Country A sets its cost-effectiveness threshold at $50,000/QALY. Country B, with five times the GDP per capita, sets its threshold at $150,000/QALY. Is this difference justified?
ANo — a QALY has the same intrinsic value everywhere, so the threshold should be universal
BYes — the threshold reflects the opportunity cost of healthcare spending, which depends on the country's wealth and health budget. A richer country can afford to fund less cost-effective interventions because its marginal spending displaces less valuable care
CThe threshold should equal GDP per capita in all countries
DThresholds are arbitrary and should be abolished
The threshold represents the opportunity cost — the health forgone by other patients when resources are allocated to the new intervention. In a wealthier country with a larger health budget, the next best use of funds may already be quite effective (high opportunity cost), while in a poorer country, there may be highly cost-effective interventions still unfunded. The threshold should ideally reflect the marginal cost-effectiveness of current spending — the health gained by the last intervention currently funded. This varies by country wealth and health system efficiency.
Question 2 True / False
A contingent valuation survey asks people: 'What is the maximum you would pay per month for a treatment that reduces your risk of a heart attack by 50%?' The average response is $200/month. This estimate reliably reflects the true value people place on heart attack prevention.
TTrue
FFalse
Answer: False
Contingent valuation (CV) is subject to well-documented biases: hypothetical bias (people state higher WTP than they would actually pay), starting-point bias (anchoring to initial suggested amounts), scope insensitivity (WTP does not scale proportionally with the magnitude of benefit), and strategic bias (overstating WTP to influence policy). CV estimates should be interpreted cautiously and validated against revealed preferences where possible. Discrete choice experiments, which ask respondents to choose between defined alternatives rather than state a dollar amount, partially mitigate some of these biases.
Question 3 Short Answer
Explain why setting the WTP threshold too high wastes resources and setting it too low denies patients beneficial care.
Think about your answer, then reveal below.
Model answer: A threshold that is too high approves interventions whose cost per QALY exceeds the health that could be produced if the same money were spent on other patients (opportunity cost exceeds benefit). This displaces more cost-effective care, reducing total population health. A threshold that is too low rejects interventions that produce genuine health benefits at a cost below the opportunity cost of current spending — denying patients access to care that would improve their health without harming others. The optimal threshold equals the marginal cost-effectiveness of current spending: the ICER of the least cost-effective intervention currently funded.
In practice, thresholds are imprecise. The UK's £20,000-30,000/QALY range was originally based on precedent and expert judgment. Recent research (Claxton et al., 2015) estimated the actual opportunity cost in the NHS at approximately £13,000/QALY — suggesting the threshold may be too high, and some currently funded interventions are displacing more cost-effective care. This finding illustrates the real-world stakes of threshold-setting: it determines who gets treated and who does not.