Medicare: Potential Cost & Quality Gains Using Cost-Effectiveness Evidence to Reallocate Expenditures

James D. Chambers, PhD, MPharm

Assistant Professor
The Center for the Evaluation of Value and Risk in Health
Institute for Clinical Research and Health Policy Studies
TuftsMedicalCenter What are the main findings of the study?

Dr. Epstein: Using cost-effectiveness evidence to help inform the allocation of expenditures for medical interventions in Medicare has the potential to generate substantial aggregate health gains for the Medicare population with no increases in spending.

Reallocating expenditures for interventions in Medicare using cost-effectiveness evidence led to an estimated aggregate health gain of 1.8 million quality-adjusted life years (QALYs), a measure of health gain that accounts for both quality and quantity of life. Were any of the findings unexpected?

Dr. Epstein: We found that some ‘dominant’ interventions, i.e., those that are both cost-saving and more effective than alternatives, are underutilized in Medicare, e.g., some cardiac rehabilitation programs.  Increasing investment in these technologies led to estimated savings of $12.9 billion and a gain of approximately 270,000 QALYs. What should clinicians and patients take away from your report?

Dr. Epstein: This study shows that it is possible to improve the aggregate health of the Medicare population without increasing aggregate health care spending.  By using the interventions that offer value for money there is potential to not only reduce costs but to increase the Medicare population’s aggregate health. What recommendations do you have for future research as a result of this study?

Dr. Epstein: This study shows the potential of using cost-effectiveness information in Medicare.  However, we acknowledge that this is an illustrative exercise and that there are limitations with available data.  Future efforts should focus on identifying or generating higher quality data with which to perform this research.


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.