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Introduction to Health Economics



A limited healthcare budget means that not all drugs, devices and equipment that can be used to treat a medical condition can be funded. Healthcare providers must make decisions about which treatments they will fund. But because treatments are designed for very different patients and have very different outcomes, it can be difficult to make them happy. To make informed and evidence-based decisions, healthcare providers must understand the impact of introducing a new treatment. This includes the costs of the treatment, the costs of treating any side effects associated with the treatment, and the expected benefits for patients health and quality of life. To quantify this, healthcare providers look to health economics. 

Health economics can be used to assess the cost-effectiveness of new healthcare interventions. Cost effectiveness assessments examine how much patients benefit from a new intervention given the financial costs and benefits compared to the next best alternative. Because health economics uses standardized measures to weigh up the cost and benefits, it can provide a meaningful and fair comparison of healthcare interventions. This allows healthcare providers to make informed, transparent and justified decisions, giving the public confidence in their healthcare system. When calculating the costs of a healthcare intervention, health economists must consider all the aspects of introducing a new treatment option. This includes the cost of medications, any equipment used to administer it, appointments to see a doctor or other healthcare professionals, and treatment for any side effects. Benefits must also be quantified numerically. The most common measure of this is quality-adjusted life years or qualities. These incorporate both the number of years lived and the quality of life experience due to treatment. Quality of life is often determined in consultation with patients to understand the impact of treatment on day-to-day life. Treatments that are more cost-effective have a greater likelihood of being approved for reimbursement, which would allow patients to receive the technologies via their healthcare provider.

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