In 1989 the Oregon State legislature passed the Oregon Basic Health Services Act, which created a Health Services Commission charged with "developing a priority list of health services, ranging from the most important to the least important for the entire population to be served."  The goal of this legislation was to permit the expansion of Medicaid to 100 percent of all Oregonians living in poverty by covering only services deemed to be of sufficient importance or priority.
The Oregon Health Services Commission (OHSC) initially interpreted "for the entire population to be served" as suggesting the use of cost-effectiveness principles for developing the priority list. These principles are based on the utilitarian quest for "the greatest good for the greatest number" and tend to devalue adverse effects of a policy on specific individuals.  By the lights of cost-effectiveness, the "importance" of a health service depends not only on the expected outcomes of treatment (such as prolongation of life, reduction of pain), but also on the cost of that service and on the number of patients who can benefit from it. Thus, even very beneficial treatments might not be considered important if the costs of providing those treatments are high or if only a few people benefit from them.
In keeping with their interpretation of the statute, the OHSC initially conducted a cost-effectiveness analysis of over 1,600 health services ranging from appendectomies to treatment of colds and flu. Predictably, the resulting draft list rated outpatient office visits for minor problems as the "most important" services; the cost of these visits was estimated at $98.51. Indeed, the first 94 items on Oregon's initial list were for office visits, for often self-limiting conditions such as thumb-sucking and low back pain. By contrast, certain life-saving surgeries, such as appendectomies, were rated relatively low because of their higher associated costs.
This counterintuitive priority order (and negative public reaction to it ) led the OHSC to abandon cost-effectiveness analysis for purposes of developing its final priority list.  Instead, the OHSC developed a set of seventeen health service "categories," which described either a specific type of service (for example, maternity care, preventive services) or, more generically, the expected outcomes of care (for example, "treatment of life-threatening illness where treatment restores life-expectancy and return to previous health"). Commissioners formally ranked these seventeen categories in order of importance according to three subjective criteria: value to the individual, value to society, and whether the category seemed "necessary."
Each treatment was then assigned to the single most appropriate category, based on Commissioners' judgment. Services were ranked within categories according to the degree of benefit expected from treatment. Finally, the OHSC rearranged apparently misplaced services "by hand," for example, moving obviously important services rated low by the method higher on the final list.
This alternate methodology produced a much more intuitively sensible final priority list than the earlier draft list, although more work may be needed before the "final" list can serve as the basis for public policy, particularly with...