The limits of cost-effectiveness analysis.

The competitive worldwide economic environment and ever-increasing costs of health care have created a setting in which understanding costs and making sure that we achieve good value in health care are paramount. One approach to seeking value is through the use of cost-effectiveness analysis. Although this science is now several decades old, it has been refined over the last several years, with increasingly sophisticated statistical and standardized methods.1,2 Is cost-effectiveness analysis useful? Does it help in medical decision making and in allocation of scarce resources? In the accompanying article, “Cost, Effectiveness, and Cost-Effectiveness” Diamond and Kaul3 argue that cost-effectiveness analysis is not a useful approach. Although we agree with many of the points that Diamond and Kaul raise, we do not agree with their conclusion. Cost-effectiveness analysis involves an assessment of both cost and effectiveness. The distribution of each needs to be understood. A cost-effectiveness analysis is only as valid as its underlying measures of effectiveness and cost, a discussion that is beyond the scope of this article. However, the methods to make these assessments vary considerably. There are standards for cost-effectiveness, but at times, perfectly adhering to these standards is not realistic, and compromises are often made that may be entirely scientifically legitimate.4 Cost-effectiveness is, by nature, incremental. Thus, it is necessary to look at the added costs compared with a control group. Selection of the appropriate control group is a challenge itself. At times, the appropriate control is placebo, and at other times, it is active therapy; the appropriate control is dependent on the clinical question being asked. However, when cost-effectiveness analysis is conducted using data from a clinical trial, the selection of the control group will not be a decision that the analyst can affect (at least after the trial has been completed). When …