Health Economics

Question 1

What is the basic economic problem?

Answer 1

• The resources are finite - scarcity
• The desire for good and services is infinite -insatiable
• No country treats all treatable ill health -no capacity to do so
• Choice cannot be avoided (decision making)

Question 2

What is opportunity cost?

Answer 2

• The opportunity cost of an activity is the sacrifice in terms of the benefits forgone from not
allocating resources to next best activity
• Loewy ignores this displaced activity

Question 3

What is economic efficiency?

Answer 3

Economic efficiency is achieved when resources are allocated between activities in such a
ways as to maximise benefit

Question 4

What is an economic evaluation?

Answer 4

• The method used to assess whether benefit is maximised – the assessment of efficiency
• Costs and effects are analysed in terms of their differences (increments)
• Asking: Are the incremental benefits of a new treatment worth the incremental costs?

Question 5

Name three types of economic evaluation?

Answer 5

• Cost-effectiveness analysis (outcomes measured in natural units: incremental cost per life
year gained)
• Cost-utility analysis (outcomes measured in quality adjusted life years: incremental cost
per QALY gained)
• Cost-benefit analysis (outcomes are measured in monetary units: net monetary benefit)

Question 6

What is equity?

Answer 6

• Equity is concerned with the fairness or justice of the distribution of costs and benefits
• There are opposing views about what is “fair” – difficult to quantify and very subjective