ANSWER
- There is a growing demand for
economic evaluation of new therapeutic interventions to provide
health care decision makers with information on the relative value
for money offered by alternative treatments. We review the
rationale for economic evaluation and distinguish between 4
analytic techniques: cost minimization analysis, cost effectiveness
analysis, cost utility analysis, and cost benefit analysis. Each
technique is illustrated with an example from the literature
health economic
principles
- Production, resources,
scarcity and opportunity cost
- The definition of economics above
includes the term to produce, emphasising that economics deals with
both health and health care as a good or service that is
manufactured, or produced. All production requires the use of
resources such as raw materials and labour, and we can regard
production as a process by which these resources are transformed
into goods
- The inputs to this productive
process are resources such as personnel, equipment and
buildingsland and raw materials. The output of a process using
health care inputs, such as health care professionals, therapeutic
materials and clinics, could be an amount of health care of a given
quality that is provided, for example. How inputs are converted
into outputs may be affected by other mediating factors, for
example the environment in which production takes place, such as
whether the clinic is publicly or privately owned.
- An assertion of economics is that
scarcity, and the resulting necessity to choose between different
uses for productive resources, applies everywhere in an economy and
cannot be avoided. This is the premise underlying a key economics
concept called opportunity cost.
Producing any economic good or service means that the scarce
resources that are used to create it cannot be used to produce
other goods or services. If those other goods or services
had been produced, they would have generated benefits to those who
consumed them.
- Costs in economics usually means
opportunity costs. This concept is quite different to the more
familiar idea of financial costs, which
is the cost of goods, services and scarce resources in terms of the
money that must be paid to obtain them
2)Markets, Demand and
Supply
- Economics analyses markets mainly
through what is called price theory. A market brings
together the demand for goods from consumers and the supply of
those goods from suppliers. Consumers and suppliers base their
buying and selling on the price that they must pay or will receive.
Price therefore acts as a signal to both groups as to what they
should do in the market. Consumers will want to buy more if the
price is lower, but suppliers will want to sell more if the price
is higher. If prices are too high, then suppliers will not be able
to sell all that they want to and may lower the price. If prices
are too low, there will be consumers who cannot buy all that they
want. As a result, consumers may bid more, or suppliers may see the
possibility that they can raise their price but still be able to
sell all that they want. Simple observable indicators like these,
the presence of excess demand or supply, determine how much of a
good or service is sold and the price that it is sold for.
- f we also assume that suppliers aim
to make as much income as possible from what they sell, then they
will wish to keep down the costs of production by choosing the most
efficient production methods. So, markets also help to determine
how goods are produced as well as what and for whom.
3) Demand for health care,
demand for health and need
- If health care is only demanded in
order to improve health, is there then a demand for health
improvements? Health can indeed be regarded as a good, in fact a
fundamental commodity that is essential to people’s well-being,
leading to a demand for improvements in it. Health does have
characteristics that more conventional goods have; it can be
manufactured; it is wanted and people are willing to pay for
improvements in it; and it is scarce relative to people’s wants for
it. However, its relationship with the demand for health care is
not one-to-one, because although health is affected by health care,
it is also affected by many other things and it also affects other
aspects of welfare, not just health care.
4)Efficiency and
equity
- he technical definitions of
efficiency described here use the labels given by Morris, Devlin,
Parkin and Spencer . Economists are specialists in the analysis of
efficiency and largely agree about what it means, and about
definitions of different types of efficiency. Unfortunately,
however, the labels that they give to those types vary. The same
concept may be given different names and the same name may be given
to different concepts. So, if other texts are consulted, it may be
wise to check what is meant if efficiency is referred to,
especially if the terms technical or allocative efficiency are
used.
- Equity is always an important
criterion for allocation of resources. However, it is observable
that people attach more importance to equity in health and health
care than they do to many other goods and services. Equity is an
important policy objective in almost every health care system in
the world. Economists have created some very useful ways of
measuring equity, but apart from that economic analysis of equity
is less clear than the analysis of efficiency and there is lower
consensus amongst economists about it.
5)MARGINS
- Margin means the extra unit
included to produce one more unit of output. To produce the health
care goods and services that extra unit which is produced to give
an output.