$50,000. This is the price of a new (and cheap) model BMW, and also a price the US government is willing to spend to prolong your medically trained (or everyone else’s for that matter) life by one year. Before describing why $50,000 was chosen it’s necessary to describe what this number stands for.
For years, health economists have been struggling to determine a way to ration health care. Since resources are limited, who is to say which treatments should be offered, and who should get them? For example, what is more important: 10 males not living with impotence for a year, or a person staying in an ICU for 3 days? How about immunizing 500 children against measles? The numbers here are not exact, but you get the idea.
Economists solved this problem by inventing a measurement called the QALY: quality-adjusted life years. QALY technically equals: å Fidiki (Gerber and Phelps, 1997). However, for the non-mathematically inclined, one QALY represents one year in perfect health. The benefit of this system is that it incorporates both the length of life and the quality in health care calculations. The QALY can range from 0 to 1: if a person has to live without an eye or without a leg, the QALY goes below 1, if a person only lives for ½ year after an intervention, the QALY is 0.5. If a person will live for 3 more years, but with “½” of a quality of life, the treatment is deemed as having 3*0.5=1.5 QALYs.
Now, onto $50,000. In the United Kingdom, such a cost-utility analysis actually determines which treatments are offered. In 2005, the National Institute for Health and Clinical Excellence (NICE) is believed to have set a threshold about £30,000 (around $55,500) per additional QALY as the cutoff for what treatment costs are acceptable. In the US, the process is a little different. The policy of the US Public Health Service Panel on cost-effectiveness is that any threshold should be recognized as a guide to health care spending decisions, not a determinant of such decisions.
However, in many health economics papers, this threshold value is listed as $50,000 (Ubel 2003; McGregor, 2003). This value represents the approximate cost of one year of dialysis treatment. Under Medicare rules, renal dialysis is a federal entitlement to all United States citizens, and is thus considered cost-effective by US standards. As such, any other treatment that costs $50,000 or less per QALY is considered cost-effective as well.
Many economists see problems with this number. First, it really only represents a floor of a QALY expenditure, not a ceiling (McGregor, 2003), meaning, that if the US funds something that costs $50,000, it should fund everything below that, but not necessarily reject everything above it. Another problem with the QALY statistics is the QALY itself. How does anybody go about measuring this value? Usually, extremely sophisticated statistical models based on many variables and assumptions are used for such calculations.
Let us look at the impotence question: What percentage of a healthy year lived is taken away by being impotent? Is it 1%, 5%, 20%, or 0%? Studies have attempted to answer this question by handing out questionnaires to males with impotence or to their significant others and came up with values ranging from 2% to 15%, which translates to a QALY ranging from 0.85 to 0.98 to (McGregor, 2003). This is a huge difference and can mean the difference between a treatment going above or below the QALY threshold.
Another major issue with the QALY threshold is whether it should increase with inflation. The $50,000 limit was set in the early 1980s, and has not been changed since. Is it fair to say that the US government should forever keep this threshold at the $50,000 limit? Probably not. In recent health economics papers, economists site the value of $100,000 as the approximate cutoff for a QALY in the US. In his paper, Ubel states that a treatment costing less than $50,000 is considered a bargain, and a treatment above $100,000 per QALY is generally considered not cost-effective (Ubel 2003).
Now, whether the threshold guidelines are followed in the United States is a matter of debate as well. The practice of sending women with low risk for cervical cancer for yearly PAP smears has a price tag of $700,000 per QALY, but is one of the fundamentals of primary care. On the other hand, yearly mammograms for all women ages 40-49, which has a QALY cost of $150,000, has not been accepted into official guidelines and practice. Now of course, decisions such as these are not solely based on economic analyses, but also on the availability of data supporting various treatments. However, health economists believe that the QALY analysis played a role in multiple treatment decisions, one of which being the rejection of recommending annual mammograms for women ages 40-49 (Ubel 2003).
So after this, what should be funded: an anti-impotence drug (QALY $11,000), an ICU stay (QALY ranging from $1,000 -$30,000, but increases significantly with age and medical/surgical comorbidities), or a measles vaccine (QALY $20). The United States funds all of these, as well as many treatments that cost much more. The real challenge will arise when a specific health care budget limit is set and the US needs to ration health care and create a specific QALY cost ceiling. Will everybody still have the right to get dialysis? Will everybody still have the right to stay in an ICU? Only time will tell. For now, all we know is that the best approximation of the value of a QALY threshold in the United States is equal to the price of a cheap BMW.
Gerber AM and CE Phelps. Economic Foundations of Cost-effectiveness Analysis. Journal of Health Economics 1997(16):1-31.
Ubel PA. What Is the Price of Life and Why Doesn’t It Increase at the Rate of Inflation? Arch Intern Med 2003(163):1640-41
McGregor M. Cost-utility Analysis: Use QALYs Only With Great Caution. CMAJ 2003(168)4:433-4 http://www.cmaj.ca/cgi/content/full/168/4/433
Estimated cost-effectiveness of commonly used medical interventions.*
Intervention Cost/life-year (1993-97)
Low dose lovastatin for high cholesterol:
Male heart attack survivors, age 55-64, cholesterol above 250 2,158
Male heart attack survivors, age 55-64, cholesterol below 250 2,293
Female nonsmokers, ages 35-44 2,023,440
Exercise electrocardiogram as screening test:
40 year old males 124,374
40 year old females 335,217
40 year old males 27,519
4 year old females 42,222
Breast Cancer Screening:
Annual breast examination and mammography, Females 55-65 41,008
Physician advice about smoking cessation:
1% quit rate, males age 45-50 3,777
PAP smear starting at age 20, continuing to 74:
Every 3 years, versus not screening 24,011
Coronary artery bypass graft/PCI:
Left main coronary artery disease CABG 8,768
CABG of Single vessel disease with moderate angina 88,087
PCI of lesion (varies very widely based on #of lesions/stents) 20,000-90,000
Neonatal intensive care units:
Infants 1000-1500 g 10,927
Infants 500-999 g 77,161
*Data derived from sources listed in the works cited section and other online sources.
Image courtesy of Wikimedia Commons.