Genes, Cost-Effectiveness and Healthcare Reform – Dialog with Dr. Buchanan

2018.03.02 Flags

This is a posting of my reply to British health economist Dr. Buchanan’s Comment of February 17, 2018.  The original posts are:

Dr. Buchanan:

Thanks for your thoughtful remarks about this blog post. I agree with all of your points. Allow me some further remarks.

  • As a proponent for using the Oregon Health Plan as a model for national health system reform, I was gratified by your observation that cost-effectiveness analysis is necessary, though not sufficient, to rein in health spending. You opine that one sure way of controlling spending would be to combine cost-effectiveness analysis with single payer (or single delivery) system, as has been done in United Kingdom.
  • In my most recent posts, I have taken to referring to cost-effectiveness analysis as “only a first step.” I agree that additional interventions beyond cost-effectiveness analysis alone would be needed to fully reform healthcare and control costs. As you point out, single payer delivery system could be one such add-on to control costs. Indeed, Oregon itself not only used its cost-effectiveness analysis results to prioritize and limit Medicaid essential benefits, but also combined this with a managed-care delivery system, as summarized in The Big Fix for Healthcare Reform. As another example, my post of November 4, 2017, references Dr. Elisabeth Rosenthal’s American Sickness, which addresses the Byzantine (and rigged) pricing system in the U.S. health system, which surely needs to be overhauled using economic analysis principles and business savvy. Another recent post of February 8, 2018, references Dr. Daniel Berwick’s 2012 JAMA article listing 6 major categories of “wasteful spending” requiring reform, and calls for a multi-pronged assault on them all, including limiting health services with low marginal benefit.
  • The idea of submitting health services to cost-effectiveness (economic) analysis challenges the notion among Americans – often embraced as something between axiomatic and an article-of-faith – that all healthcare is infinitely valuable. And cost-effectiveness analysis further challenges the widely held corollary among Americans that the more expensive a treatment, the better it must be. Of course, the British and all other OECD countries debunked these ideas long ago. This Fixing U.S. Healthcare blog aims to debunk the no-matter-what-the-cost delusion on this side of the Atlantic, and prod Americans to join our British and OECD peers with a more thrifty and clear-eyed approach to healthcare spending.
  • This blog claims that Oregonians in 1994 did accept that some treatments were not worth the cost, allowing them to set limits on Medicaid coverage. And I claim that this same premise must underpin any nationwide reform that seeks to control America’s snowballing healthcare costs.
  • Thank you for your admonition about terminology, namely my imprecise usage of “cost-benefit analysis.” As you point out, economics and clinical epidemiology distinguish among general “economic analysis” and specific methodologies such as cost-benefit, cost-utility, cost-effectiveness, and cost-minimization. Philosophers examine more abstract concepts such as costworthiness, efficiency, risk-benefit, and value. Along with Philosopher Paul Menzel, this blog has tended to use “cost-benefit analysis” in a broad philosophical sense. Oregon Health Plan calculated cost per quality-adjusted-life-year, and thus indeed properly should be categorized as a cost-effectiveness methodology.
  • You touch on the fact that cost-benefit analysis, which seeks to monetize health outcomes, poses methodological challenges, since there is no single approach universally accepted by all. I agree. If cost-benefit analysis were to be utilized for public policy purposes, the methodology would need to be standardized by a central authority and followed uniformly.

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Photo Image Credit:  By Pete Unseth (Own work) [CC BY-SA 4.0 (, via Wikimedia Commons

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