Monday, September 29, 2008

The Ineffectiveness of Cost-Effectiveness Criteria

By Grace-Marie Turner

Thee use of cost-effectiveness criteria, while lowering the cost of health care in the short term, threatens to harm future patients by stifling vital medical innovations. So argue health economists Tomas J. Philipson and Anupam B. Jena argue in a book published by the American Enterprise Institute.

Cost-effectiveness criteria:

Ignore the costs and risks to the producer in developing the new technology; instead, they consider only the transaction immediately at hand, taking the existence of medical technology as a given.
Do not consider how a decision to deny reimbursement for an innovative drug, device, or procedure will affect the incentives of innovators to produce new technologies. If producers are not adequately reimbursed for their innovations, they will not be inclined to innovate further.
May limit health care costs in the short term, but gains to today's buyers may be more than offset by potential losses to future patients, who may be deprived of more advanced technologies that have yet to be invented.