Estimating the Reference Incremental Cost-Effectiveness Ratio for the Australian Health System

Area of Science:

• Health Economics
• Public Health Policy
• Health Technology Assessment

Background:

• Healthcare spending on new technologies increases population health if benefits exceed opportunity costs.
• Opportunity costs represent the forgone benefits from alternative resource allocations.
• Understanding these costs is crucial for efficient healthcare investment.

Purpose of the Study:

• To estimate the incremental cost per quality-adjusted life-year (QALY) gained from increased government health expenditure.
• To establish an empirical reference incremental cost-effectiveness ratio (ICER) for value-based healthcare decision-making in Australia.
• To assess the opportunity costs associated with funding new health technologies.

Main Methods:

• Utilized empirical top-down approaches to quantify QALY gains from reduced mortality and morbidity.
• Employed instrumental variable two-stage least-squares regression to analyze mortality-related QALY elasticity.
• Applied regression analysis on longitudinal survey data for morbidity-related QALY gains, incorporating clinical judgment for quality-of-life duration.

Main Results:

• The base-case reference ICER was estimated at AUD28,033 per QALY gained.
• A 95% confidence interval for the reference ICER was calculated as AUD20,758–37,667, reflecting parametric uncertainty.
• This empirical ICER provides a benchmark for evaluating health expenditure decisions.

Conclusions:

• The empirical reference ICER suggests that current public funding recommendations for new technologies (above AUD40,000/QALY) may not represent the most efficient allocation of resources.
• Reallocating resources within health spending could potentially yield more QALYs.
• This study advocates for a more evidence-based approach to healthcare resource allocation in Australia.