Threshold values for cost-effectiveness ratio and public funding of medical technologies Academic Article uri icon


  • Rising healthcare costs, together with the rapid emergence of new and expensive medical technologies, have facilitated the use of economic analyses for making coverage decisions. The use of cost-effectiveness studies requires an external criterion (threshold value) for the cost-effectiveness ratio, below which funding would be recommended. Although such a threshold reflects the societal value of a full-quality life-year, currently accepted thresholds have been determined arbitrarily. Studies that screened hundreds of cost-effectiveness analyses have found that the most commonly used threshold is $US 50,000 for an additional QALY (Quality Adjusted Life-Year). This figure reflects the estimated cost per QALY to the US Medicare plan for funding a dialysis treatment for patients with chronic renal failure. While healthcare systems throughout the world, as in Israel, have not explicitly declared using a specific threshold for coverage decisions, some countries use an implicit threshold, above which the decision would usually be negative. In the UK and Australia, for instance, the implicit threshold is $US 50,000 to $US 60,000 per QALY. There are several suggestions to set a differential threshold value between countries, associated with their relative wealth, or between diverse disease and treatment characteristics, e.g. higher thresholds for life-saving treatments. Advantages of setting an explicit threshold include improved transparency and consistency of decisions, improved social equity and enhanced public credibility. Draw-backs might be the creation of an excessively mechanical decision-making process, without consideration of other relevant variables, such as severity of disease, existence of alternatives, or the economic burden to the patient. Adoption of a "flexible threshold" approach, in which the threshold is not the exclusive criterion for decision-making, might resolve these weaknesses. Utilization of the threshold concept is likely to expand in the coming years.

publication date

  • January 1, 2007