Question

identify three influences as it relates to health economics

Answer 1

Health economics is the discipline of economics applied to the topic of health care. Broadly defined, economics concerns how society allocates its resources among alternative uses. Scarcity of these resources provides the foundation of economic theory and from this starting point

Health economics addresses these questions primarily from the perspective of efficiency—maximising the benefits from available resources (or ensuring benefits gained exceed benefits forgone). Equity concerns are also recognised—what is a fair distribution of resources. Considerations of equity often conflict with efficiency directives. However, due to the contested nature of this area and the difficulties in quantifying equity dimensions, this element has not been a major focus of health economist’s work.

Opportunity cost

Health economists stress the importance of value unlike accountants who are just interested in money. When budgets are finite, resources invested into one area will be at the expense of a loss of opportunity in another and resources should be valued in terms of this lost opportunity—the opportunity cost. For example, if the Cardio-Vascular National Service Framework dictates an increase in statin prescribing, we should think carefully about what we are having to go without to provide the additional service and value it in terms of this lost opportunity.

Perspective

Whenever an economic question is being asked it is important to think carefully about the viewpoint of the analysis. This will dictate which costs and benefits are important. The perspective of the patient, health authority, NHS, and society may differ.

For example, from the perspective of a general practitioner (GP) practice, the cost of a GP is £21 per hour. If the health authority perspective is taken then capital costs and management overheads are relevant and the cost will be £53 per hour. From a NHS perspective, undergraduate and postgraduate training costs will become relevant which must be annuitised across the expected working life time and the cost is £69 per hour.

Different perspectives will give different answers when deciding between treatment options and decision makers must be clear on the viewpoint that is taken.

Marginal analysis

The relationship between resources invested into an intervention and the benefit that is incurred is rarely linear. As decisions in health are usually whether to expand or contract existing services, it is important to consider how increments in benefit change with increment in resource allocation and not the average benefits that are incurred by average costs. This is known as a marginal analysis.