Harvard Public Health Review
Fall 2004




What Price Health?

Cost-effectiveness analysis can help society get the biggest bang for the buck

When in June a new study revealed that women weren't heeding the mantra of the American Cancer Society, "A mammogram a year, starting at age 40," physicians were alarmed. But health decision scientists might have a better way to use scarce health care dollars to save lives. One idea: Encourage women aged 40 to 50 to get mammograms every two or three years, then use the substantial savings to screen more women for colorectal cancer. The result could be more healthy years of life for U.S. women.

Health decision scientists have a tool that can perform this calculation, to help figure out which combinations of services do the most good, in the most cost-efficient way. It's called cost-effectiveness analysis.

"Cost-effectiveness or 'value' analyses show us how much health bang we get for our buck," explains Peter Neumann, associate professor of health decision sciences at the Harvard Center for Risk Analysis (HCRA). "We can assess medical services--a drug, say, or a surgical procedure--in terms of the net costs to society for each year of life gained."

In an ideal society, services that offer the most health value for the money would be delivered the most widely. Other services would be dispensed starting from the top of the list on down, until the money runs out. Health care would be rationed rationally.


Rather than just estimating net costs in relation to how many years people live, health decision scientists also calculate costs in relation to how many years people live well, without disability or impairment. To do this, they use a measurement called the "quality-adjusted life year," or QALY ("qually"). This metric factors in quality of life as a variable by linking numerical values to quality-of-life indicators such as physical mobility and freedom from pain. The lower the ratio of cost to QALY, the more cost-effective a health intervention is said to be.

Calculating the cost per QALY gained of vaccines, drugs, and the like compels society to think carefully about health spending. To show how useful QALYs can be, consider the notion of trading mammograms for colonoscopies.

According to a study by University of California-San Francisco researchers, annual mammograms cost $50,000 to $100,000 per QALY, depending on a woman's age. If women in the ages 40-to-50 bracket had the test every two to three years instead of annually, society might gain nearly as many QALYs--and could perhaps use the cost savings to screen more women for colorectal cancer, thus saving even more QALYs. The colonoscopy, administered every five to 10 years to women age 50 and up, buys a quality-adjusted year of life for just $15,000 to $20,000. (Of course, if women get mammograms less frequently but don't get colonoscopies, QALYs are lost.)

For another example of QALYs at work, look to HSPH's Sue Goldie, also an associate professor of health decision science, and her colleague, Jane Kim. They and their collaborators recently identified a promising way to save the U.S. health system as much as $15 billion, calculated over the lifetime of women aged 18 to 24. The researchers set out to evaluate the costs, clinical benefits, and quality-of-life gains of four alternative strategies for following up ambiguous results from Pap smears, a screening test for cervical cancer. Simply shifting women who are currently getting Pap smears annually to a once-every-three-years schedule would reap huge cost savings, their analysis found, while saving nearly as many lives--provided that all indeterminate Pap test results were automatically followed by DNA testing for the human papilloma virus, the cause of most cervical cancers.

Given QALYs' obvious advantages, why have Americans shied away from using them to set health policies and make payment and coverage decisions? "Rationing is a dirty word in this country," says Milton Weinstein, the Henry J. Kaiser Professor of Health Policy and Management and director of the Program for the Economic Evaluation of Medical Technology at the Harvard Center for Risk Analysis. "The only thing harder than telling Americans their costs are going up is telling them they can't have every last form of care available."

Yet rationing is already happening, says Weinstein, who helped launch health decision science as a field in the 1970s. "Just look at the 15 percent of Americans who lack health insurance. They get care from emergency rooms and often go without primary and preventive care." Rationing also occurs when insurers limit the pills and medical services they cover, and impose co-payments and deductibles that discourage some people from seeking care.

Wouldn't it make sense to spend health dollars in a way that gets more value for the money? Of course, economic considerations aren't the only ones that drive health decisions. Moral values are also influential, especially when lives hang in the balance. But value-driven decision making can and does enhance health systems that stress fairness, as in Canada, Britain, and other nations that guarantee coverage for every citizen.


Weinstein is working to help maximize health resources against tuberculosis in countries where many patients' infections are resistant to standard multidrug regimens. He is exploring whether it will be cost-effective for these nations to invest in potent but expensive new TB drugs, considering that the spread of multidrug-resistant disease down the road could prove costlier still.

Laments Weinstein, "In the U.S., physicians and patients aren't willing to face limits and explicit tradeoffs." Even the cash-strapped Medicare system has explicitly rejected valuation as a criterion for covering new medical technologies.
And yet, the idea is catching on. Medical journals now publish cost-effectiveness studies regularly. And physicians who draw up clinical practice guidelines cite QALY studies more and more.

"In the U.S., value analysis could help control the spiraling costs of health care," Weinstein says. "Moreover, giving more thought to value-for-money aspects of care could help this country extend the most effective care not just to some, but to all Americans."

Karin Kiewra is Editor of the Harvard Public Health Review and Associate Director of Development Communications at the Harvard School of Public Health

Cost of health interventions in dollars per quality-adjusted life year gained
2002 figures

There is no consensus on the cost per QALY that represents acceptable value for money. According to Associate Professor Peter Neumann, values ranging from $50,000 to $100,000 are sometimes used as a benchmark in the United States. Such values are relative, however: Cost-effectiveness is just one of many factors in any assessment of a treatment or preventive measure, Neumann says. Also important are whether effective alternatives exist, the total health budget, and society’s moral and ethical values.

For cost-effectiveness information on thousands of preventive measures and health care interventions, see www.hsph.harvard.edu/cearegistry, a peer-reviewed database established by Neumann and colleagues at the Harvard Center for Risk Analysis.

Is the price right?

dollars per QALY, 2002
< $0 (If the cost per QALY is less than zero, the intervention actually saves money)
Flu vaccine for the elderly

Under $10,000
Beta-blocker drugs post-heart attack in high-risk patients

$10,000 to $20,000
Combination antiretroviral therapy for certain patients infected with the AIDS virus

$20,000 to $50,000
Antihypertensive medications in adults age 35-64 with high blood pressure but no coronary heart disease

Dialysis for patients with end-stage kidney disease

Over $500,000
CT and MRI scans for children with headache and an intermediate risk of brain tumor




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