Does Medicare Have an Implicit Cost-Effectiveness Threshold?

Abstract

Background. Despite the huge cost of the program, the Centers for Medicare and Medicaid Services (CMS) has maintained a policy that cost-effectiveness is not considered in national coverage determinations (NCDs). Objective. To assess whether an implicit cost-effectiveness threshold exists and to determine if economic evidence has been considered in previous NCDs. Methods. A literature search was conducted to identify estimates of cost-effectiveness relevant to each NCD from 1999—2007 (n = 103). The economic evaluation that best represented each coverage decision was included in a review of the cost-effectiveness of medical interventions considered in NCDs. Results. Of the 64 coverage decisions determined to have a corresponding cost-effectiveness estimate, 49 were associated with a positive coverage decision and 15 with a noncoverage decision. Of the positive decisions, 20 were associated with an economic evaluation that estimated the intervention to be dominant (costs less and was more effective than the alternative), 12 with an incremental cost-effectiveness ratio (ICER) of less than $50,000, 8 with an ICER greater than $50,000 but less than $100,000, and 9 with an ICER greater than $100,000. Fourteen of the sample of 64 decision memos cited or discussed cost-effectiveness information. Conclusions. CMS is covering a number of interventions that do not appear to be cost-effective, suggesting that resources could be allocated more efficiently. Although the authors identified several instances where cost-effectiveness evidence was cited in NCDs, they found no clear evidence of an implicit threshold.