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Illustrating Potential Efficiency Gains from Using Cost-Effectiveness Evidence to Reallocate Medicare Expenses

The Issue

In many countries, governments perform comparative analyses of the cost-effectiveness of medical treatments to help determine the allocation of limited health care resources. Policymakers in the United States have not adopted this approach, even though there is broad consensus that U.S. health care spending growth is unsustainable.

What the Study Found

Commonwealth Fund–supported researchers illustrate the potential gains in health and efficiency if decision-makers at the Centers for Medicare and Medicaid Services (CMS) were to take into account cost-effectiveness when making Medicare coverage decisions. Based on a review of published studies, they determined the cost-effectiveness of 36 treatments considered by CMS from 1999 through 2007. The analysis found that:

  • Increasing investment in cost-saving and health-increasing interventions resulted in 270,000 additional quality-adjusted life years (QALYs) and savings of $12.9 billion.
  • Reallocating expenditures to include a broader set of interventions yielded an additional 1.8 million QALYs.
  • After reallocation, a greater proportion of resources went to oncology, diagnostic imaging/tests, and the most prevalent diseases. Fewer resources went to cardiology, to drugs or surgeries (as opposed to preventive services), and to treatments for the least prevalent diseases.


In the U.S., cost-effectiveness research has been associated with rationing of health care. But the authors assert that "rather than using [cost-effectiveness analysis] to reduce spending, it can identify how to increase aggregate population health while maintaining existing spending levels." Including cost-effectiveness in coverage determinations could add substantial gains to beneficiaries’ health and increase the nation’s return on health care spending.

Publication Details



J. D. Chambers, J. Lord, J. T. Cohen et al., "Illustrating Potential Efficiency Gains from Using Cost-Effectiveness Evidence to Reallocate Medicare Expenses," Value in Health, published online May 13, 2013.