Health Economics Key Concepts

Question 1

Comparison of 2 or more alternative courses of action in terms of both their costs and their consequences

Answer 1

Economic evaluation

Question 2

How are different types of economic evaluation distinguished?

Answer 2

From how consequences are measured (different units for outcomes)

Question 3

An economic evaluation that expresses both costs and outcomes of an intervention in monetary terms

Answer 3

Cost Benefit Analysis

Question 4

In CBA, how are benefits valued?

Answer 4

In monetary terms using valuations of people’s observed or stated preferences

Question 5

An economic evaluation that compares costs and consequences of different interventions using a single outcome measured in natural units. Interventions are compared in terms of cost per unit of outcome.

Answer 5

Cost Effectiveness Analysis (cost per unit of effectiveness)

Question 6

An economic evaluation where benefits are expressed as the number of life years saved adjusted to account for loss of quality from morbidity/side effects from intervention.

Answer 6

Cost Utility Analysis

Question 7

What is the most common measure used in CUAs?

Answer 7

QALY - quality-adjusted life year

Question 8

A subjective threshold used to determine if the intervention studied is cost-effective and/or should be adopted.

Answer 8

Cost Effectiveness Threshold

Question 9

Typical cost effectiveness threshold in the UK?

Answer 9

£20,000-£30,000 per QALY

Question 10

Diagrammatic way of comparing technologies or treatment alternatives.

Answer 10

Cost effectiveness plan

Question 11

What are the 4 different areas in a cost effectiveness plan?

Answer 11

Quadrant 1 - intervention more effective + more costly than comparator

Quadrant 2 - intervention more effective + less costly than comparator

Quadrant 3 - intervention less effective + less costly than comparator

Quadrant 4 - intervention is less effective and more costly than comparator

Question 12

The standard intervention (or lack of intervention) against which the intervention under appraisal is compared.

Answer 12

Comparator

Question 13

The measure of the possible results that may stem from exposure to a preventative or therapeutic intervention.

Answer 13

Outcome

- measures may be intermediate endpoints or they can be final endpoints

Question 14

What does effectiveness refer to in the context of healthcare?

Answer 14

Clinical effectiveness

Question 15

A combination of an individual’s physical, mental, and social well-being; not merely the absence of disease.

Answer 15

Health-related quality of life (HRQL)

Question 16

An index of survival (years gained) that is adjusted to account for the patient’s quality of life during this time.

Answer 16

QALY

Question 17

Why are QALYs favoured over just years-gained?

Answer 17

QALYs take into account BOTH quantity and quality of life gained

Question 18

A standard measure for comparing health outcomes for various health conditions taking into account years of life lost due to premature mortality and years of productive life lost due to disability.

Answer 18

DALYs - disability adjusted life years

Question 19

Average years of life gained per person as a result of an intervention.

Answer 19

Life-years gained (often used in CEAs)

Question 20

The difference between the present value of cash inflows and the present value of cash outflows.

Answer 20

Net Present Value

Question 21

The difference in the mean costs in the population of interest divided by the differences in the mean outcomes in the population of interest.

Answer 21

Incremental Cost Effectiveness Ratio (ICER)

Question 22

If an intervention has higher costs and lower outcomes than an alternative intervention, it is…

Answer 22

Being dominated (by the alternative)

Question 23

If an intervention has lower costs and higher outcomes than an alternative intervention, it is…

Answer 23

Dominating (the alternative)

Question 24

Discounting says what about costs and benefits occurring now and in the future?

Answer 24

Costs and benefits incurred today have a higher value than costs and benefits occurring in the future

Question 25

Based on discounting, does individual preference prefer benefits to be experienced now or in the future?

Answer 25

Now

Question 26

Based on discounting, does individual preference prefer costs to be experienced now or in the future?

Answer 26

In the future

Question 27

The benefit of an option in monetary units minus total cost of the benefit in monetary units

Answer 27

Monetary Net Benefit

Question 28

The benefit of an option in health units minus total cost of the benefit in health units

Answer 28

Health Net Benefit

Question 29

A method used to measure utility where the individual is asked to make a trade-off between having a chronic disease (the state being valued) for a certain period of time, and a gamble with good health for the same period and death.

Answer 29

Standard Gamble

Question 30

A method used to measure utility by finding the point at which the respondent cannot choose between 2 scenarios - usually between illness for a period of time and perfect health for a shorter time, both followed by death.

Answer 30

Time Trade-Off

Question 31

What's the difference between Standard gamble and TTO?

Answer 31

Standard gamble is between illness for a certain amount of time (certain) and the chances of good health for the same amount of time (uncertain). TTO is between illness for a certain amount of time and good health for a shorter amount of time.

Question 32

A visual representation of a decision problem intended to help people make better decisions. Made up of nodes indicating a choice by the decision-maker, a probabilistic outcome, or a terminal node.

Answer 32

Decision tree

Question 33

The sum of all the possible outcomes of the probability of the outcome multiplied by the value of the outcome. Can be calculated for both the costs and the benefits of a treatment.

Answer 33

The Expected Value

Question 34

An analysis that identifies how responsive a result is to changes in key economic parameters. Values around key parameters are varied in the analysis to test how much results respond to these changes.

Answer 34

Sensitivity Analysis

Question 35

Amount of a good that buyers are willing and able to purchase

Answer 35

Quantity demanded

Question 36

Tabulated relationship between price and quantity demanded

Answer 36

Demand schedule

Question 37

Graphical relationship between price and quantity demanded

Answer 37

Demand curve

Question 38

All individual demands for a particular good or service added together through horizontal summation.

Answer 38

Market demand

Question 39

Law of demand?

Answer 39

Quantity demanded of a good decreases as price of good increases

Question 40

The increase in output that arises from one additional unit of input.

Answer 40

Marginal product

Question 41

The fall in the rate-of-increase in output of a process as the amount of an input is increased, while the amount of other inputs is held constant.

Answer 41

Diminishing marginal product

Question 42

A curve showing all the different quantities of 2 inputs which may be used to produce a given level of output.

Answer 42

Isoquant

Question 43

The amount by which the quantity of one input has to be reduced when one extra unit of another input is used, so that output remains constant.

Answer 43

Marginal rate of technical substitution (MRTS)

Question 44

Costs that vary with the quantity of output produced.

Answer 44

Variable costs

Question 45

Total revenues minus total costs

Answer 45

Profit

Question 46

The increase in total cost that arises from an extra unit of production.

Answer 46

Marginal cost

Question 47

Variable cost divided by the quantity of output.

Answer 47

Average variable cost

Question 48

The quantity of one product that must be foregone in order to obtain more of another product without varying the input level.

Answer 48

Rate of product transformation

Question 49

Graph that compares the production rates of two goods that use the same fixed total of the factors of production (inputs).

Answer 49

Product transformation curve of Product possibilities frontier

Question 50

Total cost divided by the total quantity

Answer 50

Average cost

Question 51

Fixed cost divided by the quantity of output

Answer 51

Average fixed cost

Question 52

The locus traced out by various combinations of 2 inputs, each of which costs the producer the same amount of money.

Answer 52

Isocost line (this is to producers what the budget line is to consumers)

Question 53

The combination of inputs which will cost the firm the least and thus yield maximum profits.

Answer 53

Producer equilibrium

Question 54

How is the producer equilibrium found on a graph?

Answer 54

The point where the highest isoquant is tangent to the isocost line

Question 55

Amount sellers are willing and able to sell

Answer 55

Quantity supplied

Question 56

Consumer surplus + producer surplus. All gains from trading goods in a market.

Answer 56

Total surplus

Question 57

Tabulation of relationship between price and quantity supplied

Answer 57

Supply schedule

Question 58

The amount a seller is paid for a good minus the seller's cost of providing it

Answer 58

Producer surplus

Question 59

Graphical representation of relationship between price and quantity supplied

Answer 59

Supply curve

Question 60

The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

Answer 60

Consumer surplus

Question 61

Law of supply?

Answer 61

The quantity supplied of a good increases when the price of that good increases

Question 62

What does economic welfare refer to?

Answer 62

How the allocation of resources affects economic wellbeing

Question 63

The horizontal summation of all individual firms' supply

Answer 63

Market supply

Question 64

The maximum amount that a buyer will pay for a good

Answer 64

Willingness to Pay

Question 65

A situation where the market price has reached the level at which quantity supplied equals quantity demanded

Answer 65

Market equilibrium

Question 66

A situation where quantity demanded is greater than quantity supplied

Answer 66

Shortage

Question 67

The price that balances quantity supplied and quantity demanded

Answer 67

Equilibrium price

Question 68

A situation where quantity supplied is greater than quantity demanded

Answer 68

Surplus

Question 69

The quantity supplied and the quantity demanded at equilibrium price

Answer 69

Equilibrium quantity

Question 70

Altering incentives so that people take account of the external effects of their actions is an example of...

Answer 70

Internalising an externality

Question 71

Societal benefit from the consumption of a good. Equals the private marginal benefit plus the marginal external benefit.

Answer 71

Social marginal benefit

Question 72

Societal cost from the production of a good. Equals the private marginal cost plus the marginal external cost.

Answer 72

Social marginal cost

Question 73

The uncompensated impact of one individual's actions on the wellbeing of a bystander.

Answer 73

Externality/ies

Question 74

The fall in total surplus that results from a market distortion/failure.

Answer 74

Deadweight loss

Question 75

Total revenue divided by the quantity sold.

Answer 75

Average revenue

Question 76

The change in total revenue from selling one additional unit.

Answer 76

Marginal revenue

Question 77

Government-created monopolies, normally for limited periods.

Answer 77

Artificial monopoly

Question 78

How are artificial monopolies formed?

Answer 78

Created by governments by mandating entry restrictions

Question 79

A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could 2 or more firms.

Answer 79

Natural monopoly

Question 80

Market structure where there is only one seller. This seller determines the quantity supplied/market-clearing price.

Answer 80

Monopoly

Question 81

A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.

Answer 81

Competitive market

Question 82

A situation in which a market left on its own fails to allocate resources efficiently

Answer 82

Market failure

Question 83

A change to a different allocation that makes at least one individual better off WITHOUT making any other individual worse off.

Answer 83

Pareto improvement

Question 84

An economic allocation where no one party can be made better off without making at least one other party worse off.

Answer 84

Pareto efficient

Question 85

If outcomes will occur that a probability that cannot even be estimated, the decision maker faces...

Answer 85

Uncertainty

Question 86

A contract or policy where an individual or entity receives financial protection or reimbursement against losses.

Answer 86

Insurance

Question 87

How do insurance companies make payments affordable for the insured?

Answer 87

By pooling clients' risks (can't let price go too high or the whole system collapses as healthy people leave)

Question 88

The money paid to an insurance company for coverage. Paid monthly and can be paid in part/full by your employer.

Answer 88

Premium

Question 89

What health insurance plan does and does not pay for.

Answer 89

Coverage

Question 90

A shared payment between an insurance company and an insured individual, usually described in percentages

Answer 90

Co-insurance

Question 91

A portion of the covered expenses that an insured individual must pay before benefits are paid by the insurance plan.

Answer 91

Deductible

Question 92

The act of combining the uncertainty of individuals into a calculable risk for large groups.

Answer 92

Risk-pooling

Question 93

A situation in which one party in a transaction has more or superior information compared to another party. Most often seller knows more than buyer but can happen the other way.

Answer 93

Asymmetric information

Question 94

The tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.

Answer 94

Adverse selection

Question 95

The tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behaviour

Answer 95

Moral hazard

Question 96

Method used by insurers to determine the price of premiums for different groups/individuals based on those people's history of claims.

Answer 96

Experience rating

Question 97

Name of a situation where a person is performing an act for another person.

Answer 97

Agent (performer) & Principal (person performed on behalf of)

Question 98

A situation where, due to an asymmetry of information between supplier and consumer/payer, the supplier can use superior information to encourage an individual to demand a greater quantity of the good/service they supply than the Pareto efficient level, should asymmetric information not exist.

Answer 98

Supplier-induced Demand

Question 99

Name for payment per service provided

Answer 99

Fee-for-service

Question 100

Name for payment per person

Answer 100

Capitation

Question 101

Equal treatment for equal need is what type of equity?

Answer 101

Horizontal equity

Question 102

Unequal treatment for unequal need is what type of equity?

Answer 102

Vertical equity