American Journal of Law & Medicine

Priority Setting, Cost-Effectiveness, and the Affordable Care Act

The Affordable Care Act (ACA) may be the most important health law statute in American history, yet much of the most prominent legal scholarship examining it has focused on the merits of the court challenges it has faced rather than delving into the details of its priority-setting provisions. In addition to providing an overview of the ACA's provisions concerning priority setting and their developing interpretations, this Article attempts to defend three substantive propositions.

First, I argue that the ACA is neither uniformly hostile nor uniformly friendly to efforts to set priorities in ways that promote cost and quality.

Second, I argue that the ACA does not take a single, unified approach to priority setting; rather, its guidance varies depending on the aspect of the healthcare system at issue (Patient Centered Outcomes Research Institute, Medicare, essential health benefits) and the factors being excluded from priority setting (age, disability, life expectancy).

Third, I argue that cost-effectiveness can be achieved within the ACA's constraints, but that doing so will require adopting new approaches to cost-effectiveness and priority setting. By limiting the use of standard cost-effectiveness analysis, the ACA makes the need for workable rivals to cost-effectiveness analysis a pressing practical concern rather than a mere theoretical worry.

        1. Individuals with Disabilities
        2. The Elderly
        3. The Terminally III
        1. Nondiscrimination in Design
        2. Nondiscrimination in Provision
        3. Fairness to Diverse Segments of the Population
        1. Preventing Death at Any Cost
        2. Clinical Trials and "Life-Threatening Conditions"


In drafting the Affordable Care Act (ACA), policymakers faced delicate and politically explosive tradeoffs between expanding access to medical care and controlling the ever-increasing cost of that care. This Article conducts a detailed examination of several provisions of the ACA, introduced as the ACA traced its tortuous path from introduction to enactment, that limit the healthcare system's use of cost-effectiveness analysis, a technique that quantifies the cost and expected benefit of medical interventions and enables actors within the system to set priorities. (1)

Part I of this Article introduces three representative patients and presents the problem of priority setting in healthcare. Priority setting takes place at a variety of different levels within the healthcare system, ranging from basic science research to federal policy to individual physician-patient interactions. And priority-setting decisions can potentially save--or cost--more lives than even some of the most discussed innovations and mistakes within medical care. (2)

Part II then turns to the text of the ACA, analyzing a variety of provisions that regulate the priority-setting options of different actors in the healthcare system. Part II. A discusses provisions that prevent the Patient Centered Outcomes Research Institute (PCORI) from employing priority-setting approaches that disadvantage people with disabilities. Part II.B discusses similar provisions that restrict the considerations Medicare can employ when making reimbursement or coverage decisions. Part II.C discusses restrictions on priority setting for essential health benefits. Part II.D discusses priority setting for health plans offered through Health Insurance Exchanges. In discussing these provisions, I draw on parallels with both tort and antidiscrimination law. My ultimate concern is that these provisions generate an inconsistent set of priority-setting rules that threaten to hamstring cost control efforts without substantially improving population health.

Part III offers solutions to the challenges that the provisions discussed in Part II pose. Part III.A proposes an approach to cost-effectiveness analysis that avoids disadvantaging people with preexisting disabilities in a manner prohibited by the ACA. Part III.B discusses when considering age in priority setting is and is not appropriate under the ACA. Part III.C discusses how cost-effectiveness analysis can equitably respond to the different healthcare needs of different groups within a population.

In addition to providing an overview of the ACA's provisions concerning priority setting and their developing interpretation, this Article attempts to defend three substantive propositions. First, I argue that the ACA is neither uniformly hostile nor uniformly friendly to priority-setting efforts that promote cost and quality. Second, I argue that the ACA does not take a single, unified approach to priority setting; rather, its guidance varies depending on the aspect of the healthcare system at issue (PCORI, Medicare, essential health benefits) and the factor being excluded from priority setting (age, disability, life expectancy). Third, I argue that cost-effectiveness can be achieved within the ACA's constraints, but only by adopting new approaches to cost-effectiveness and priority setting. While several authors have criticized the prevailing cost-effectiveness approaches used in medical contexts as insufficiently sensitive to important normative considerations, (3) these criticisms have had little force because the prevailing approaches are widely adopted and easy to operationalize. By limiting the use of standard cost-effectiveness analysis, the ACA makes the need for workable rivals to cost-effectiveness analysis a pressing practical concern rather than a mere theoretical worry.

A few commentators on the ACA have noted the provisions I discuss, (4) as have some commentators on comparative effectiveness and cost-effectiveness in medical care more generally. (5) Some of these authors regard the ACA's priority-setting provisions as largely or completely precluding the use of cost-effectiveness analysis, (6) while others regard these provisions as ineffectual window dressing that fails to set meaningful limits on the choices of healthcare decision makers. (7) Even though priority-setting provisions affect a wide swath of actors in the healthcare system--ranging from private insurers to administrators to potential litigants challenging insurance decisions--legal scholarship has yet to discuss them at length. In particular, no article has yet discussed the United States Department of Health and Human Services' Final Rule that codifies the ACA's provisions, nor has any discussed the question of how far the ACA extends the antidiscrimination paradigm into the fields of health insurance and medical care. In this Article, I both provide a systematic analysis of these provisions and begin a broader conversation.

More importantly, this Article offers novel positive solutions to the problems that these provisions pose. These solutions have applicability not only for the growing field of legal scholarship surrounding the ACA, but also for empirical and conceptual work on cost-effectiveness more generally. This Article explores alternatives to traditional cost-effectiveness analysis, which could help healthcare priority setting accord better with public preferences as well as with antidiscrimination goals.


Imagine three cancer patients:

* Alice, 70, has breast cancer. Untreated, her life expectancy is estimated at five years. Treatment could cure her cancer, but, because of her advanced age, would add only five years to her untreated life expectancy.

* Bill, 60, has metastatic prostate cancer. Untreated, he can expect to live for three months; treatment could add five years to that estimate.

* Caroline, 30, has osteosarcoma of the leg. Untreated, she is expected to live for five more years; treatment would require amputating her leg, but would leave her completely cancer free. She is also hearing impaired.

Priority setting at different sites and different levels within the healthcare system shapes Alice, Bill, and Caroline's options in myriad ways. Choices about priorities at the "micro level"--that is, choices about which specific individuals should receive which treatments (8)--will affect these patients' options in the most obvious way. Principles and procedures for the micro-level allocation of resources have been most vigorously discussed in contexts where resources are absolutely scarce: when physicians on the battlefield are asked to engage in triage, (9) when a pandemic leads to vaccine shortages, (10) or when choices must be made about which patient will receive an organ transplant. (11) However, micro-level rationing also takes place in more mundane contexts: physicians' decisions about which tests to order, how much time to spend with a patient, or which treatments to prescribe all reflect judgments about priorities. (12)

Priority setting at other levels of the healthcare system affects patients' options as well. A 1969 student note in the Columbia Law Review makes the point as well as anything since:

   The decisions of particular hospitals or doctors in their selection
   of specific patients for an available treatment--decisions which
   might be characterized as "micro-allocation"--form only one aspect
   of medical resource allocation. Equally significant in affecting
   the ultimate availability and distribution of these resources are
   the determinations and underlying policies of a wide variety of
   persons and institutions--public and private alike--who are quite
   far removed from the immediate context of patient treatment.
   Congressional appropriations of research funds, the activities of
   national health organizations, state underwritings of specialized
   treatment costs, budgetary allocations within federal agencies
   maintaining public hospital facilities, and the adjustment of
   coverage by private health insurance companies are some of the
   activities which are part of the second phase of medical facilities
   distribution: the process of "macro-allocation." (13)

Much of this priority setting, rather than establishing hard limits on whether a given patient receives a given treatment, operates by affecting the cost and supply of different treatments. Medical insurers may reimburse treatments for different conditions at different rates, (14) while formularies and practice guidelines may recommend some treatments over others and deny reimbursement for unproven treatments. (15) Value-based insurance designs, which reduce or eliminate copayments for certain drugs or even pay patients to choose those drugs, may also provide patients with financial incentives to choose specific treatments. (16) Even more general decisions in the healthcare system--such as which specialties prospective physicians are encouraged to pursue--also ultimately affect patients' access to care. (17)

Priority-setting decisions can markedly affect the ability of the healthcare system to save lives, cure illness, and improve patients' quality of life. Directing resources toward treatments that save more lives and cure more illnesses has had, in many cases, a greater impact than the discovery of a new antibiotic or an innovative device. (18) As the medical ethicist Toby Ord observes:

   If we can save one thousand lives with one intervention and ten
   thousand with another at an equal price, then merely moving our
   funding from the first to the second saves nine thousand lives.
   Thus merely moving funding from one intervention to a more
   cost-effective one can produce almost as much benefit as adding an
   equal amount of additional funding. (19)

Old's point is that moving funding from a less cost-effective to a more cost-effective intervention can provide almost as much benefit as increasing funding for a more cost-effective intervention by the same amount. But his reasoning additionally suggests that moving funding from a less cost-effective to a more cost-effective intervention could provide more benefit than adding a lesser amount of additional funding, or than making a modest improvement in the efficiency or effectiveness of medical practice.

However, unlike the discovery of new antibiotics or surgical techniques, priority setting decisions are frequently controversial. This is because the great gains realized by shifting resources toward more cost-effective interventions entail losses-- sometimes substantial losses--for those who benefited from the less cost-effective interventions. (20) Put differently, priority-setting decisions, unlike medical innovations, are not Pareto improvements. (21) Those who believe they will lose under a given priority-setting regime frequently organize to oppose that change, even when their victory leads to a less effective healthcare system. (22) Consider, for example, Ord's suggestion that the money spent on providing surgical treatment for Kaposi's sarcoma, a cancer associated with AIDS, could save far more lives if instead spent on expanding access to antiretroviral treatments for HIV-infected individuals. (23) A proposal to put Ord's suggestion into practice would almost certainly draw fire from those who have a stake in continued public funding for the treatment of Kaposi's sarcoma: patients with the condition, surgeons specializing in its treatment, and associated advocacy organizations. This coalition might mobilize to entrench funding for Kaposi's sarcoma treatment and safeguard it against attempts to shift resources toward more cost-effective treatments, just as other groups--such as breast cancer patients, (24) back surgeons, (25) and Medicare recipients (26)--now do. Indeed, breast cancer advocacy groups have already succeeded in entrenching access to mammograms in the ACA, despite research calling mammography's clinical effectiveness into doubt. (27) That priority setting in medical care is more difficult to implement than innovation mirrors similar phenomena elsewhere: while efforts to eliminate government fraud and abuse are broadly popular, proposals to replace existing programs with more efficient alternatives frequently meet vigorous opposition from those who would lose out due to the change. (28)

The ACA, perhaps in recognition of the political power particular interest groups wield, contains no "death panels" (29) or "God Committees" (30) that set specific priorities for micro-level allocation, or that directly deny Alice, Bill, or Caroline access to treatment. Nonetheless, the ACA's provisions substantially affect the priorities that physicians, insurers, and other actors in the healthcare system pursue. By establishing which priority-setting factors may be used in establishing the list of essential health benefits, (31) the ACA shapes the landscape of medical care: if a category of treatments is defined as an essential health benefit, that category of treatments will be provided in every plan that is a "qualified health plan" under the ACA. (32) The same is true when the ACA sets standards for which factors can be employed in priority setting within Medicare. (33) The ACA also establishes--and establishes priority-setting standards for--the PCORI, which researches the comparative effectiveness of different treatments and publicizes its findings, thereby providing physicians and insurers with an important resource when setting priorities. (34) And the ACA regulates plans offered through government-established Health Insurance Exchanges ("Exchanges") in other ways; for instance, the ACA requires plans to permit enrollees to participate in certain clinical research trials. (35)

Part II discusses in more detail these provisions of the ACA, which explicitly set healthcare priorities, or--more frequently--prohibit decision makers from considering certain factors when setting priorities.


Many aspects of the ACA simply attempt to improve cost, quality, or access to healthcare for patients across the board, by increasing funding or focusing resources on preventing fraud and waste. (36) Although these aspects may incidentally affect priority setting, their focus is not the distribution of benefits among patients. (37)

This Article, in contrast, concentrates on provisions in the ACA that explicitly prohibit or require certain forms of priority setting, and thereby affect the comparative priority that specific health conditions--like those of Alice, Bill, and Caroline--receive in the healthcare system. The provisions I discuss in this Part pertain to four different aspects of the healthcare system that the ACA establishes or affects: PCORI, Medicare, essential health benefits, and the Exchanges. These provisions restrict the use of four different health factors for priority setting: disability, age, life expectancy, and imminence of death. (38)

                   Disability   Age          Future Life   Imminence
                                             Expectancy    of Death

PCORI              Prohibited   Permitted    Permitted     Permitted

Medicare           Prohibited   Prohibited   Prohibited    Permitted

Essential          Prohibited   Prohibited   Prohibited    Permitted
Health Benefits

Exchange Plans     Neutral      Neutral      Neutral       Required

I divide my discussion below into four subparts, focusing on PCORI, Medicare, essential health benefits, and Exchanges, respectively. I choose this organization, rather than organizing my discussion by health factor, in order to emphasize that the ACA issues different guidelines to different actors within the healthcare system. That the ACA directs one actor, like PCORI, to consider or ignore a given healthcare factor when setting priorities does not entail that it gives the same direction to another actor, like Medicare.

Interestingly, many of the provisions in the ACA that prohibit or require certain forms of priority setting represent an unusual consensus among a variety of actors in the healthcare system. Many were added through efforts by conservative Senators who opposed the ACA, such as Michael Enzi of Wyoming, and conservative lobbying organizations such as the National Committee on the Right to Life. (39) Yet they have been embraced by many more moderate and liberal causes, such as patient advocacy groups and advocates for persons with disabilities. (40) They have also met approval from industry groups. (41) This complicates any sort of purposive or public meaning interpretation of these provisions. Looking to the intent of the legislators who introduced the provision might suggest an interpretation in line with conservative objections to cost-effectiveness, which have emphasized concerns about ill people--particularly the elderly--being deprived of opportunities to access costly, last chance treatments. (42) The public understanding of the statute, however, suggests that these provisions also benefited from support on more traditionally liberal grounds. These grounds include concerns about health insurers cherry-picking healthy patients, about the fair treatment of people with disabilities, and about ensuring that the health benefits offered through the ACA were valuable to a diverse cross section of the population. (43)

Some have argued that the provisions I will discuss below in fact place few meaningful restrictions on the use of standard methods of priority setting, such as the use of quality-adjusted life years. (44) This argument has come both from those enthusiastic about the believed lack of restriction and those concerned about it. Stephen Mikochik argues that the ACA broadly permits priority-setting methods that disadvantage people with disabilities:

   Of the numerous instances where the Act authorizes adoption of
   quality measures, in one case only is the Secretary of Health and
   Human Services expressly forbidden from relying on comparative
   clinical effectiveness research that discounts the lives of
   disabled people. No comparable limit prevents the use of such
   research in developing best practices for the delivery of health
   care services. Even in formulating a national health care strategy,
   the Secretary is not prohibited from incorporating the findings of
   biased research when addressing gaps in comparative effectiveness
   information. (45)

Mikochik views this broad permission as catastrophic, and argues for additional regulation. (46) Meanwhile, Nicholas Bagley agrees with Mikochik that the ACA places few restrictions on the use of cost-effectiveness analysis, but regards this as a desirable feature of the ACA. (47) Others have argued that the ACA substantially limits or entirely prohibits the use of cost-effectiveness analysis in the healthcare system. (48)

The truth is somewhere in between. The ACA does place substantial limitations on the use of traditional cost-effectiveness analysis by certain actors in the healthcare system, and also fails to remove the limitations that other laws--most notably the Americans with Disabilities Act (ADA)--may place on cost-effectiveness analysis, particularly on methods that employ quality-adjusted life years (QALY) as a metric. But the ACA is not invariably hostile to the use of cost-effectiveness or comparative effectiveness information, so long as these approaches are employed without considering certain factors in a prohibited way. (49) Furthermore, different sections of the ACA limit the use of cost-effectiveness information in different ways. The limitations on the use of cost-effectiveness information to set essential health benefits, for instance, are more restrictive than the limitations on its use in PCORI or in Medicare. (50) I turn now to a discussion of these individual sections.


The ACA establishes, and provides funding for, the PCORI. (51) PCORI is a nonprofit corporation whose core aim "is to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions." (52) The ACA directs PCORI to pursue that aim by researching the comparative risks and benefits of different treatments, and by disseminating its research findings to healthcare decision makers. (53) PCORI does not issue mandates; rather, it provides information that decision makers can rely on as they set priorities. (54)

Although PCORI has been praised as a potential lever to limit high-cost, low-benefit care, (55) the ACA limits the approach to priority setting that PCORI can take. Although the initial draft of the ACA authorized PCORI to assess "efficiency and value (including the full range of harms and benefits, such as quality of life)," (56) this mandate disappeared in the final version of the ACA. (57) Instead, 42 U.S.C. [section] 1320e-1(e) mandates that, PCORI "shall not develop or employ a dollars-per-quality adjusted life year (or similar measure that discounts the value of a life because of an individual's disability) as a threshold to establish what type of healthcare is cost effective or recommended." (58)

Many commentators have worried that section 1320e-1(e) eviscerates PCORI's ability to engage in any sort of analysis that considers costs as well as comparative effectiveness. (59) Barry Furrow, for example, argues that this section of the statute imposes "a prohibition on cost-effectiveness calculations" on PCORI, and "appears to explicitly block study of a treatment's cost-effectiveness." (60) Elizabeth Weeks Leonard similarly notes that "PCORI is prohibited from generating QALY data, which commercial insurers, providers, and patients might use to compare cost effectiveness of treatment alternatives just as the President envisioned." (61) And Larry Gostin and his co-authors note, "the final law inhibits the use of quality cost-effectiveness analysis in coverage, reimbursement, and incentive structures." (62) I will argue that the ACA's limitation on the use of QALYs within PCORI does not announce a broad opposition to consideration of costs in priority setting, but rather pursues a more narrow aim: to ensure that patients with preexisting disabilities (like our osteosarcoma patient Caroline) are not disadvantaged in priority-setting decisions on the basis of the effect of their preexisting disability on their future quality of life.

Although the statute establishing PCORI defines several other terms, (63) it does not define a "quality-adjusted life year." (64) However, QALYs are widely used by health economists when assessing the benefit of a medical or public health intervention or the burden of an illness, (65) and have been proposed for use by agencies as well. (66) As John La Puma notes, "QALYs attempt to combine expected survival with expected quality of life into a single number: if an additional year of healthy life expectancy is worth a value of one (year), then a year of less healthy life expectancy is worth less than one (year)." (67) For example, if amputating Caroline's leg to protect her from osteosarcoma will extend her life by fifty years, but will reduce her quality of life during those additional years to 70% of a fully healthy person's quality of life, then a QALY approach will evaluate the procedure as providing thirty-five QALYs (fifty life years at a quality of life of 0.7).

The appeal of the QALY is that it provides a single, unified way of accounting for the effects of medical interventions on both quality and length of life. As Matthew Adler has noted, a variety of administrative agencies have recently employed QALYs, or related units of measurement that consider an intervention's effect on both quality and length of life, when making regulatory decisions:

   The FDA, over the last half-decade or so, has repeatedly relied on
   QALYs in its rulemakings.... [T]he EPA has experimented with the
   so-called "value of statistical life year" (VSLY) approach to
   monetizing mortality, an approach closely related to QALYs.... The
   HHS, in a recent rulemaking facilitating flu and pneumonia
   vaccinations, cited the cost-effectiveness of these vaccinations in
   promoting "year[s] of healthy life," a synonym for a QALY. The
   Office of Management and Budget's (OMB) current guide for Executive
   Order 12,866, which requires formal regulatory analyses of major
   rules, stipulates that these documents must include a
   cost-effectiveness analysis in the case of rules targeted at public
   health and safety, and it gives a qualified endorsement to QALYs as
   an appropriate effectiveness metric. The Public Health Service's
   "Healthy People" initiative, an informational program which
   measures progress towards public health goals, employs QALYs as one
   of its key metrics. (68)

The ACA's explicit rejection of the use of QALYs diverges from the programs Adler mentions, and raises the question of what lies behind the ACA's choice not to employ a QALY approach.

Determining how much a given disability detracts from quality of life is often done by employing a "time trade-off' design, where people are asked how much future life they would give up in order to live that future life without disability. (69) Such time trade-off questions can be posed both to non-disabled and disabled people: nondisabled people could be asked how much extra life would compensate for suffering a disability, while disabled people could be asked how much life they would give up in order to be cured of a disability. However, time trade-offs arguably confuse two types of questions: what ethicists call "axiological questions" (questions about which options produce the most benefit), and what they call "deontic questions" (questions about which options we ought to choose). (70) That Caroline regards forty-five years of life without a hearing impairment as personally preferable to fifty years of life with a hearing impairment does not entail that she regards it as good public policy to disadvantage someone with an incurable hearing impairment when deciding who should receive life-extending treatment. Yet QALY approaches give lower priority to extending the lives of already disabled people. This objection to QALYs may have found expression--in dicta--in one recent case, where the D.C. Circuit suggested that cost-effectiveness analysis should adopt an approach that, for policy purposes, treats disadvantages imposed on people with preexisting disabilities the same as disadvantages imposed on people without disabilities, even if the existence of a preexisting disability means that the disadvantage does not result in as great a change in well-being. …

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