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Health Policy and Cost-Effectiveness Analysis: Yes We Can. Yes We Must.

John B. Wong, MD; Cynthia Mulrow, MD, MSc, Deputy Editor; and Harold C. Sox, MD, Editor
[+] Article, Author, and Disclosure Information

From Tufts University School of Medicine, Boston, MA 02111, and American College of Physicians, Philadelphia, PA 19106.

Potential Financial Conflicts of Interest:Consultancies: J.B. Wong (Foundation for Informed Medical Decision Making); Grants received: J.B. Wong (Foundation for Informed Medical Decision Making).

Requests for Single Reprints: John B. Wong, MD, Tufts Medical Center, Tufts University School of Medicine, 800 Washington Street, 302, Boston, MA 02111; e-mail, jwong@tuftsmedicalcenter.org.

Ann Intern Med. 2009;150(4):274-275. doi:10.7326/0003-4819-150-4-200902170-00010
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Just over 40 years have passed since the publication of the first cost-effectiveness analysis that arguably influenced major U.S. health policy (an analysis of Medicare coverage of renal replacement therapy in 1972) (1). In this issue, Pletcher and colleagues (2) use the same approach to answer an analogous policy question: What is the best strategy for using statins to prevent coronary heart disease (CHD) in the United States—following the Adult Treatment Panel III (ATP III) guidelines or treating on the basis of 10-year risk, attained age, or sex-specific alternative age thresholds?

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Clarifying the example
Posted on February 25, 2009
Anupam Goel
University of California, San Diego
Conflict of Interest: None Declared

I was puzzled by the authors' illustration of how cost-effectiveness analyses (CEAs) can help a policy-maker best use their resources (1). My confusion may reflect a lack of understanding CEAs, so I apologize if my questions appear uninformed. I have four specific questions.

First, the authors conclude that using the ATP III primary prevention guidelines "provides the most benefit at an acceptable societal value and does not require limiting the treatment population to remain within budget - so that would be the recommended health policy." If policy-makers only focused on interventions that did not shift costs from current interventions (e.g., coronary artery bypass grafting) toward other less-expensive interventions (e.g., statins for primary prevention), then most policy-makers would hardly ever change current resource allocation decisions. As I understand CEAs, most investigators combine prevention and treatment costs into a single number (i.e., the strategy's total costs), combine morbidity and mortality into a single number (i.e., the strategy's total quality-adjusted life-years [QALYs]), and then create a cost-effectiveness ratio. Isn't a policy-maker's goal to increase QALYs at the lowest possible cost, regardless of the reason those QALYs are gained (e.g., prevention or treatment) or the reasons for losing QALYs (e.g., heart disease or some other condition)?

Second, how did the authors determine that $1 million would pay for treating 154 patients with heart disease? Despite my best efforts, I was unable to generate that number with the information provided in the article (2).

Third, I believe the example should include more patients than just the 154 who developed heart disease. For example, in the first strategy, I would imagine statins would be prescribed to some fraction of a 1000- patient cohort with a 10-year heart disease risk of 15% or higher (e.g., 250 patients). Then, some cases of heart disease would be prevented (or at least delayed), but at a cost of delivering statins to patients without heart disease. If the authors stated the size of the population to whom they would administer the primary prevention strategy, then I believe many readers would better understand the approach.

Finally, I believe that approaching health policy from the perspective of a policy-maker with a fixed budget can provide a useful alternative to incremental cost-effectiveness ratios. Would the authors be willing to state the total costs of the five strategies and the total QALYs gained? Again, I believe this information would help the readership better understand CEAs.


1. Wong JB, Mulrow C, Sox HC. Health policy and cost-effectiveness analysis: yes we can. Yes we must. Ann Intern Med. 2009;150:274-5.

2. Pletcher MJ, Lazar L, Bibbins-Domingo K, Moran A, Rodondi N, Coxson P, et al. Comparing impact and cost-effectiveness of primary prevention strategies for lipid-lowering. Ann Intern Med. 2009;150:243-54.

Conflict of Interest:

None declared

Assumptions in the illustration of CEA
Posted on March 13, 2009
Robert C Burack
Wayne State University
Conflict of Interest: None Declared

The editorial that accompanies the cost-effectiveness analysis (CEA) of Fletcher et al makes clear the rationale supporting CEA as a guiding principle in the allocation of health care resources(1,2). Unfortunately I found the editorial's illustration of this principle less clear and thus find it difficult to apply the method to other questions of health care-related resource allocation.

Using the incremental cost-effectiveness ratio estimates provided by Fletcher, the editorial projects the gain in quality adjusted life years expected if $1,000,000 is allocated to primary prevention under different statin scenarios in a hypothetical cohort of 154 individuals. However, without additional information concerning the distribution of heart disease and the associated allocation of costs to prevention or treatment at baseline (in the cohort of 154 individuals) I cannot recreate the editorial's calculation of the point at which total cost exceeds the available budget of $1,000,000. This is not to take issue with the important conclusions of the editorial -there is a trade-off between prevention and treatment and a fixed budget will constrain adoption of less efficient strategies. However, at least for some readers, more transparency in the illustration could help further advance this argument.


1.Wong JB, Mulrow C, Sox HC. Health policy and cost-effectiveness analysis: yes we can. Yes we must. Ann Intern Med. 2009;150:274-5.

2.Fletcher MJ, Lazar L, Bibbins-Domingo K, Moran A, Rodondi N, Coxson P, et al. Comparing impact and cost-effectiveness of primary prevention strategies for lipid-lowering. Ann Intern Med. 2009;150:243-54.

Conflict of Interest:

None declared

In Response
Posted on April 3, 2009
John B Wong
Tufts University School of Medicine
Conflict of Interest: None Declared

Cost-effectiveness analysis enables policymakers to maximize outcomes without exceeding available resources by either determining the greatest possible benefit for a given resource or by determining the lowest resource cost for a given benefit. To illustrate, Pletcher and colleagues (1) estimated averaged annual discounted health care costs of $897.64 billion (Table 2) for 138.6 million men and women aged 35- to 85-years old at baseline, yielding an average cost of $6477 per treated or untreated person. The next most expensive policy options: treating individuals with 10-year coronary heart disease risk greater than 15% (CHD>15%) or adhering to ATPIII would cost $6487 or $6503 per person, respectively, so for all three of these policies, about 154 individuals could be covered yearly for statin primary prevention with a $1 million annual budget.

These alternative policies affect who receives treatment and where health dollars are consumed. Changing policies would increase the proportion of the population receiving statins from 35% to as high as 42% and would result in up to 33% of those over the age of 65 starting statins. By increasing the proportion of patients receiving statins, drug-related costs rise by $2 to $6 billion, but $1 to $3 billion less would be spent on CHD-related complications such as hospitalizations and procedures. Because annual heart disease deaths would fall, annual non-CHD health expenditures would increase by $270-560 million annually.

More simplistically, divide $1 million by each incremental cost-effectiveness ratio. Spending $1 million increases population health by 27 years with CHD>15% and by 22 years with ATPIII. CHD>15% is a more efficient use of resources, so why might that not be preferred? Spending $1 million on hemodialysis with its cost-effectiveness ratio of $60,000 per quality-adjusted life year gained (2) yields 17 years, so relative to hemodialysis, ATPIII provides comparable health value for its costs.

Can the U.S. "raise health care's quality and lower its costs" (3)? Similar to its financial system, U.S. healthcare is a complex adaptive system with individual agents acting independently and not predictably (4). In such a system, instead of over specifying a solution, targeting a few flexible simple goals may enable the complex interacting parts of our health delivery and research enterprise to self-adjust and arrive at creative solutions (5, 6) involving issues such as coverage, malpractice, and payment reform to align incentives and move from a fee for service (where more is presumed to be better) to a system that provides quality care at a sustainable and affordable cost.


1. Pletcher MJ, Lazar L, Bibbins-Domingo K, et al. Impact and cost-effectiveness of lipid-lowering: comparing primary prevention strategies. Ann Intern Med. 2009150:243-54.

2. Weinstein MC. High-priced technology can be good value for money. Ann Intern Med. 1999;130:857-8.

3. Obama BH. Presidential Inaugural Address, January 20, 2009, Washington DC.

4. Plsek PE, Greenhalgh T. Complexity science: The challenge of complexity in health care. BMJ. 2001;323:625-8.

5. Plsek P. Innovative thinking for the improvement of medical systems. Ann Intern Med. 1999;131:438-44.

6. Plsek PE, Wilson T. Complexity, leadership, and management in healthcare organisations. BMJ. 2001;323:746-9.

Conflict of Interest:

Consultancies and research funding from the Foundation for Informed Medical Decision Making

Patient Care and Public Health: Shall the Twain Ever Meet?
Posted on May 7, 2009
Robert Kuschner
No Affiliation
Conflict of Interest: None Declared

It is popularly accepted that cost-effectiveness analyses can be utilized to inform policy decisions about health care expenditures and, thereby, improve public health. To the contrary, this approach is misguided and harmful. The underlying assumptions of this approach are 1) the size of the health care pie is fixed, 2) if we divide up the pie properly we can improve public health, and 3) cost-effectiveness analyses can determine how to best divide the pie. For instance, hemodialysis is said to be a reasonable expense for society to bear and its cost ($55,000 to $80,000 per life-year gained) is accepted as a standard against which the cost-effectiveness of all medical interventions should be compared (1). The absurdity of this approach is revealed if suddenly, due to a technological advance, the cost of hemodialysis decreases ten-fold. Either many interventions which were accepted as being cost-effective would suddenly lose that imprimatur or, more likely, another "standard" which- conveniently- costs $55000 to $80000 would be arbitrarily selected to replace hemodialysis. The unexplored question is "what does hemodialysis of an individual contribute to public health"? In turn, this is unanswerable until society agrees upon a practical definition of public health. Only then can health care providers prioritize medical practices to achieve the desired state of public health and only then can policy makers determine the required size of the health care pie. Absent that, we are all merely cannibalizing the pie and cost-effectiveness analyses can only inform us how to be more efficient cannibals. Providers are obligated by Hippocratic Oath to reject this approach and, instead, offer each patient the best possible available intervention, based upon the best available evidence rather than cost-effective analysis.


1. Wong JB, Mulrow C, Sox HC. Health Policy and Cost-Effectiveness Analysis: Yes We Can. Yes We Must. Ann Intern Med. 2009;150:274-75.

Conflict of Interest:

None declared

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