Incremental cost-effectiveness ratios (ICERs): The silence of the lambda

Amiram Gafni and Stephen Birch

Social Science & Medicine, 2006, vol. 62, issue 9, 2091-2100

Abstract: Despite the central role of the threshold incremental cost-effectiveness ratio (ICER), or lambda ([lambda]), in the methods and application of cost-effective analysis (CEA), little attention has been given to the determining the value of [lambda]. In this paper we consider 'what explains the silence of the [lambda]'? The concept of the threshold ICER is critically appraised. We show that there is 'silence of the [lambda]' with respect to justification of the value of ICER thresholds, their use in decision-making and their relationship to the opportunity cost of marginal resources. Moreover, the 'sound of silence' extends to both 'automatic cut-off' and more sophisticated approaches to the use of [lambda] in determining recommendations about health care programs. We argue that the threshold value provides no useful information for determining the efficiency of using available resources to support new health care programs. On the contrary, the threshold approach has lead to decisions that resulted in increased expenditures on health care programs and concerns about the sustainability of public funding for health care programs without any evidence of increases in total health gains. To improve efficiency in resource allocation, decision-makers need information about the opportunity costs of programs.

Keywords: Economic; evaluation; Cost-effectiveness; analysis; Decision; rules; Incremental; cost-effectiveness; ratio; Health; care; costs (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (25)

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