adoption deserve mention. First, Eichler et al. correctly present these guidelines as they were offered in 1992. Nevertheless, this work is often and inappropriately cited as the source of the $50,000 per QALY threshold, although this figure does not serve as any boundary Laupacis et al. proposed. Second, Laupacis et al. state that their recommended boundaries were adapted from the earlier work of Kaplan and Bush [6] in their presentation of the “well-year”—a measure of health-related quality of life—and its usefulness to policy makers for making comparisons between various health or medical programs. Kaplan and Bush present the estimated cost per well-year for several health programs and argue for the use of the well-year for making comparisons among health programs on the basis of their relative efficiency. Programs costing less than $20,000 per well-year are considered “cost effective by current standards;” a program costing $20,000 to $100,000 per wellyear are “possibly controversial, but justifiable by many current examples;” and programs costing greater than $100,000 per well-year are “questionable in comparison with other health care expenditures [6].” All of the health programs referred to by Kaplan and Bush in their article, such as PKU screening, tuberculin testing, and estrogen therapy for postmenopausal symptoms, among others, are based on previously published studies, save one—hospital renal dialysis, for which estimated cost-utility is presented as much greater than $50,000 per well-year. 2. Hirth et al. [2] used the results of their review of studies estimating the value of life to calculate the implied value of a QALY. Depending on the method used in the original study to calculate the value of life, the reported values of a QALY ranged from $31,000, human capital approach, to $543,000, revealed preference/job risk approach, with a median value of $336,000, all in 2003 US dollars [7]. It is interesting to note that the inflation-adjusted value of $336,000 approximates the upper value of the cost per well-year, $366,000 after adjust-
1. In reviewing the various thresholds used in the literature, Eichler et al. (citing Hirth et al. [2]) note the dialysis standard of $50,000 per quality-adjusted life year (QALY) as the “purported cost/QALY to the Medicare program for patients with chronic renal failure . . . [and which] might have been based on considerable underestimation of the program’s true costs [1].” From accounts published by Richard Rettig of RAND, we find that, except in the broadest sense, costs were not clearly enumerated. At the time the expansion of Medicare to patients with chronic renal failure was before Congress in 1972, the Social Security Administration’s Office of the Actuary provided estimates of first year costs of the expansion to be between $100 million and $500 million. Senator Vance Hartke, in proposing the kidney entitlement amendment during Senate hearings, offered estimates of $75 million for the first year and $250 million for the fourth year. Hartke also stated that per patient costs of dialysis ranged from $19,000 per year for the first year of home dialysis to up to $25,000 per year for treatment in a hospital, figures that were provided to Hartke by the National Kidney Foundation and physicians who were also advocating for the entitlement. These reported events, then, suggest that the use of any dollar amount as implying willingness to pay for a medical or health intervention by the federal government—and by extension, the $50,000 threshold—appears to be without basis. Of particular note is how testimony in support of the amendment included dialyzing a patient—who volunteered to do this—before members of the House Ways and Means Committee. Unbeknownst to this legislative audience was that the dialysis session was quickly aborted as the patient went into ventricular tachycardia during the procedure. The legislative audience, however, believed they © ISPOR
1098-3015/05/86
86–87
86
87
To the Editor ment for inflation, for an intervention to be considered controversial but justifiable as proposed by Kaplan and Bush. To summarize, although some allocation decisions made in the UK and Australia seem to point to $50,000 per QALY as a cost-effectiveness threshold, neither the dialysis standard nor Laupacis et al.’s recommended guidelines for technology adoption are the basis for this figure. The opportunity to offer these remarks is appreciated.—Franklin Laufer, PhD, AIDS Institute, New York State Department of Health. I wish to thank Richard A. Rettig for providing materials describing the legislative process that led to the expansion of Medicare to persons with end-stage renal disease, as well as for his comments on an earlier work on this subject. I also wish to thank Alison Sheehan Laufer for her assistance with library research. The views expressed here are those of the writer and do not necessarily reflect those of the New York State Department of Health.
References 1 Eichler HG, Kong SX, Gerth WC, et al. Use of costeffectiveness analysis in health-care resource alloca-
2
3
4 5
6
7
tion decision-making: How are cost-effectiveness thresholds expected to emerge? Value Health 2004;7:518–28. Hirth RA, Chernew ME, Miller E, et al. Willingness to pay for a quality-adjusted life year: In search of a standard. Med Decis Making 2000;20:332–42. Rettig RA. Origins of the Medicare kidney entitlement. The Social Security Amendments of 1972. In: Hanna K, ed., Decision Making in Science and Technology. Washington DC: National Academy Press, 1991. Rettig RA. The policy debate on patient care financing for victims of end-stage renal disease. Law Contemp Probl 1976;40:196–230. Laupacis A, Feeny D, Detsky AS, Tugwell PX. How attractive does a new technology have to be to warrant adoption and utilization? Tentative guidelines for using clinical and economic evaluations. Can Med Assoc J 1992;146:473–81. Kaplan RM, Bush JW. Health-related quality of life measurement for evaluation research and policy analysis. Health Psychol 1982;1:61– 80. Bureau of Labor Statistics. Available from: http:// www.bls.gov/data/home.htm (Accessed August 26, 2003).
Volume 8 • Number 1 • 2005 VALUE IN HEALTH
Thresholds in Cost-Effectiveness Analysis—More of the Story
To The Editor—Thanks are due to Eichler et al. [1] for their excellent overview of the history and issues concerning the various thresholds used as a benchmark in many cost-effectiveness studies. The international picture they present is especially welcome. I offer the following to complement what Eichler and colleagues reported:
had witnessed a completed procedure [3,4]. Two items related to Laupacis et al.’s [5] recommended guidelines for technology adoption deserve mention. First, Eichler et al. correctly present these guidelines as they were offered in 1992. Nevertheless, this work is often and inappropriately cited as the source of the $50,000 per QALY threshold, although this figure does not serve as any boundary Laupacis et al. proposed. Second, Laupacis et al. state that their recommended boundaries were adapted from the earlier work of Kaplan and Bush [6] in their presentation of the “well-year”—a measure of health-related quality of life—and its usefulness to policy makers for making comparisons between various health or medical programs. Kaplan and Bush present the estimated cost per well-year for several health programs and argue for the use of the well-year for making comparisons among health programs on the basis of their relative efficiency. Programs costing less than $20,000 per well-year are considered “cost effective by current standards;” a program costing $20,000 to $100,000 per wellyear are “possibly controversial, but justifiable by many current examples;” and programs costing greater than $100,000 per well-year are “questionable in comparison with other health care expenditures [6].” All of the health programs referred to by Kaplan and Bush in their article, such as PKU screening, tuberculin testing, and estrogen therapy for postmenopausal symptoms, among others, are based on previously published studies, save one—hospital renal dialysis, for which estimated cost-utility is presented as much greater than $50,000 per well-year. 2. Hirth et al. [2] used the results of their review of studies estimating the value of life to calculate the implied value of a QALY. Depending on the method used in the original study to calculate the value of life, the reported values of a QALY ranged from $31,000, human capital approach, to $543,000, revealed preference/job risk approach, with a median value of $336,000, all in 2003 US dollars [7]. It is interesting to note that the inflation-adjusted value of $336,000 approximates the upper value of the cost per well-year, $366,000 after adjust-
1. In reviewing the various thresholds used in the literature, Eichler et al. (citing Hirth et al. [2]) note the dialysis standard of $50,000 per quality-adjusted life year (QALY) as the “purported cost/QALY to the Medicare program for patients with chronic renal failure . . . [and which] might have been based on considerable underestimation of the program’s true costs [1].” From accounts published by Richard Rettig of RAND, we find that, except in the broadest sense, costs were not clearly enumerated. At the time the expansion of Medicare to patients with chronic renal failure was before Congress in 1972, the Social Security Administration’s Office of the Actuary provided estimates of first year costs of the expansion to be between $100 million and $500 million. Senator Vance Hartke, in proposing the kidney entitlement amendment during Senate hearings, offered estimates of $75 million for the first year and $250 million for the fourth year. Hartke also stated that per patient costs of dialysis ranged from $19,000 per year for the first year of home dialysis to up to $25,000 per year for treatment in a hospital, figures that were provided to Hartke by the National Kidney Foundation and physicians who were also advocating for the entitlement. These reported events, then, suggest that the use of any dollar amount as implying willingness to pay for a medical or health intervention by the federal government—and by extension, the $50,000 threshold—appears to be without basis. Of particular note is how testimony in support of the amendment included dialyzing a patient—who volunteered to do this—before members of the House Ways and Means Committee. Unbeknownst to this legislative audience was that the dialysis session was quickly aborted as the patient went into ventricular tachycardia during the procedure. The legislative audience, however, believed they © ISPOR
1098-3015/05/86
86–87
86
87
To the Editor ment for inflation, for an intervention to be considered controversial but justifiable as proposed by Kaplan and Bush. To summarize, although some allocation decisions made in the UK and Australia seem to point to $50,000 per QALY as a cost-effectiveness threshold, neither the dialysis standard nor Laupacis et al.’s recommended guidelines for technology adoption are the basis for this figure. The opportunity to offer these remarks is appreciated.—Franklin Laufer, PhD, AIDS Institute, New York State Department of Health. I wish to thank Richard A. Rettig for providing materials describing the legislative process that led to the expansion of Medicare to persons with end-stage renal disease, as well as for his comments on an earlier work on this subject. I also wish to thank Alison Sheehan Laufer for her assistance with library research. The views expressed here are those of the writer and do not necessarily reflect those of the New York State Department of Health.
References 1 Eichler HG, Kong SX, Gerth WC, et al. Use of costeffectiveness analysis in health-care resource alloca-
2
3
4 5
6
7
tion decision-making: How are cost-effectiveness thresholds expected to emerge? Value Health 2004;7:518–28. Hirth RA, Chernew ME, Miller E, et al. Willingness to pay for a quality-adjusted life year: In search of a standard. Med Decis Making 2000;20:332–42. Rettig RA. Origins of the Medicare kidney entitlement. The Social Security Amendments of 1972. In: Hanna K, ed., Decision Making in Science and Technology. Washington DC: National Academy Press, 1991. Rettig RA. The policy debate on patient care financing for victims of end-stage renal disease. Law Contemp Probl 1976;40:196–230. Laupacis A, Feeny D, Detsky AS, Tugwell PX. How attractive does a new technology have to be to warrant adoption and utilization? Tentative guidelines for using clinical and economic evaluations. Can Med Assoc J 1992;146:473–81. Kaplan RM, Bush JW. Health-related quality of life measurement for evaluation research and policy analysis. Health Psychol 1982;1:61– 80. Bureau of Labor Statistics. Available from: http:// www.bls.gov/data/home.htm (Accessed August 26, 2003).