Threshold values for cost-effectiveness ratio and public funding of medical technologies

Mordechai Rabinovich*, Dan Greenberg, Joshua Shemer

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review


Rising healthcare costs, together with the rapid emergence of new and expensive medical technologies, have facilitated the use of economic analyses for making coverage decisions. The use of cost-effectiveness studies requires an external criterion (threshold value) for the cost-effectiveness ratio, below which funding would be recommended. Although such a threshold reflects the societal value of a full-quality life-year, currently accepted thresholds have been determined arbitrarily. Studies that screened hundreds of cost-effectiveness analyses have found that the most commonly used threshold is $US 50,000 for an additional QALY (Quality Adjusted Life-Year). This figure reflects the estimated cost per QALY to the US Medicare plan for funding a dialysis treatment for patients with chronic renal failure. While healthcare systems throughout the world, as in Israel, have not explicitly declared using a specific threshold for coverage decisions, some countries use an implicit threshold, above which the decision would usually be negative. In the UK and Australia, for instance, the implicit threshold is $US 50,000 to $US 60,000 per QALY. There are several suggestions to set a differential threshold value between countries, associated with their relative wealth, or between diverse disease and treatment characteristics, e.g. higher thresholds for life-saving treatments. Advantages of setting an explicit threshold include improved transparency and consistency of decisions, improved social equity and enhanced public credibility. Drawbacks might be the creation of an excessively mechanical decision-making process, without consideration of other relevant variables, such as severity of disease, existence of alternatives, or the economic burden to the patient. Adoption of a "flexible threshold" approach, in which the threshold is not the exclusive criterion for decision-making, might resolve these weaknesses. Utilization of the threshold concept is likely to expand in the coming years.

Original languageEnglish
Pages (from-to)453-458
Number of pages6
Issue number6
StatePublished - Jun 2007


  • Cost-effectiveness ratio
  • Medical technologies
  • Prioritization
  • Resource allocation
  • Threshold value


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