Cost-effectiveness analysis in the courts: Recent trends and future prospects

This article provides an initial look at how managed care organizations (MC Os) might incorporate cost-effectiveness analysis (CEA) into their decision making process and how the courts might respond. Because so few medical lia bility cases directly involve CEA, we must look at other areas of the law t o assess potential MCO liability for applying CEA. In general negligence ca ses, courts rely on a risk-benefit test to determine customary practice. Li kewise, in product liability cases, courts use a risk-utility calculus to d etermine liability for product design defects. And in challenges to governm ent regulation, courts examine how agencies use CEA to set regulatory polic y. The results have been mixed. In product liability cases, CEA has led to some punitive damage awards against automobile manufacturers. But courts ha ve integrated it in negligence cases without generating juror antipathy, an d generally defer to agency expertise in how to incorporate CEA. The articl e discusses the implications of these cases for MCO use of CEA and outlines various options for setting the standard of care in the managed care era.