Do QALYs Matter in the U.S.?

For medtech founders looking to enter the U.S. market, cost-effectiveness is often at the center of their reimbursement strategy. Many assume that proving value via a technology’s long-term cost-effectiveness—often through Quality-Adjusted Life Years (QALYs)—will be the key to securing coverage.

That’s true in many countries. But in the U.S., not so much.

Unlike in the UK, Canada, and many European health systems, where cost per QALY plays a central role in determining reimbursement, U.S. payers operate under a completely different set of rules. Medicare, the nation’s largest payer, does not use cost-effectiveness to make coverage decisions, while commercial insurers take a short-term financial view that largely ignores the long-range benefits that QALY-based models capture.

This fundamental disconnect can derail market access strategies for companies that aren’t prepared.

Medicare Pays for Clinical Impact, Not Cost-Effectiveness

In the U.S., Medicare does not evaluate cost-effectiveness when determining coverage. Unlike health technology assessment (HTA) bodies in Europe—such as the UK's National Institute for Health and Care Excellence (NICE)—Medicare’s primary criterion for coverage is whether a technology is reasonable and necessary for patient care.

This means that if a device, drug, or procedure demonstrates significant clinical benefit, it has a pathway to coverage, even if it comes with a high price tag. Some examples:

• CAR-T therapies (chimeric antigen receptor T-cell therapies) for cancer, which cost hundreds of thousands of dollars per patient, were covered by Medicare based on their ability to induce remission—even though their cost per QALY would be considered astronomical by international HTA standards.

• Surgical robotics have been widely adopted, even though they add substantial cost to procedures. Medicare covers them because they improve surgical precision and outcomes.

• Artificial heart devices and other high-cost interventions for end-stage disease are routinely reimbursed, not because they are cost-saving, but because they meet a clinical need.

The result? Medicare often covers breakthrough technologies before private payers do, because it is not bound by a strict cost-benefit threshold the way many other healthcare systems are.

Private Payers Think in 2-3 Year Windows—Not Decades

While Medicare is driven by clinical necessity, commercial insurers take an entirely different approach—one that further reduces the relevance of QALYs.

Private payers aren’t managing patient populations for life. The average U.S. health plan enrollee switches insurers every two to three years, whether due to job changes, employer plan restructuring, or aging into Medicare. This focus is in contrast to traditional cost-effectiveness, where QALYs measure long-term health and cost benefits, sometimes spanning decades.

If your medtech reduces hospital readmissions over a 10-year span, or prevents complications that manifest over decades, that may be great for public health—but it’s irrelevant to a private payer. They’re primarily concerned with whether your technology will reduce costs in the next two to three years while the patient is still in their plan.

Consider the difference in coverage logic:

✅ A device that prevents expensive hospitalizations in the short term? Payers are interested.

❌ A therapy that reduces long-term disability 20 years down the road? Payers are unlikely to prioritize it.

What Actually Drives Coverage Decisions?

If QALYs aren’t a meaningful driver of U.S. reimbursement, what is? The real determinants of coverage vary by payer type:

1. Clinical Necessity for Medicare

• Does your technology provide a clear clinical benefit that meets Medicare’s “reasonable and necessary” criteria?

• Can it improve near-term health outcomes in a way that’s measurable and impactful?

• If yes, cost-effectiveness is largely irrelevant—Medicare will cover it.

2. Short-Term Cost Offsets for Private Payers

• Can you demonstrate that your technology will reduce costs within two to three years?

• Does it prevent expensive hospitalizations or eliminate the need for costly procedures in the near term?

• If yes, private payers are more likely to consider coverage.

3. Physician and Hospital Economics

• Does your device increase physician efficiency or hospital throughput?

• Will hospitals and providers make or lose money by using it?

• If your technology saves money for payers but reduces revenue for providers, expect adoption challenges.

If your medtech relies on long-term cost-effectiveness arguments, you need to rethink your strategy.

The Takeaway for Medtech Founders

The U.S. healthcare system doesn’t prioritize QALYs, and coverage is rarely granted based on long-term cost-effectiveness models.

Medicare’s focus is on clinical necessity, while private payers care about short-term financial impact. If your strategy depends on proving a 10-year economic benefit, it’s time to adjust your approach.

For real traction in the U.S. market, founders should:

• Engage payers early and understand their specific decision-making frameworks.

• Focus on immediate, tangible benefits that resonate with both payers and providers.

• Align with stakeholder incentives—because reimbursement isn’t just about proving value, it’s about proving value in a way that matters to the right people at the right time.

For U.S. coverage, you are best off focusing on demonstrating value of your device through quality evidence in peer-reviewed publications, demonstrating a favorable improvement in clinically meaningful outcomes.