Value Proposition: The Role of Cost-Effectiveness in Coverage Decisions

Marthe Gold
Stirling Bryan
Marge Ginsburg


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This is archived content; for historical reference only.

This issue brief looks at public and industry attitudes toward cost-effectiveness analysis (CEA) as a component of decisions about what services should be covered in public and private health plans. CEA is a method for weighing the value of different health care options relative to their cost. Rather than identifying the lowest-cost option, CEA measures health benefits in terms of the “quality-adjusted life year” to assign value to patients’ quality of life and longevity.

Although conventional wisdom holds that Americans will not accept cost factors in coverage decisions, three studies suggest more openness to their use. The authors suggest that Medicare is well-placed to provide leadership in CEA application, thereby easing technical and policy barriers that have slowed industry progress in ensuring the “best bang for the buck” in health care services.

The complete report is available under Document Downloads.