Why cost-effectiveness thresholds for global health donors differ from thresholds for Ministries of Health (and why it matters)

Why cost-effectiveness thresholds for global health donors differ from thresholds for Ministries of Health

In short, we argue that donors and national decision-makers should adopt different cost-effectiveness thresholds from one another because they have different decision perspectives, shaped by the following two factors:

Why does this matter?

The lack of clarity around differences in donor and national cost-effectiveness thresholds is indicative of the lack of clarity in the decision perspectives and the roles that different actors have in funding healthcare in LMICs. Despite global health financing being a multi-billion-dollar sector where rhetoric on evidence-informed priority-setting is commonplace, many donors lack a clear framework for prioritisation. Collaboration between donors and national institutions in countries which receive DAH is often complex, political, and constantly negotiated for both donors and countries. The result is a fragmented system of financial support that impedes national health leaders in their work to develop an efficient and effective health system.²²

The application of separate cost-effectiveness thresholds that reflect the perspective of decision-makers and donors can help to clarify the roles and responsibilities of national vs international funders of health services in LMICs; in other words, it would create a structure for who-should-fund-what. National institutions could design and fund a cohesive core package of the most-cost-effective services up to their national thresholds and “invite” donors to support a top-up package of the next-most-cost-effective services (see Figure 1). The role of DAH would therefore be auxiliary: donors would fund interventions above the national threshold, up to their own threshold (we will discuss what this would look like below). In other words, the national cost-effectiveness threshold would represent a ceiling for a national payers and a floor for donors, below which they would not seek to fund activities in that country.

Figure 1. National and donor cost-effectiveness thresholds using the bookshelf metaphor.

This approach could address some of the greatest challenges in global health financing.¹⁰ First, it could focus national resources towards funding a core package of the most essential services, which could ensure that funding for the provision of key services is not affected by aid volatility. Second, fragmentation of health financing^23,24 (and resulting duplication) could be reduced by a clearer separation of funding responsibilities. Further, the application of separate cost-effectiveness thresholds can avoid displacement of domestic resources by aid. Greater prioritisation of health interventions from a national perspective could be achieved, especially in designing a core package of most essential services – which can maximise the impact of overall health funding, rather than of funding streams operating in silos. The approach would also empower national institutions to set their own priorities, rather than needing to work within the complex and fragmented financing space created by ad hoc donor support. At present, a significant share of health prioritisation is de facto done in donor headquarters and does not necessarily reflect national priorities; which is especially important in countries where the share of DAH in total health expenditure is high. Moreover, in this framework, as domestic finances increase, so might the national health budget and national cost-effectiveness threshold, and health aid is naturally crowded out. Conversely, transition from aid or the ending of specific aid programmes does not disrupt the provision of the most-cost-effective services.

Beyond reforms to within-country resource allocation, clearer frameworks for evidence informed prioritisation could help donors equitably and effectively prioritise investments between countries. A clear donor cost-effectiveness threshold would promote the concentration of funding from global health donors in the programmes and contexts in which the greatest health gains can be made with the resources available. This approach is consistent with the ethical position that all health gains should be valued equally, regardless of where occur and how they are produced.

Options for setting thresholds

How might cost-effectiveness thresholds be set to reflect those two decision perspectives?

For national thresholds, methodological approaches to setting a threshold have been discussed extensively elsewhere.^14,25 In 1993, the World Bank suggested income-group-specific thresholds of US$50-200 per disability-adjusted life-year (DALY) averted.²⁶ These were superseded by the World Health Organisation’s Choosing Interventions that are Cost-Effective (WHO-CHOICE) programme, which suggested that interventions with an ICER below 3x or 1x gross domestic product (GDP) per capita could be considered “cost-effective” or “highly cost-effective”, respectively.²¹ The use of WHO-CHOICE thresholds is now being discouraged because they appear to be too high and do not adequately reflect the resource limitations of LMICs. Indeed WHO health economists note they were never intended to be used in the way they often were.^12,27 Recently, health economists have sought to clarify the theory underpinning thresholds, as we discussed in the introduction, linking it to resource availability and local opportunity costs; with a set of estimates produced for LMICs in two papers.^15,16 It is worth noting that only few countries have defined an explicit cost-effectiveness threshold – for example, the UK and Thailand do, while Austria and Kenya do not.²⁸

In contrast, there is almost no literature discussing what a cost-effectiveness threshold could look like from a donor perspective. Drake (2014) outlines a case for a minimum DALY value to guide donor prioritisation.¹⁸ Morton et al., (2017) describe an approach towards subsidising and crowding-in services which are just cost-ineffective from a national perspective, but does not address donor-perspective thresholds.¹⁹ GiveWell uses a benchmark that charity programmes should be expected to provide value at least 10 time greater than cash transfers²⁹ and Open Philanthropy require a 1000 fold expected return on investment for their (generally higher risk and upstream) investments.⁹

In attempting to set a threshold from a donor perspective, a first question is whether global health donors would all follow a single cost-effectiveness threshold or develop their own, agency-specific threshold. It is tempting to view each donor as having its own decision perspective and institutional mandate and therefore its own threshold. Use of numerous donor-specific thresholds could retain the advantage of improving the efficiency of each donor’s allocation between contexts, but the key challenges to coordination with national institutions and other donors would remain. To realise the benefits of improved donor harmonisation outlined in the section above, a shared donor threshold is necessary. This could be a joint threshold agreed between donors at a country level forum, such as a Sector Wide Approach (SWAp), which would facilitate the benefits of country level harmonisation but would lose the benefits of between-country resource allocation. A generalised global threshold would be required to achieve both within- and between-country benefits.

In broad terms, how could a global health donor threshold be set?

Option 1: Notional. Many countries and organisations use CEA to guide healthcare prioritisation without formally defining a cost-effectiveness threshold. One option is for donors to use the theoretical possibility of a separate cost-effectiveness threshold to shape policy and the clarify roles with regards to national decision-makers, without quantifying the threshold itself.

Option 2: Supply-side. Supply-side estimation means linking the threshold to the resources available and what they currently achieve in health production, at the margin. That is, a new investment opportunity should be more cost-effective than the next-best alternative that additional funding could support instead. If a cost-effectiveness threshold should reflect the payer’s opportunity costs, then a donor’s threshold should reflect opportunity costs at the global level, and should therefore be the same across all countries in which the donor may consider investing. It may also be possible to use statistical analysis analogous to the techniques used for estimating healthcare opportunity cost at the country level for domestic finances³⁰ to estimate the opportunity cost of marginal health aid globally.

Option 3: Demand-side. In contrast to the resource-linked supply-side approach, a demand-side route to setting a donor-perspective threshold could mean defining an aspirational benchmark that relevant stakeholders agree on. For example, participants in a World Health Assembly could support an aspirational declaration that all countries should be able to provide services that produce health for $X per DALY averted. That is, a minimum DALY value above which services should be considered worthy of investment, regardless of affordability to the national healthcare provider. Such an approach bridges the philosophical position of right-to-health advocates and technical optimisation approaches of health economists by effectively establishing a minimum value on health and therefore a right to services that can produce health for this minimum standard. The drawback of the aspirational target is that it may allow sub-optimal allocation decisions if the demand-side aspiration is radically different from the supply-side reality. However, an important advantage of such a threshold is that it would function not only as an optimisation tool, but an advocacy goal.