Questions: Cost-Effectiveness Analysis in Public Health

Question 1

A new antiretroviral regimen costs $80,000 more per patient over a lifetime than standard care and generates 4 additional QALYs. The national willingness-to-pay threshold is $30,000/QALY. What is the correct conclusion?

• A. The regimen is cost-effective because it generates meaningful health gains
• B. The regimen is not cost-effective because its ICER ($20,000/QALY) exceeds the WTP threshold
• C. The regimen is not cost-effective because its ICER ($20,000/QALY) falls below the WTP threshold
• D. The regimen is cost-effective because its ICER ($20,000/QALY) falls below the WTP threshold

Answer: (D)

ICER = $80,000 / 4 QALYs = $20,000/QALY. Since $20,000 < $30,000 (WTP threshold), the intervention is cost-effective. Option A is wrong because generating 'meaningful health gains' is not the criterion — the ICER vs. threshold comparison is. The common trap here is confusing total cost ($80,000) with cost per QALY ($20,000).

Question 2

A cost-effectiveness analysis reports an ICER of $15,000/QALY, well below the WTP threshold. A health ministry nonetheless declines to fund the intervention nationally. What economic concept best explains this apparent contradiction?

• A. The willingness-to-pay threshold was set incorrectly
• B. Budget impact: the intervention may be cost-effective but unaffordable at scale across a large population
• C. The ICER should have used DALYs, not QALYs, for this type of disease
• D. Probabilistic sensitivity analysis would show the ICER is unreliable

Answer: (B)

Cost-effectiveness and affordability are distinct. An ICER below the WTP threshold means each QALY is 'worth' the price — but if millions of patients are eligible, the aggregate cost may strain the health budget even at $15,000/QALY. Budget impact analysis, not CEA, captures this population-level cost. Options A, C, and D address methodology but do not explain the scenario described.

Question 3

An intervention with an ICER below the willingness-to-pay threshold may still be unaffordable for a health system to implement at scale.

• T. True
• F. False

Answer: True

Cost-effectiveness and budget impact are separate analyses. A low ICER means each unit of health gain is purchased at acceptable value, but if the eligible population is large, the total expenditure can still overwhelm a health budget. Both CEA (is it worth it per QALY?) and budget impact analysis (can the system afford it?) are needed for complete health technology assessment.

Question 4

A cost-effectiveness acceptability curve (CEAC) shows the probability that an intervention is cost-effective at a given threshold. This output comes from one-way sensitivity analysis varying each parameter in turn.

• T. True
• F. False

Answer: False

The CEAC comes from probabilistic sensitivity analysis (PSA), which simultaneously varies all parameters according to their probability distributions across thousands of Monte Carlo simulations. One-way sensitivity analysis varies a single parameter at a time, producing a tornado diagram showing which parameters most influence the ICER — not a probability of cost-effectiveness across thresholds.

Question 5

Why is a Markov model used in cost-effectiveness analysis rather than a simple comparison of intervention cost against comparator cost?

Model answer: A Markov model simulates transitions among health states over time, allowing CEA to capture costs and QALYs that accrue at different stages of disease progression across a lifetime horizon. Real diseases involve delayed outcomes — a preventive intervention may cost more now but avert expensive late-stage disease decades later. A simple before/after cost comparison cannot capture these temporal dynamics and would misrepresent the true economic value of interventions with long-term benefits.

The model also allows the analyst to incorporate epidemiological parameters (transition probabilities from incidence and mortality studies) alongside cost and utility data, integrating clinical evidence into a single economic framework. This is why CEA is sometimes called 'decision analysis' — it is a structured approach to choices under uncertainty across time.