Ideas About Resourcing Health Care in the United States: Can Economic Evaluation Achieve Meaningful Use?

“Managing health care spending is critical considering that the U.S. health care economy exceeds $3.5 trillion. Between $760 billion and $935 billion is wasted on low-value care that costs considerably more than its clinical benefits are worth.

Giving Equal Weight to Valuation of Health Care Services and Technologies

[..] payer reimbursements for health care providers and biomedical manufacturers could not be more different. Medicare and other payers that adhere to Medicare payment structures use prospective payments based on diagnosis-related group for hospital services, and fee schedules based on relative value units for physician services. Payments have created a fundamental divide in Maryland and elsewhere, in that service costs are regulated but prices of biomedical interventions have increased in defense of supporting innovation. [..] A governing body that uses economic evaluation without discriminating between services and biomedical interventions stands to reduce wasteful spending across health systems.

Opportunity Costs

[..] Opportunity costs describe forgone benefits relating to the next best option when financial resources are committed to a particular activity. For example, spending resources on costly health care services, procedures, or pharmaceuticals can withdraw finances from other priorities, such as primary and preventive care.

[..] Overall, opportunity costs need to be considered in balance with health care benefits. Economic evaluation can identify decisions that maximize benefits and control costs—for example, establishing “cost-effectiveness thresholds” that represent the maximum a system can spend on health care before its benefits are outweighed by its opportunity costs.

Resource Prioritization With Value of Information [VOI]

[..] If applied effectively, VOI would move the United States ahead of other countries that use economic evaluation by enabling educated decisions about future research investments that lead to new innovations or more efficient resource allocation for patients who need targeted therapies. Research prioritization based on empirical methods would be a commonsensical way to allocate funding.

[..] VOI has not gained traction in the United States for several reasons. First, it does not always align with special interests that may aim to perform new trials in areas that offer little incremental value to the wealth of information. Second, it is linked to cost-effectiveness analysis, models, and thresholds, which have themselves been slow to become established. However, VOI can be used outside economic evaluation, as work funded by the Patient-Centered Outcomes Research Institute has shown.


[..] The QALY expresses health status as a function of impacts on quality of life, including physical and mental components, and on survival and life expectancy. Limitations of QALYs are widely understood, including lack of sensitivity to some important changes in health and strong assumptions about inapplicable individual preferences. However, QALYs offer a well-understood, durable, and easily applied measure to inform resource allocation.

Addressing No-Value Care

[..] In the absence of an empirically evidenced threshold, there remain many low-value services and biomedical interventions that could be phased out. In particular, dominated interventions (“no-value care”) that increase costs but do not improve benefits are low-value options that do not need a threshold for decision makers to agree that they should be phased out. For example, a recent study identifying that individualized glycemic control for type 2 diabetes reduced costs and increased QALYs across several sociodemographic strata provided justification for phasing out outdated practices of uniform intensive glycemic control. In these situations, economic evaluation could reduce the availability of treatments that increase costs at reduced health benefit compared with more affordable alternatives, as well as protect these treatments for certain individuals who could still gain exceptional health benefit (such as minority populations).

State-Level Agreement on Value

[..] If the relative values of services and biomedical interventions are analyzed using economic evaluation, then opportunity costs, and hence cost-effectiveness thresholds, would vary greatly between states on the basis of high-cost health care decisions. For example, New York Medicaid’s formulary rejection of lumacaftor/ivacaftor (Orkambi [Vertex Pharmaceuticals]) for cystic fibrosis at the list price, in reference to ICER’s economic evaluation, implied that the product’s benefits were insufficient to justify the opportunity costs imposed on other patients at the acquisition price sought by the manufacturer. Alternatively, statewide policy in Louisiana to cover hepatitis C treatment for Medicaid beneficiaries may generate sufficient health benefits to justify opportunity costs imposed on others. However, for Mississippi, providing the same coverage for hepatitis C could come at such a high opportunity cost that it could not be justified on grounds of efficiency or equity. Therefore, the issue of redistribution of spending on health care and public health between states would follow.

[..] First, the United States could use economic evaluation only to phase out no-value care options. Second, it could establish a universal cost-effectiveness threshold at the level of the wealthiest or poorest state, with varying consequences: A threshold too high or too low could affect opportunity costs for some states. Third, cost-effectiveness thresholds could vary by state or clusters of states with similar levels of affordability (for example, quartiles). With the latter option, clusters could also organize value assessment commissions like Maryland did to make local decisions and spare separate states the duplication of effort. In addition, federal oversight of state processes could prevent situations where local-level decisions negatively affect persons in other places.

Finding a Collective Purpose for Economic Evaluation

[..] Health care in the United States is made up of fragmented payers, health systems, and innovators that do not have to play by similar rules. This is highly contrasted to other nations like England, where decisions by the National Institute for Health and Care Excellence are linked to economic evaluation to recommend coverage decisions. The fact that the National Health Service and National Institute for Health and Care Excellence serve the same patients means that they have a collective purpose in England—to ensure that these patients have access to high-value care.

[..] The United States may be far off from adopting a single-payer system; however, short-term goals exist that could serve a collective purpose for economic evaluation. For instance, Medicare lacks a formulary to inform provider patterns of prescribing and ordering. If Medicare organized governance in value assessment to inform formulary-based decisions about coverage, then it would use taxpayer dollars to ensure that resources are allocated equitably among all beneficiaries.

[..] Likewise, if other payers and providers could begin to adopt the same rules of value through a central body like Medicare might do, then the collective purpose would spread while protecting the individuality of coverage plans and health systems. Some payers have indicated that they are already prepared to use economic evaluation in coverage decisions; for example, CVS Caremark announced that it would partner with ICER on economic evaluations assessed at a $100 000-per-QALY threshold. However, others lack transparency on how their benefit plans are structured. Meaningful use of economic evaluation among all stakeholders in health care delivery can happen only when the playing field is level and, as the previous point implies, when states offer important financial structure on which these institutions can model their economic evaluation.

Political Discourse for Economic Evaluation

[..] distributional cost-effectiveness analysis has been developed and applied to reflect the distribution of health outcomes across populations, and extended cost-effectiveness analysis has sought to incorporate concerns about financial risk protection to certain groups or individuals. Nonetheless, in order for economic evaluation to gain bipartisan support, liberals would have to compromise with conservatives on some other interests to introduce value assessment governance through federal legislation.

Perhaps for this reason, states may be best suited to address value locally. However, the single largest payer remains a federally funded one—Medicare—and the United States spends an average of more than $10 000 per capita on health care. Spending levels are astronomical, so there is no better time than now to introduce legislation that expresses a need for the United States to follow more economical practices in the allocation of health care resources. With U.S.-based organizations, such as ICER, prepared to handle some demand for economic evaluation, the United States could efficiently transition to more economical approaches for delivering health care.”

Full article, Padula WV and Sculpher MJ. Annals of Internal Medicine 2020.9.29