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Cost-effectiveness analysis could shift from being an academic curiosity to an essential tool for health care decision making.
ABSTRACT: Private health plans and government health insurance programs in the United States base their coverage decisions on evidence criteria, rather than explicit cost-effectiveness criteria. As health spending continues to grow rapidly, however, approaches to coverage policy that ignore costs fail to meet the needs of consumers, employers, health plans, and federal and state governments. I describe the role of evidence-based criteria in formal coverage decision making and contrast the ways that these criteria differ from cost-effectiveness criteria. Finally, I discuss options for incorporating considerations of cost-effectiveness into coverage policy and other aspects of benefit design.
RESURGENT HEALTH SPENDING GROWTH and the continuing erosion of private health insurance have renewed U.S. debates over health care reform. Absent from these debates, however, is any systematic discussion of processes to choose the medical goods and services that health insurance should cover. Policymakers may instinctively sidestep the topic as a narrowly technical issue, to be decided by physicians and others with the patience and interest to evaluate a mass of information about medical treatments and diagnostic tests. They may also see little incentive to pursue it, knowing the political risk that comes with any public stand on coverage policy.
Their reticence is unfortunate, though, because coverage policy is so tightly linked to the affordability of health insurance, and hence the rate of uninsurance. When the cost of purchasing a private health insurance plan rises, the number of Americans with commercial health insurance falls: Employers stop offering their employees health insurance, and employees stop paying their share of premiums when their employers continue to offer insurance. Coverage policy also influences the types of medical care Americans receive, because health insurance coverage is the gateway to the availability of medical innovations. It is difficult to imagine how therapies that cost thousands of dollars per patient, such as left ventricular assist devices for severe congestive heart failure, could be adopted if health insurance did not cover them.
Although they did not arise from an explicit legislative process, de facto principles for coverage decision making have emerged. They are the product of historical practices, legal decisions, and insurance contract language. Coverage policy under...