Estimation of the Cost-Effectiveness Threshold: The Case of the Dominican Republic

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Riascos Villegas, Álvaro J.
Sep 2023
This study uses quantitative techniques from the health economics literature for evaluating the cost-effectiveness of financing new technologies (including procedures and medications) that result in greater well-being and health for the country. Specifically, a methodology is developed to estimate the cost-effectiveness threshold (CET) for the public healthcare system of the Dominican Republic. Since the CET measures the level of healthcare expenditure estimated to be necessary to gain one quality-adjusted life year (QALY) or some analogous measure of health outcome, this value provides a criterion for determining whether the financing of a new technology is cost-effective. Given a budget constraint, if the cost per QALY of a new technology exceeds the CET, its adoption would yield health benefits inferior to the technologies it displaces. Using econometric techniques, this study estimates the CET for the Dominican Republic at 85,928 Dominican pesos (DOP), with confidence intervals of 40,720 DOP and 131,140 DOP, which is equivalent to 26% of the per capita GDP in 2016 (331,253 Dominican pesos) with a confidence interval of 12.3% to 39.6% of per capita GDP, respectively. These results are robust to various econometric specifications and/or alternative measures of health outcomes.