Unbiased Analysis of Today's Healthcare Issues

Comparative Effectiveness vs. Cost Effectiveness Research

Written By: Jason Shafrin - Mar• 11•10

Comparative Effectiveness has been a hot topic in health services research. According to a recent article in the New England Journal of Medicine, “the American Recovery and Reinvestment Act of 2009 authorizes the expenditure of $1.1 billion to conduct research comparing ‘clinical outcomes, effectiveness, and appropriateness of items, services, and procedures that are used to prevent, diagnose, or treat diseases, disorders, and other health conditions.'”

Comparative effectiveness compares how effective various medical treatments improve health outcomes.  This sounds like the course we want to take.  Most policymakers laud the health benefits of comparative effectiveness research, but some people claim that comparative effectiveness research can also save cost.

This is most easily seen in the case where a treatment is completely ineffective.  If research can prove a treatment is ineffective, then insurers could save a lot of money by not covering this type of treatment.  This is especially true if the treatment is expensive.

However, comparative effectiveness treatment could also increase cost.  Assume that there are two treatment currently in use: Treatment A and Treatment B.  Let us say that treatment A costs $1,000 and has a 90% cure rate and Treatment B costs $10,000 and has a 95% cure rate.  According to comparative effectiveness research, we should always use Treatment B.  Yet this would significantly increase costs.

Most health economists argue that cost effectiveness research is provides a better way to improve health and decrease cost.  In the example above, should we cover Treatment B?  The answer is likely yes if this is a very serious disease (e.g., cancer) but likely not if the disease is less serious (e.g., the common cold).  Some readers may believe insurers should always cover Treatment B no matter what.  However, would you be willing to pay increased premiums that would occur if treatment B were covered?  Would you feel the same way if Treatment B cost $100,000?  or $10 million?  What if the cure rate was only 90.1%?

At some point, there must be a trade-off between cost and benefit.  Admittedly, these are very difficult decisions in practice, but because there are limited healthcare resources, we must ration care.  Yes, I said it, we must ration care.  I’ve said this before.  This rationing can take many forms: the scope of what your insurance company (or Medicare) will cover, waiting lines, or increased prices you must pay out of pocket for medical services.  The government wants to avoid making these tough choices because it is politically unpopular.  Politicians don’t want to be labelled  the sentator who “killed Grandma” or “instituted a death panel.”  But to truly decrease cost and improve quality, cost effectiveness rather than comparative effectiveness is the prescription we need.

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  1. Mike says:

    Jason, there has been more talk about “decremental cost effectiveness” lately– finding treatments that are almost as effective but substantially cheaper. Perhaps you could share your take on this?

  2. Arthur_500 says:

    There has been so much confusion between Health Care and Health Insurance it is often all too easy to forget that what is really important to the consumer is Health Care. A team approach OFFERS much better care as the team has multiple expertise to bring to the patient’s problem and should enable them to focus in on what really works in patient care. This is not often less expensive but it usually does provide better care.

    The majority of medical care is adequately provided by a single care provider. The times when this type of approach is helpful is in the most difficult and complex cases where the benefit of care is dubious when looked at from a cost vs value perspective.

    Patient care from a health care perspective has no restrictions but from a personal or payer perspective the restrictions come to the forefront. I am not willing to spend hundreds of thousands of dollars on a patient (even myself) who is terminally ill and yet our government will open the coffers for any and all care. Insurance companies are also hesitant to spend dollars on what is obviously unnecessary treatments.

    Oddly, the government recognizes the need for restraint in care for those who will continue to be productive members of society when they heal up. Therefore, we will continue to have the inner tug of wr between what is most effective and what is most cost effective and this tug will become ever more public as Insurance companies and government healthcare paying entities become increasingly involved.

    Too bad we couldn’t just have great health care that is provided with a team of dedicated professionals doing what is best for their patients.

  3. Comparative effectiveness and cost effectiveness research should not really be viewed as different from each other. Most cost effectiveness, if done well, is a comparative effectiveness method. That is, it compares outcomes and costs in an effectiveness setting.

    The question you should be asking is whether CER studies should always include costs. Many think so.

    Another important questions is whether CER studies should always assess treatment effect heterogeneity. The summary effects reported in traditional clinical trials are notoriously difficult to apply in a clinical setting where the presenting patient is not like the trial’s average patient. CER has an opportunity to adopt principles of personalized medicine, so that effects can be assessed across the full distribution of patients. If this effort can be successful, and many think it can, your example of treatment A v treatment B is too simple. Both treatments would survive in a marketplace where evidence is generated that shows at least some patients would benefit the more expensive treatment.

    In any case, I don’t think “CER or CEA?” is the right question to ask.

  4. Rockon says:

    I don’t think “CER or CEA?” is the right question to ask.

  5. […] On areas other than the health bill, Jason Shafrin looks at the perennial problem in health insurance – cost effectiveness. […]

  6. CancerSurvivor says:

    The problem with all of this research is that it leaves the individual patient out. Humans do not come from the same cookie cutter. We are individuals with individual needs and desires. I’m a breast cancer survivor. My cancer was caught at stage 0. I had four options: do nothing and watch it; a lumpectomy, single mastectomy or double mastectomy. The first three options left me vunerable to the cancer recurring more agressively. The last option offered me a cure. So under CER or CEA, which treatment would be dictated to me under government controlled panels? How many years of survivorship would be considered- 5, 10, 15, 20 years? Would my desires for my body be considered – save my breasts or save my life? Would my age be considered? If mastectomies are dictated, would reconstruction be covered? Would my mental/emotional/spiritual state be considered?
    Medical decisions need to be between the doctor and the patient.

    As far as costs, those will come down when the government gets out of healthcare completely and insurance companies are allowed to right policies the market wants – from catistrophic only policies to “cadillac” policies. Let the people decide how much of their money they want to spend on insurance polices and medical treatments. As far as the poor among us, the market will step up and take care of them, too. I see it through out my community through charitable organizations and doctors.

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