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Health Economics Logo

Health Economics Information Resources: A Self-Study Course

Glossary of Frequently Encountered Terms in Health Economics

Note: Additional key general economics concepts can be found elsewhere in this learning opportunity.

Access to Health Care

1) The degree to which individuals are inhibited or facilitated in their ability to gain entry to and to receive care and services from the health care system. Factors influencing this ability include geographic, architectural, transportational, and financial considerations, among others. (MeSH uses the term 'Health Services Accessibility'.

2) Entry [to the health care system] is dependent on the wants, resources, and needs that individuals bring to the care-seeking process. Ability to obtain wanted or needed services may be influenced by many factors, including travel distance, waiting time, available financial resources, and availability of a regular source of care. (Turnock, 2001)

Allocative Efficiency

Assesses competing programs and judges the extent to which they meet objectives. An allocation of resources such that no change in spending priorities could improve the welfare of one person without reducing the welfare of another.
Attitude to Health
Public attitudes toward health, disease, and the medical care system. (MeSH)
Average Cost - see Cost


The sum (usually expressed in money terms to make it commensurate with cost) of the effects on well-being (positive or negative) which a particular program bestows upon society. NB. as with costs, all benefits, and disbenefits, which result from a particular program are considered relevant, regardless of who gains them. Some of these benefits, such as relief of pain or suffering, are referred to as 'intangible'. These are difficult to quantify but attempts have been made to value them using for example, QALYs or the willingness-to-pay approach.


The dollar amount available for the cost of covered medical services.


Any person, either a subscriber or a dependent, eligible for service under a health plan.

Blue Cross/Blue Shield

A combined medical plan offered through a worker’s place of employment that combines both hospital and physician coverage.


A fixed amount of payment per patient, per year, regardless of the volume or cost of services each patient requires.

Clinical Effectiveness

...The application of interventions which have been shown to be efficacious to appropriate patients in a timely fashion to improve patients' outcomes and value for the use of resources (Batstone, 1996).

Controlled Vocabulary (Librarianship)

Specific words and phrases (descriptors) used when creating subject headings for a book, article, etc. for a specific index or catalog. (USC)

Co-payments (Co-pay, user charge)

A fixed dollar payment that is made by the patient to the provider at the time of service. (Glossary)

Consumer Behavior

The observable behavior that a health care consumer does when deciding to acquire health care.

Consumer Expenditure Survey

Collects current consumer expenditure data, which provide a continuous flow of data on the buying habits of the American consumers.

Consumer Price Index (CPI)

Prepared by the U.S. Bureau of Labor Statistics, it is a monthly measure of the average change in the prices paid by urban consumers for a fixed market basket of goods and services. The medical care component of CPI shows trends in medical care prices based on specific indicators of hospital, medical, dental, and drug prices.

Controlled Vocabulary (Librarianship)

A means of searching a resource using words or terms selected by the creator of a resource or by an organization or individual other than the user of the resource. In contrast to a keyword, which can be any word or term selected by the user of the resource. Searching a resource using controlled vocabulary is usually more precise and focused than searching by keyword. (University of Wisconsin)


The economic definition of cost (also known as opportunity cost) is the value of opportunity forgone, strictly the best opportunity forgone, as a result of engaging resources in an activity. Note that there can be a cost without the exchange of money. Also the economists' notion of cost extends beyond the cost falling on the health service alone, e.g., includes costs falling on other services and on patients themselves.

In considering the production process, costs may be differentiated as follows:

  • Average costs - equivalent to the average cost per unit; i.e., the total costs divided by the total number of units of production.
  • Fixed costs - those costs which, within a short time span, do not vary with the quantity of production; e.g., heating and lighting.
  • Incremental cost - the extra costs associated with an expansion in activity of a given service.
  • Marginal cost - the cost of producing one extra unit of a service.
  • Total costs - all costs incurred in the production of a set quantity of service.
  • Variable costs - those costs which vary with the level of production and are proportional to quantities produced.
In considering health problems, costs may be differentiated as follows:
  • Avoided costs - costs caused by a health problem or illness which are avoided by a health care intervention.
  • Direct costs - those costs borne by the healthcare system, community and patients' families in addressing the illness.
  • Indirect costs - mainly productivity losses to society caused by the health problem or disease.

Cost Allocation

The assignment, to each of several particular cost-centers, of an equitable proportion of the costs of activities that serve all of them. Cost-center usually refers to institutional departments or services. (MeSH)

Cost Analysis

Analysis of the comparative costs of alternative interventions or programs. Does not include consequences. (Drummond)

Cost-benefit Analysis (CBA)

An economic evaluation in which all costs and consequences of a program are expressed in the same units, usually money. CBA is used to determine allocative efficiency; i.e., comparison of costs and benefits across programs serving different patient groups. NB. Even if some items of resource or benefit cannot be measured in the common unit of account; i.e., money, they should not be excluded from the analysis.

Cost Comparison

Cost comparison compares only the costs of two or more interventions or programs. (Zarnke)

Cost Control

The containment, regulation, or restraint of costs. Costs are said to be contained when the value of resources committed to an activity is not considered excessive. This determination is frequently subjective and dependent upon the specific geographic area of the activity being measured. (Dictionary)

Cost Description

Examines the costs of a single intervention or program. Does not include the consequences of the intervention and no comparison is made with an alternative intervention. (Zarnke)


The point at which the minimum amount of input (and therefore cost) is used to achieve a given output.

Cost-effectiveness Analysis (CEA)

An economic evaluation in which the costs and consequences of alternative interventions are expressed cost per unit of health outcome. CEA is used to determine technical efficiency; i.e., comparison of costs and consequences of competing interventions for a given patient group within a given budget. See also Technical Efficiency

Cost-minimization Analysis (CMA)
An economic evaluation in which consequences of competing interventions are the same and in which only inputs, that is, costs are taken into consideration. The aim is to decide the least costly way of achieving the same outcome.

Cost of Illness

The personal cost of acute or chronic disease. The cost to the patient may be an economic, social, or psychological cost or personal loss to self, family, or immediate community. The cost of illness may be reflected in absenteeism, productivity, response to treatment, peace of mind, QUALITY OF LIFE, etc. It differs from HEALTH CARE COSTS, meaning the societal cost of providing services related to the delivery of health care, rather than personal impact on individuals. (MeSH)

Cost of Illness Study

Aims to identify and measure the total costs attributable to a particular disease. These are not a type of economic evaluation as they are not used to assess the costs and benefits of alternative interventions or programs. They may provide useful information which can be used in the context of an economic evaluation of interventions related to the disease category, although care must be taken as not all costs included in a cost of illness study represent resource costs (Donaldson). Cost of illness studies may also be utilized in the estimation of the economic burden of disease.

Cost Outcome Description

Describes the costs and consequences of a single intervention or program. No comparison is made with an alternative intervention. (Zarnke)

Cost Sharing

Provisions of an insurance policy that require the insured to pay some portion of covered expenses. Several forms of sharing are in use, e.g., deductibles, coinsurance, and copayments. Cost sharing does not refer to or include amounts paid in premiums for the coverage. (Dictionary)

Cost-utility Analysis (CUA)

A form of economic study design in which interventions which produce different consequences, in terms of both quantity and quality of life, are expressed as 'utilities'. These are measures which comprise both length of life and subjective levels of well being. The best known utility measure is the 'quality adjusted life year' or QALY. In this case, competing interventions are compared in terms of cost per utility (cost per QALY). See also Quality-Adjusted-Life-Year.

Costs and Cost Analysis

Absolute, comparative, or differential costs pertaining to services, institutions, resources, etc., or the analysis and study of these costs. (MeSH)


The process of making a selective intellectual judgment when presented with several complex alternatives consisting of several variables, and usually defining a course of action or an idea. (MeSH)

Deductible (excess)

A fixed dollar amount that the patient must pay before reimbursement begins; in most indemnity plans there is no separate deductible for drugs. (Glossary)

Direct Service Costs

Costs which are directly identifiable with a particular service. (MeSH)


A technique which allows the calculation of present values of inputs and benefits which accrue in the future. Discounting is based on a time preference which assumes that individuals prefer to forego a part of the benefits if they accrue it now, rather than fully in the uncertain future. By the same reasoning, individuals prefer to delay costs rather than incur them in the present. The strength of this preference is expressed by the discount rate which is inserted in economic evaluations.

Drug Approval

Used for investigational new drug application. (Emtree)

Drug Costs

The amount that a health care institution or organization pays for its drugs. It is one component of the final price that is charged to the consumer (FEES, PHARMACEUTICAL or PRESCRIPTION FEES). (MeSH)

Note: EMBASE uses Drug Cost (singular)

Drug Formulary

A list of drugs, usually by their generic names, and indications for their use. A formulary is intended to include a sufficient range of medicines to enable physicians, dentists, and, as appropriate, other practitioners to prescribe all medically appropriate treatment for all reasonably common illnesses. (AcademyHealth)

Drug Utilization

Drug prescription and use patterns.

Economic Appraisal - see Economic evaluation

Economic Burden of Disease, see Cost of Illness

Economic Competition

The effort of two or more parties to secure the business of a third party by offering, usually under fair or equitable rules of business practice, the most favorable terms.

Economic Evaluation

The systematic appraisal of costs and benefits of projects, normally undertaken to determine the relative economic efficiency of programs. See Cost-benefit analysis, Cost-effectiveness analysis, Cost-minimization analysis, Cost-utility analysis.

Economic Value of Life - see Value of Life

Economic Value Theory

The intrinsic worth of a commodity. If defined in terms of money, value determines price. It is traditional to separate the concepts of use value and value in exchange. Value in use is not an intrinsic quality of a commodity, but its capacity to satisfy human wants. Value in exchange is the worth of commodity in terms of its capacity to be exchanged for another commodity. In classical economics the existence of use value was a prerequisite for commodities to have value in exchange. A commodity must possess UTILITY or usefulness in order for it to be produced or exchanged. (adapted from the Macmillan Dictionary of Modern Economics. 4th edition. Basingstoke. Macmillan. 1992)


(1) The science of utilization, distribution, and consumption of services and materials. (MeSH)

(2) The study of how individuals and societies choose to allocate scarce productive resources among competing alternative uses and to distribute the products from these uses among members of the society. (World Bank, 2001)


The contribution which a program makes to individuals' utility or welfare, normally through better health, but not necessarily solely through better health.


Making the best use of available resources; i.e. getting good value for resources. See also Allocative efficiency and Technical efficiency.

Employer Health Costs

That portion of total HEALTH CARE COSTS borne by an individual's or group's employing organization. (MeSH)


The study of the distribution of determinants and antecedents of health and disease in human populations; the ultimate goal is to identify the underlying causes of a disease, then apply findings to disease prevention and health promotion. (Turnock, 2001)


The degree to which some distribution or other is judged to be 'fair'. 'Fairness' involves a value judgment so; e.g., 'greater equality' need not imply 'greater equity'.


These are negative or positive utilities accruing to an individual from another person's consumption. For example, if the majority of a community is vaccinated against an infectious disease, the resulting herd immunity benefits those who have not been vaccinated.

Fees and Charges

Fee: A charge for a service rendered. (World Bank 2001)

Charge: The amount asked for a service by a health care provider. Its contracted with the cost, which is amount the provider incurs in furnishing the service. It is difficult to determined precise costs for many services, and in such cases charges are substituted for costs in many reimbursement or payment formulas (often with the stipulation that the hospital’s bookkeeping follow certain rules). (World Bank 2001)


1) As a broad managerial field, finance is the art or science of obtaining and managing funds.

2) The manipulation of money and credit; the fields of banking, taxes, and insurance, and the money, foreign exchange, and investment markets. Finance directly involves other fields such as accounting, marketing, and production. It is an integral part of management in all three sectors of the economy (i.e., the private, non-profit, and public sectors). (Rhea)

Financial Management

The obtaining and management of funds for institutional needs and responsibility for fiscal affairs.


In health care finance, these are the methods of gaining, and the sources of, revenue in health services. Modes of financing include third-party payers, public grants, contracts with managed care, government contracts, direct public/government payment for service, philanthropic grants and payments for service, loans, bonds and self-pay.

Financing, Organized

All organized methods of funding. (MeSH)

Full Economic Evaluation

Full economic evaluations are studies in which a comparison of two or more treatments or care alternatives is undertaken and in which both the costs and outcomes of the alternatives are examined. See also, Cost-benefit analysis (CBA), Cost-effectiveness analysis (CEA), andCost-utility analysis (CUA).


Grampian Region Early Anistreplase Trial (GREAT). This is a single study randomized controlled trial. The study was multi-centered covering 29 rural general practices and one hospital. The follow-up period was four years. No loss to follow-up was reported.

Gross Domestic Product (GDP)

GDP is the market value of the goods and services produced by labor and property located in the United States. A barometer of the U.S. economy, it illustrates the pace at which the economy is growing or shrinking.

Gross National Product (GNP)

The market value of all final goods and services produced in a given time period (usually one year) by the nationals of a country residing either in the country or abroad. (Glossary)

Health Care Costs

The actual costs of providing services related to the delivery of health care, including the costs of procedures, therapies, and medications. It is differentiated from HEALTH EXPENDITURES, which refers to the amount of money paid for the services, and from fees, which refers to the amount charged, regardless of cost. (MeSH)

Note: Embase uses Health Care Cost (singular)

Health Care Financing - see Financing

Health Care Markets - See Health Care Sector

Health (Care) Policy

Decisions, usually developed by government policymakers, for determining present and future objectives pertaining to the health care system. (MeSH)

Health Care Reform

Innovation and improvement of the health care system by reappraisal, amendment of services, and removal of faults and abuses in providing and distributing health services to patients. It includes a re-alignment of health services and health insurance to maximum demographic elements (the unemployed, indigent, uninsured, elderly, inner cities, rural areas) with reference to coverage, hospitalization, pricing and cost containment, insurers' and employers' costs, pre-existing medical conditions, prescribed drugs, equipment, and services. (MeSH)

Health Care Sector

Economic sector concerned with the provision, distribution, and consumption of health care services and related products. (MeSH)

Health Care Rationing

Planning for the equitable allocation, apportionment, or distribution of available health resources.

Health Care Utilization - see Utilization

Health Economics

The study of how scarce resources are allocated among alternative uses for the care of sickness and the promotion, maintenance and improvement of health, including the study of how healthcare and health-related services, their costs and benefits, and health itself are distributed among individuals and groups in society. (World Bank 2001)

Health Expenditures

The amounts spent by individuals, groups, nations, or private or public organizations for total health care and/or its various components. These amounts may or may not be equivalent to the actual costs (HEALTH CARE COSTS) and may or may not be shared among the patient, insurers, and/or employers. (MeSH)

Health Inequalities

The gap in health status, and in access to health services, between different social classes and ethnic groups and between populations in different geographical areas (Source NHS Public Health Electronic Library)

Health Insurance

Given that illness is unpredictable and that everyone's future health status is uncertain, demand for health care is also uncertain. The institutional response to this uncertainty is the development of insurance mechanisms whereby covered individuals make regular payments to some risk-pooling agency in return for guarantees of some form of reimbursement in the event of illness. This agency might be a public body or a private firm, the payments might be premiums or taxes, and the benefits might be indemnities (fixed cash payments) varying across illness events, reimbursement of all or part of actual health care expenditure, or direct provision (public or private) of services as needed." (Evans)

Health Maintenance Organization (HMO)

An HMO is a prepaid health plan delivering comprehensive care to members through designated providers, having a fixed monthly payment for health care services, and requiring members to be in a plan for a specified period of time.

(Health) Outcome

In health economics, the term ‘outcome’ is used to describe the result of a health care intervention weighted by a value assigned to that result. (adapted from: Purchasing and providing cost-effective health care. Drummond MF & Maynard A (eds). Edinburgh. Churchill Livingstone. 1993. and Kielhorn A. and Graf von der Schulenburg J.M. The health economics handbook. 2nd ed. Chester. Adis International. 2000)

Health Planning

Planning for needed health and/or welfare services and facilities. (MeSH)

Health Service Planning - see Health Planning

Health Services Research

The integration of epidemiologic, sociological, economic, and other analytic sciences in the study of health services. Health services research is usually concerned with relationships between need, demand, supply, use, and outcome of health services. The aim of the research is evaluation, particularly in terms of structure, process, output, and outcome. (From Last, Dictionary of Epidemiology, 2d ed) (MeSH)

Health Status

1. The degree to which a person is able to function physically, emotionally and socially, with or without help from the health care system. (Source: NHS Public Health Electronic Library)

2. The level of health of the individual, group, or population as subjectively assessed by the individual or by more objective measures. (MeSH)

Health Technology Assessment

Evaluation of biomedical technology in relation to cost, efficacy, utilization, etc., and its future impact on social, ethical, and legal systems. (MeSH, use: Technology Assessment, Biomedical when searching)

Hospital Costs

The expenses incurred by a hospital in providing care. The hospital costs attributed to a particular patient care episode include the direct costs plus an appropriate proportion of the overhead for administration, personnel, building maintenance, equipment, etc. Hospital costs are one of the factors which determine HOSPITAL CHARGES (the price the hospital sets for its services). (MeSH)

Note: Embase uses Hospital Cost

HYE (Healthy Years Equivalents)

These have been suggested as an alternative to QALYs. The advantage of HYEs is that they fully represent individual preferences without imposing restrictive assumptions associated with QALYs. HYEs are measured using a two-stage gamble technique where the health state is described to the respondent, along with the duration of the state, and the respondent is asked how many years of life in full health would be equivalent to this scenario. (HERU Glossary)


Monies paid by an insurer to a provider, in a predetermined amount in the event of a covered loss by a beneficiary; differs from reimbursement, which provides coverage based on actual expenses incurred. There are fewer restrictions on what a doctor may charge and what an insurer may pay for a treatment under indemnity payment, and generally there are also fewer restrictions on a patient’s ability to use specialty services.

Industrial Organization

Industrial organization is concerned with the working of the market economy and generally organizes its approach in terms of market structure, conduct and performance of firms as well as the role of public policy with respect to market structure. (Macmillan)


A method of providing for money to pay for specific types of losses, which may occur. Insurance is a contract (the insurance policy) between one party (the insured) and another (the insurer). The policy states what types of losses (see risk) are covered, what amounts will be paid for each loss and for all losses, and under what conditions. Two types of insurance commonly spoken of in health care are: (1) insurance covering the patient for health services (health insurance, also called a “third party payer”); and (2) insurance covering the health care provider for risk associated with the delivery of health care (liability to a patient for malpractice, for example) (World Bank, 2001) See also Health Insurance

Insurance Premiums

The payment individuals make to obtain health insurance.


The investing of funds for income or profit. (MeSH)

Labor Economics

The aspects of economics concerned with the supply and demand for labor. This includes factors affecting the participation rate, wage bargaining and organized labor, training, hours and conditions of work, practices concerning hiring, redundancy, labor turnover, migration and the age of retirement. (Black)

Managed Care

Managed care is a health care plan that integrates the financing and delivery of health care services by using arrangements with selected health care providers to provide services for covered individuals. Plans are generally financed using capitation fees. There are significant financial incentives for members of the plan to use the health care providers associated with the plan. The plan includes formal programs for quality assurance and utilization review. HMO’s, PPO’s and POS plans are examples of managed care.

Marginal Analysis (MA)

The evaluation of the change in costs and benefits produced by a change in production or consumption of one unit; i.e., examines the effect of small changes in the existing pattern of health care expenditure in a given setting.

Marginal Benefit

The value of benefit derived when output is increased by one unit.

Marginal Cost - see Cost


A joint federal/state program providing some payments for some health services for some individuals whose income and resources are insufficient to pay for their own care.

Medical Ethics (MeSH uses Ethics, Medical)

The principles of proper professional conduct concerning the rights and duties of the physician, relations with patients and fellow practitioners, as well as actions of the physician in patient care and interpersonal relations with patient families. (From Stedman, 25th ed) (MeSH)

Medical Practice Variations - see Physician's Practice Patterns


A federal entitlement program of medical and health care coverage for the elderly and disabled and persons with end-stage renal disease.


The art and science of preventing, diagnosing, and treating disease, as well as the maintenance of health. (MeSH)

MeSH Tree (Librarianship)

The National Library of Medicine's (NLM's) controlled vocabulary thesaurus. MeSH is the acronym for Medical Subject Headings. (NLM)

Methods of Benefit Assessment

Methods used by insurance companies to assess the health benefits individuals receive based on the insurance they purchased.

National Health Expenditures

This measure estimates the amount spent for all health services and supplies and health-related research and construction activities consumed in the United States during the calendar year. Detailed estimates are available by source of expenditures (for example, our-of-pocket payments, private health insurance, and government programs), and by type of expenditures (for example, hospital care, physician services, and drugs), and are in current dollars for the year of report. Data are compiled from a variety of sources.

Opportunity Cost

The notion of cost used in economics. See also, Cost

Option Appraisal (OA)

The systematic examination of the relative advantages and disadvantages of alternative options in meeting specific health objectives before resources are committed to one or more programs. The foundations of option appraisal are in cost-benefit analysis and it usually used in appraisal of capital developments in the NHS.

Organization of Economic Cooperation and Development (OECD)

An international organization of developed countries, which produces international statistics on healthcare systems in member countries and provides a forum for research and discussion about economic issues. (Glossary)

Out-of-pocket Expenditures

The portion of medical expenses a patient is responsible for paying. (Nevadans)

Outcome Description

Examines only the consequences of a single intervention or program. (Drummond)

Partial Evaluation

Partial evaluations constitute a number of economic study types which consider costs and/or consequences, but which either do not involve a comparison between alternative interventions or do not relate costs to benefits. (see module 3)


Economic aspects of the fields of pharmacy and pharmacology as they apply to the development and study of medical economics in rational drug therapy and the impact of pharmaceuticals on the cost of medical care. Pharmaceutical economics also includes the economic considerations of the pharmaceutical care delivery system and in drug prescribing, particularly of cost-benefit values. (From J Res Pharm Econ 1989;1(1); PharmacoEcon 1992;1(1) (MeSH)

Physician's Practice Patterns

Patterns of practice related to diagnosis and treatment as especially influenced by cost of the service requested and provided. (MeSH)

Point of Service Plan (POS)

A plan that contains elements of both HMO’s and PPO’s. They resemble HMOs for in-network services in that they both require co-payments and a primary care physician. Services received outside of the network are usually reimbursed on a fee-for-service basis.

Preferred Provider Organization (PPO)

This is a health plan generally consisting of hospital and physician providers. The PPO provides health care services to plan members usually at discounted rates in return for expedited claims payment. Plan members can use PPO or non-PPO health care providers; however, financial incentives are built into the benefit structure to encourage utilization of PPO providers.

Priority Setting and Rationing (MeSH term is Health Care Rationing)

Planning for the equitable allocation, apportionment, or distribution of available health resources. (MeSH)


The science dealing with the study of mental processes and behavior in man and animals. (MeSH)

Public Health

Activities that society undertakes to assure the conditions in which people can be healthy. These include organized community efforts to prevent, identify and counter threats to the health of the public. (Turnock, 2001)

Public Policy (and Finance)

A course or method of action selected, usually by a government, from among alternatives to guide and determine present and future decisions. (MeSH)

Purchasing Power Parities (PPPs)

PPPs are the rates of currency conversion that eliminate the differences in price levels between countries. The PPP rate is formed by pricing the same, fixed basket of goods and services across different countries in the national currency of each country. For example, if an identical basket of goods and services cost 500 French Francs (FF) in France and US$100 in the US, then the PPP conversion rate would be calculated at five FF to one US$.

Quality-Adjusted-Life-Year (QALY)

(1) Units of measure of utility which combine life years gained as a result of health interventions/health care programs with a judgment about the quality of these life years.

(2) A common measure of health improvement used in cost-utility analysis, it measures life expectancy adjusted for quality of life. (World Bank, 2001)

Quality of Life

A generic concept reflecting concern with the modification and enhancement of life attributes, e.g., physical, political, moral and social environment; the overall condition of a human life. (MeSH)


Payment for services. Payment of providers by a third-party insurer or government health program for health care services. Reimbursement can be either PROSPECTIVE REIMBURSEMENT or RETROSPECTIVE REIMBURSEMENT. MEDICARE has evolved a complex reimbursement system based of DRGs. Reimbursement is a major influence on the structure of the American health care system. Changes in the reimbursement mechanisms impact the cost and delivery of service, as well as trends in medical education and specialization.

Remuneration Methods & Incentives

Remuneration methods are payment/reimbursement methods which may include DRGs, and other payment methods. See Reimbursement. Incentives are "implicit or explicit inducements that influence behavior. In the workplace, refers to financial or psychological rewards designed to motivate employees to perform above an established standard. Incentive wages are one way in which PROSPECTIVE payment systems encourage health care providers to use fewer procedures and make fewer office appointments. In contrast, the fee-for-service reimbursement system rewards providers for increasing UTILIZATION of health care services.

Resource Allocation

Societal or individual decisions about the equitable distribution of available resources. (MeSH)


The basic inputs to production - the time and abilities of individuals, natural resources such as land and capital (facilities, equipment, etc.). (World Bank, 2001)

Risk (actuarial)

An actuary’s statement of the risk presented by a group of individuals, which is being considered for enrollment in health care insurance. This risk statement is the basis for rating the group, i.e., determining the insurance premium to be charged. For community rating, the risk statement is for entire community; for experience rating, the statement is for a smaller group, such as the employees of a given corporation.


A situation in which the needs and wants of an individual or group of individuals exceed the resources available to satisfy them.

Sensitivity Analysis

A technique which repeats the comparison between inputs and consequences, varying the assumptions underlying the estimates. In so doing, sensitivity analysis tests the robustness of the conclusions by varying the items around which there is uncertainty.

Socioeconomic Determinants of Health

The entire range of individual and collective factors-and their interactions-that affect the health of the people of Canada. These factors may include income and social status; social support networks; education; employment and working conditions; social environments; physical environment; personal health practices and coping skills; healthy child development; culture; health services; gender; biology and genetic endowment. (Health Canada)

Socioeconomic Factors

Social and economic factors that characterize the individual or group within the social structure.


A social science dealing with group relationships, patterns of collective behavior, and social organization. (MeSH)

State Children's’ Health Insurance Program (SCHIP)

A largely federally funded Medicaid program designed to help states expand health insurance to children whose families earn too much for traditional Medicaid but not enough to afford private health insurance.

Self Insured Plan

Plan offered by employers and other groups who directly assume the major cost of health insurance for their employees or members. Firms that self-insure generally obtain state tax benefits and freedom from mandated benefits.

Statistical Methods

The arithmetical tests that statisticians and health economists use to derive meaning from data.

Technical Efficiency

Assesses whether a given output can be achieved by using less of one input while holding all other inputs constant. This concept is related to cost-effectiveness. See also Cost-effectiveness and Cost-effectiveness analysis.

Third party payer

In health care finance, this is an insurance carrier, Medicare, and Medicaid or their government-contracted intermediary, managed-care organization, or health plan that pays for hospital or medical bills instead of the patient. Also know as “third party carrier”.


Refers to people who have some type of health insurance, such as catastrophic care, but not enough insurance to cover all their health care costs. (Nevadans)

Uninsured (MeSH uses the term Medically Uninsured)

Individuals or groups with no or inadequate health insurance coverage. Those falling into this category usually comprise three primary groups: the medically indigent (MEDICAL INDIGENCY); those whose clinical condition makes them medically uninsurable; and the working uninsured.


A term used by economists to signify the satisfaction accruing to a person from the consumption of a good or service. This concept is applied in health care to mean the individual's valuation of their state of well-being deriving from the use of health care interventions. In brief, utility is a measure of the preference for, or desirability of, a specific level of health status or specific health outcome. (Source Kielhorn A. and Graf von der Schulenburg J.M. The health economics handbook. 2nd ed. Chester. Adis International. 2000)


The level of use of a particular service over time. (Managed)

Utilization Review

Evaluation of the necessity, appropriateness, and efficiency of the use of health care services, procedures, and facilities. In a hospital, this includes review of the appropriateness of admissions, services ordered and provided, length of a stay, and discharge practices, both on a concurrent and retrospective basis. Utilization review can be done by a peer review group, or a public agency. (AcademyHealth)

Value of Life

The intrinsic moral worth ascribed to a living being. (MeSH)

Voluntary Care

Care, usually by a family member. The market price is zero but there is an opportunity cost in terms of the alternative ways in which the carer could have utilized the time. A value would have to be imputed, perhaps based on the salary of a paid caregiver.

Willingness-to-pay (WTP)

A technique which aims to assign a value to health benefits by directly eliciting individual preferences in the views of samples of the general public who are asked how much they would be prepared to pay to accrue a benefit or to avoid certain events.

Definitions are compiled from the following sources:

AcademyHealth. Glossary of Terms Commonly Used in Health Care. 2004 edition. Washington, D.C.: AcademyHealth, 2004.

Batstone G and Edwards M. 1996. Achieving clinical effectiveness: just another initiative or a real change in working practice? Journal of Clinical Effectiveness, 1 (1), 19-21.

Black, John. Dictionary of Economics. Oxford: Oxford University Press, 1997.

Centers for Medicare and Medicaid Services (CMS) U.S. Dept. of Health and Human Services, [formerly, Health Care Financing Administration – HCFA] [online] Site URL.

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