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National Information Center on Health Services Research and Health Care Technology (NICHSR)

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Health Economics Information Resources: A Self-Study Course

Module 1, Part 1: The Scope of Health Economics

Health Economics Model
Health Economics lies at the interface of economics and medicine and applies the discipline of economics to the topic of health.

Why is it important to look at economics in health? There are several reasons. Health resources are finite. A choice must be made about which resources to use for which activities. By choosing to use resources for one activity, the opportunity of using those resources for alternative activities is given up and the benefits associated with the best alternative use of resources is lost. This is called the opportunity cost .

Let's look at opportunity cost. The aim of economics is to ensure that the chosen activities have benefits which outweigh their opportunity costs OR the most beneficial activities are chosen within the resources available.

Economics is concerned with efficiency but it is more than just efficiency.

Efficiency is not the only objective in choosing how health care resources should be allocated. We also need to think about equity, or the fair distribution of resources and benefits, which is also an objective in health care decision-making. Economics provides an information framework in which the objectives of both efficiency and equity may be pursued. Economics also provides a framework which aims at maximizing benefits within available resources.

 

 

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