Concept Architecture
Cost-effectiveness threshold
This page explains what a cost-effectiveness threshold means, how it is used with ICERs and net benefit, and why thresholds can differ between health systems. It also explains the important distinction between a threshold, affordability and an automatic reimbursement rule.
What a threshold tells us
A cost-effectiveness threshold provides a benchmark for comparing additional costs with additional health outcomes. It is commonly expressed as an amount per QALY, although another outcome unit may be used when appropriate.
A threshold does not describe the cost, price or total budget impact of an intervention. It states how incremental costs and outcomes will be valued within a particular economic decision rule.
How a threshold is used with an ICER
When an intervention is more effective and more costly than its comparator, its ICER can be compared with the applicable threshold. An ICER below the threshold generally supports the intervention on cost-effectiveness grounds, while an ICER above it generally favours the comparator.
This comparison is only appropriate after the cost-effectiveness-plane position and dominance status have been checked. A negative ICER should not be interpreted by comparing its numerical value directly with a threshold.
How a threshold is used with net benefit
A threshold converts incremental health outcomes into a monetary value. Incremental net monetary benefit then subtracts incremental cost from that value.
INMB = (λ × ΔE) − ΔC
- Positive INMB favours the intervention at the stated threshold.
- Zero INMB means the alternatives are tied under the stated rule.
- Negative INMB favours the comparator at the stated threshold.
A simple healthcare example
Suppose a treatment costs £6,000 more than current care and produces 0.40 additional QALYs. Its ICER is £15,000 per QALY.
At £20,000 per QALY, INMB is £2,000 and supports the treatment on cost-effectiveness grounds. At £10,000 per QALY, INMB is negative and the comparator is preferred under the same rule.
Why thresholds can differ
Thresholds can differ because health systems have different budgets, opportunity costs, objectives, evidence requirements and decision processes. The meaning of a published threshold also depends on how the institution says it should be used.
A threshold may be a single value, range, empirical estimate, policy benchmark or implicit decision rule. These forms should not be treated as interchangeable.
Opportunity-cost thresholds
A supply-side threshold is intended to represent health that may be lost elsewhere when resources fund a new intervention. Accepting an intervention that costs more per health unit than this threshold may reduce total population health.
Estimating opportunity cost requires evidence about spending, outcomes and displaced services. The estimate is uncertain and can vary across health systems and over time.
Willingness-to-pay thresholds
A demand-side willingness-to-pay threshold represents the value individuals or society place on an additional unit of health. It answers a different question from a supply-side estimate of health-system opportunity cost.
Willingness-to-pay and opportunity-cost thresholds may produce different values. The terms should not be used as though they describe the same evidence or policy objective.
Threshold ranges and modifiers
Some institutions use a range rather than one fixed threshold. Position within that range may depend on uncertainty, unmet need, severity, innovation or other explicitly stated considerations.
A modifier does not necessarily create a new threshold. Current guidance should establish whether it changes the threshold, evidence weighting or another part of appraisal.
A threshold is not an automatic approval rule
An ICER below a threshold or positive INMB supports a cost-effectiveness conclusion under stated assumptions. It does not require an institution to approve, reimburse or adopt the intervention.
Health technology assessment may also consider clinical evidence, uncertainty, severity, equity, feasibility and implementation. The authority and process for the final decision should be identified.
A threshold is not an affordability test
A threshold evaluates incremental value, not the total financial effect of adoption. A cost-effective intervention can still create an unaffordable budget impact when population, uptake or per-person expenditure is large.
Budget impact analysis estimates financial consequences for a defined budget holder. It complements threshold-based cost-effectiveness analysis but answers a different question.
Why the threshold must be stated
Calling an intervention cost-effective without identifying the threshold leaves the decision rule incomplete. Readers cannot reproduce the conclusion unless they know how outcomes were valued.
Report the value or range, currency, price year, health-outcome unit, jurisdiction, decision context and source. Label alternative threshold scenarios clearly.
How uncertainty affects threshold decisions
Costs, outcomes and the threshold itself may be uncertain. Sensitivity analysis can show whether the preferred alternative changes across plausible threshold values.
A cost-effectiveness acceptability curve shows the probability each alternative is cost-effective at different thresholds. It describes uncertainty and does not replace the greatest-expected-net-benefit rule.
Common mistakes
These mistakes can turn a threshold calculation into a misleading policy claim. Each should be checked before reporting a conclusion.
- A threshold is not the market price of a QALY.
- A threshold from one jurisdiction should not be transferred automatically.
- A negative ICER should not be compared mechanically with a positive threshold.
- A threshold range should not be reported as one fixed cutoff.
- A modifier should not be described as changing the threshold unless the institution says it does.
- Being below the threshold does not automatically mean approval or affordability.
Further learning
These verified Library resources explain threshold meaning, estimation and institutional use. Final links must use the confirmed Library destination for cost-effectiveness-threshold rather than a guessed URL.
- Methods for the Economic Evaluation of Health Care Programmes — LIB-000001
- Applied Methods of Cost-Effectiveness Analysis in Healthcare — LIB-000003
- NICE Health Technology Evaluations: The Manual — LIB-000099
- Webinar Series: Perspectives on US Cost-Effectiveness Thresholds — LIB-000128
- NICE: Economic evaluation — LIB-000249
- The NICE Cost-Effectiveness Threshold: What It Is and What That Means — LIB-000297
- Cost-Effectiveness Thresholds: The Past, the Present and the Future — LIB-000298
- Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis — LIB-000299
Media & tools (1)
Cost-Effectiveness Threshold Explorer
Explore how a selected cost-effectiveness threshold changes incremental net monetary benefit, identify the break-even threshold, and distinguish a cost-effectiveness conclusion from affordability and reimbursement.
Open tool →Related Concepts (7)
Institutional Perspectives (4)
- NICE
£20,000–£30,000 per QALY (Rising to £25,000–£35,000 from April 2026)
Value for money is assessed against a range of £20,000–£30,000 per QALY gained: below £20,000 a technology is normally recommended; between £20,000 and £30,000 other factors such as uncertainty and innovation are weighed; above £30,000 it is not normally considered cost effective. A higher threshold applies to ultra-rare conditions. NICE has confirmed the range will rise to £25,000–£35,000 per QALY from April 2026.
NICE Health Technology Evaluations: The Manual (PMG36); NICE, Changes to Cost-Effectiveness Thresholds Confirmed (2025)View source → - ICER
$100,000–$150,000 per QALY / evLYG
ICER's standardized value-based price benchmark uses a cost-effectiveness threshold range of $100,000–$150,000 per QALY (and per equal-value life-year gained), with results also presented across a wider $50,000–$200,000 range; the range is anchored on estimated health-system opportunity cost.
Institute for Clinical and Economic Review, 2023 Value Assessment Framework; ICER Reference Case (2023)View source → - ZIN
Tiered Threshold by Proportional Shortfall (€20,000–€80,000 per QALY)
The reference threshold varies with disease burden (proportional shortfall): approximately €20,000 per QALY for the lowest burden stratum, €50,000 for intermediate, and €80,000 per QALY for the highest burden of disease.
Zorginstituut Nederland, Cost-effectiveness threshold framework (burden-of-disease strata)View source → - CADTH (CDA-AMC)
No Single Explicit Threshold
CADTH does not declare a single fixed cost-effectiveness threshold; committees weigh the magnitude of the ICER alongside clinical benefit, budget impact, and other contextual factors rather than applying a fixed cost-per-QALY cut-off.
CADTH (now CDA-AMC), Procedures and guidance for reimbursement reviewsView source →
Library
Publications
13
Methods for the Economic Evaluation of Health Care Programmes — Drummond, Sculpher, Claxton, Stoddart & Torrance, 4th Edition ed., 2015 (Oxford University Press)
The standard international reference text for economic evaluation methods in health care, covering cost-effectiveness, cost-utility and cost-benefit analysis, measurement of costs and outcomes, evidence synthesis, and the characterisation of uncertainty.
BookView source →Applied Methods of Cost-Effectiveness Analysis in Healthcare — Gray, Clarke, Wolstenholme & Wordsworth, 1st Edition ed., 2011 (Oxford University Press)
A practical, worked-example guide to conducting cost-effectiveness analysis, structured around outcomes, costs, modelling with decision trees and Markov models, and presenting results. Volume 3 in the Handbooks in Health Economic Evaluation series, developed from the University of Oxford course.
BookView source →Cost-Effectiveness in Health and Medicine — Neumann, Sanders, Russell, Siegel & Ganiats, 2nd Edition ed., 2016 (Oxford University Press)
The revised report of the Second Panel on Cost-Effectiveness in Health and Medicine, providing methodological benchmarks for CEA including the reference case, perspectives, discounting, and the valuation of health outcomes.
BookView source →NICE DSU Technical Support Document 12: The Use of Health State Utility Values in Decision Models — Brazier, Papaioannou, Cantrell, et al., TSD 12 ed., 2011 (NICE Decision Support Unit (University of Sheffield))
Guidance on selecting and applying health-state utility values within decision models, including consistency, appropriate sources, adjustment for age/comorbidity, and handling of adverse events.
NICE DSU Technical Support Document 23: A Guide to Calculating Severity Shortfall for NICE Evaluations — Hernandez Alava, Pudney, Wailoo, et al., TSD 23 ed., 2024 (NICE Decision Support Unit (University of Sheffield))
Guidance on calculating the severity shortfall (absolute and proportional QALY shortfall) that underpins the NICE severity modifier for weighting QALYs in more severe conditions.
Systematic Review on the Evaluation Criteria of Orphan Medicines in Central and Eastern European Countries — Zelei, Molnar, Szegedi & Kalo, Vol. 11 ed., 2016 (Orphanet Journal of Rare Diseases)
A systematic review of how orphan (rare-disease) medicines are evaluated for reimbursement, highlighting the limitations of standard HTA and cost-effectiveness analysis when clinical and economic evidence is scarce, and the role of equity and MCDA.
Journal ArticleView source →Pharmacoeconomic Profiles of Advanced Therapy Medicinal Products in Rare Diseases: A Systematic Review — (systematic review), Systematic Review ed., 2025 (Journal of Clinical Medicine)
A PRISMA-guided systematic review of the cost-effectiveness and cost-utility profiles of EMA-authorised advanced therapy medicinal products (gene and cell therapies) for rare diseases, benchmarking ICERs against willingness-to-pay thresholds.
Journal ArticleView source →NICE Health Technology Evaluations: The Manual (PMG36) — National Institute for Health and Care Excellence, PMG36 ed., 2022 (NICE)
NICE’s consolidated methods and processes manual for health technology evaluation, defining the reference case for economic evaluation (perspective, comparators, time horizon, discounting, EQ-5D, cost-effectiveness thresholds and the severity modifier) — the authoritative HTA methods reference for the English NHS.
Guidelines for the Economic Evaluation of Health Technologies: Canada, 4th Edition — Canadian Agency for Drugs and Technologies in Health (CADTH), 4th Edition ed., 2017 (CADTH / CDA-AMC)
CADTH’s national methods guidelines for the economic evaluation of health technologies in Canada — reference case, comparators, modelling, effectiveness, discounting and uncertainty — a major national HTA methods reference (co-authored with Sculpher and other leading health economists).
The NICE Cost-Effectiveness Threshold: What It Is and What That Means — Christopher McCabe, Karl Claxton and Anthony J. Culyer, 26(9):733–744 ed., 2008 (PharmacoEconomics)
Foundational critical analysis of what the NICE threshold represents and how it should support efficient resource allocation.
Journal ArticleView source →Cost-Effectiveness Thresholds: The Past, the Present and the Future — Praveen Thokala, Jessica Ochalek, Ashley A. Leech and Thaison Tong, 36(5):509–522 ed., 2018 (PharmacoEconomics)
Authoritative review of threshold meanings, supply-side and demand-side estimation, assumptions, international practice and common misconceptions.
Journal ArticleView source →Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis — Aaron A. Stinnett and John Mullahy, 18(2 Suppl):S68–S80 ed., 1998 (Medical Decision Making)
Foundational net-health-benefit framework for cost-effectiveness decisions under uncertainty.
Journal ArticleView source →Methods for the Estimation of the NICE Cost Effectiveness Threshold — Karl Claxton, Steve Martin, Marta Soares, Nigel Rice, Eldon Spackman, Sebastian Hinde, Nancy Devlin, Peter C. Smith and Mark Sculpher, Health Technology Assessment 19(14) ed., 2015 (NIHR Journals Library)
Empirical and conceptual analysis of the health opportunity costs faced by the English NHS when additional expenditure displaces health-producing activity elsewhere.
Research MonographView source →
Media
5
Webinar Series: Perspectives on US Cost-Effectiveness Thresholds — Claxton, Grueger, Sullivan & McCabe, 5-part series ed., 2019 (Institute for Clinical and Economic Review)
A five-part webinar series featuring leading health economists debating how a US cost-effectiveness threshold should be set, and the theory and practice behind threshold-based decision rules.
Webinar RecordingView source →A Dose of Economics — OHE Podcast — Office of Health Economics (host: Grace Hampson), Ongoing series ed., 2024 (Office of Health Economics)
The Office of Health Economics’ podcast covering health economics, HTA, drug pricing policy, rare diseases, prevention and AI in health economics, with leading global experts discussing the questions behind the evidence.
Audio (Podcast)View source →Interpretation Guide, Health Economics: Cost-Effectiveness Plane Figures — National Advisory Committee on Immunization Economics Task Group, Version 1.0 ed., 2024 (Government of Canada)
A government interpretation guide with clear diagrams of the cost-effectiveness plane, showing how ICER results are read across the four quadrants (dominance, trade-off regions and the willingness-to-pay threshold).
Health Technology Assessment: Choosing Which Treatments Get Funded — University of Sheffield, MOOC (4 weeks) ed., 2023 (FutureLearn)
A University of Sheffield MOOC introducing how health technology assessment is used to decide which treatments get funded, covering cost-effectiveness, the QALY and decision thresholds.
Online CourseView source →OHE Insights — Office of Health Economics Commentary — Office of Health Economics, Ongoing series ed., 2024 (Office of Health Economics)
The Office of Health Economics’ commentary series, publishing accessible expert insights on HTA, drug pricing, value assessment, health financing and methods developments in health economics.
Web (Blog/Commentary)View source →
Economic evaluation — National Institute for Health and Care Excellence, Technology appraisal and highly specialised technologies guidance manual ed., 2026 (NICE)
Official methods guidance for comparative economic evaluation, including incremental analysis, ICERs, comparators and the treatment of dominated options.
Web GuidanceView source →
Frequently Asked Questions (6)
What is a cost-effectiveness threshold?
A cost-effectiveness threshold is a benchmark used to judge whether the additional health produced by an intervention is worth its additional cost, usually expressed as an amount per QALY or another unit of health outcome.
How is a cost-effectiveness threshold applied in practice?
When an intervention is more effective and more costly than its comparator, its ICER can be compared with the applicable threshold. An ICER below the threshold generally supports the intervention on cost-effectiveness grounds, while an ICER above it generally favours the comparator. The threshold should be applied only after the cost-effectiveness-plane position and dominance status have been checked, and the result does not by itself determine reimbursement or affordability.
Is a cost-effectiveness threshold a point or a range?
In published frameworks it is normally a range rather than a single figure, with acceptance becoming progressively less likely as the ratio rises through it. The range acknowledges that the underlying quantity is uncertain and that considerations beyond efficiency bear on the decision. It also creates a zone within which the outcome depends on judgement rather than arithmetic, which is where most contested appraisals sit and where the reasoning given matters more than the ratio itself.
Source: Culyer 2016
What modifiers are applied to a cost-effectiveness threshold?
Frameworks commonly allow the effective threshold to rise where the condition treated is severe, measured by the health a patient would lose without treatment, and some have applied additional weight to treatments extending life at the end of life or serving very small populations. Each modifier states that a unit of health counts for more in certain circumstances, which is a value judgement made explicit rather than a technical adjustment. Publishing the modifiers makes the reasoning inspectable, which applying them informally does not.
Source: Neumann, Sanders et al. 2016
What happens where no explicit cost-effectiveness threshold exists?
Decisions are still made, so a threshold operates implicitly whether or not it is published. It can be inferred retrospectively from the pattern of accepted and rejected ratios, and such analyses typically reveal a wide band with substantial inconsistency. The absence of a stated figure removes the discipline of having to justify departures from it and makes decisions harder to challenge, while preserving flexibility that decision makers frequently value. Which matters more is a genuine disagreement rather than a technical question.
Source: healtheconomics.wiki
Should a cost-effectiveness threshold change over time?
On the displacement conception it should, since it reflects the productivity of the budget at the margin, and that changes as the budget changes and as the mix of funded activity changes. A threshold left unrevised while budgets tighten becomes progressively too generous, and adoption at it displaces more health than it adds. In practice thresholds are revised rarely, which means most systems apply a figure that was set by circumstances no longer obtaining and that has not been re-estimated since.
Source: Claxton et al. 2015
Trust Record
Verified by Dr Darrin Baines
British health economist
Professional identity: darrinbaines.org
Verification date: 15 Sep 2026, 20:19 UTC
Content version: 1.2.15
Canonical Identity
- Term code
- HE-EE-CEA-016
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