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Health Care Costs and Financing

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The cost-effectiveness threshold for medical interventions may depend on the context of the circumstances

For many years, a medical intervention such as knee replacement surgery has been considered cost-effective at a cost of $50,000 or less per gain of a quality-adjusted life year (QALY). However, different contexts—for example, whether a condition is life-threatening or not—may require different cost-effectiveness thresholds, suggests a study supported in part by the Agency for Healthcare Research and Quality (HS10876). Texas and Florida researchers found that a person's willingness to pay (WTP) for a QALY often depends on the context of the medical circumstances.

In this study, individuals were not willing to pay as much per QALY for improvements in knee osteoarthritis, a debilitating but non-life-threatening condition, as they were in previous studies for interventions that reduced the risk of death. The researchers explain that many people are not able to comprehend statistical risks, particularly of death, in an unbiased way. They unconsciously overstate or exaggerate a small risk of death, which may lead them to be willing to pay more for interventions to reduce the risk of death than those that reduce pain or improve function.

The team interviewed 193 ethnically diverse, randomly selected people to collect demographic information and health preferences. They used four methods, or utilities for evaluating various health states, which have been substantially tested in people with osteoarthritis: the visual analog scale, time tradeoff, standard gamble, and WTP. Study participants were asked, for example, what they were willing to pay or how many years they were willing to give up (time tradeoff) to improve mild to moderate osteoarthritis, severe osteoarthritis, or their own health to perfect health. The mean WTP/QALY for all methods was lower (range $1,221 to $5,690/QALY) than many estimates from revealed preference studies (that usually address risk of death) and lower than the oft-cited arbitrary cutoff of $50,000.

See "Willingness to pay per quality-adjusted life year in a study of knee osteoarthritis," by Margaret M. Byrne, Ph.D., Kimberly O'Malley, Ph.D., and Maria E. Suarez-Almazor, M.D., Ph.D., in the December 2005 Medical Decision Making 25, pp. 655-666.

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