We’re excited to launch “3 Things About Cost-Effectiveness”, the fifth video in our ‘3 Things About’ series designed to simplify complex healthcare topics. In this video, Frederick Thielen explores cost-effectiveness analysis (CEA)—a key tool in healthcare decision-making. With limited resources, CEA helps determine which treatments provide the most health benefits for their cost. However, cost-effectiveness is often misunderstood or oversimplified.
Transcript of the video
3 THINGS ABOUT COST-EFFECTIVENESS
Imagine you are managing your fridge at home. You only have limited space, and you try to organize it neatly with separate compartments for fruits, vegetables, drinks, and other items. Every time you buy groceries, you need to decide what stays and what goes. Should you add a new fancy drink and remove that old broccoli? This is similar to how cost-effectiveness analysis (CEA) helps us make decisions in healthcare. But cost-effectiveness analysis is often misunderstood or oversimplified. Here are three things you might not know about it.
Beyond costs and benefits
Cost-effectiveness is not just about finding out if something works or if it is affordable. It is about figuring out the best way to use limited resources—just like choosing which items deserve a spot in your fridge. In healthcare, this means comparing how much health benefit different treatments provide for their cost. If you think of each new treatment like a new grocery item, it is not enough to just ask if it is “good.” You need to ask if it adds more value than what is already there. In healthcare, this value is often measured in terms of Quality-Adjusted Life Years or Disability-Adjusted Life Years. They quantify the years of healthy life a treatment can add or save. Just like you would not throw out fresh vegetables to make room for a sugary drink that adds no real value, healthcare prioritizes treatments that bring the greatest health benefit for the money. It is about getting the most value, not just the cheapest option.
Different compartments, different priorities
The fridge analogy also works for its distinct compartments for different types of food—fruits, vegetables, drinks, and so on. Much like how healthcare has different areas, such as surgery, mental health, and preventative care. Sometimes, the decision is not just about finding the best item in one compartment, but also comparing across different compartments. For example, you might decide that having more vegetables is more important than keeping that extra bottle of juice. In healthcare, this means making tough choices between different treatment areas: should we invest more in cancer treatments, or shift some of that money into preventative care for diabetes? These decisions are challenging because they involve comparing different needs. Cost-effectiveness analysis helps us make those choices systematically. They often use Quality-Adjusted Life Years or Disability-Adjusted Life Years as benchmarks for evaluating the impact on health.
Cost-effectiveness thresholds are not universal
A big question in healthcare is: how big should the fridge actually be? Or, put differently, how much should we spend on health overall? Different countries have different healthcare budgets—like having different-sized fridges—and each country sets its own “cost-effectiveness threshold.” This threshold is like the rule you might set for deciding when it is worth upgrading to a bigger fridge. It tells you how much you are willing to pay for an additional year of healthy life. If a treatment costs more than this threshold, it may not be considered cost-effective because the money could be better spent elsewhere. But sometimes, when the value is high enough, it might be worth expanding the budget—just like deciding to get a bigger fridge if it means being able to store all the essentials you really need.
Cost-effectiveness analysis is a powerful tool that helps us make informed decisions about how to allocate limited resources in healthcare. It is not as simple as just comparing costs and benefits—it is a tool that can guide our priorities, inform us about the consequences of making tough choices across different areas, and help us decide how much we are willing to spend to improve health outcomes.
And don’t miss the making-of video
The videos were filmed on November 28, 2024, at the Gegevens Erasmus Studio of Erasmus University Rotterdam.
We invite you to watch, share, and join the conversation about how we can work together to make healthcare more equitable and effective.
