Chapter 36
Economic perspectives on health
Dr. David Kernick, a general medical practitioner from Exeter, in England, has stated
Life in healthcare organisations is a continuum of decisions on how physical and human resources are allocated. Against a background of limited budgets, resources invested into one area are at the expense of a lost opportunity in another and difficult decisions are inevitable. Every decision in healthcare is a rationing decision. Expanding one service means that there is less for another, an extra five minutes spent with one patient will be at the expense of the next.
This is a useful introduction to health economics for two reasons. First, it clearly describes one of the most useful concepts of economics and health economics – opportunity cost. For economists, the true cost of a good, a service or a treatment is not the specific amount of money that was paid for it. Instead, the true cost of something is the value of the benefits foregone by not applying the same money or resources to the next best alternative. This is because most decision-making, in healthcare or elsewhere, takes place under conditions of scarcity. Scarcity of resources, in turn, necessitates choices – you cannot have everything. And choices nearly always imply opportunity costs.
Second, it reminds us that all decisions in healthcare – and doctors make or influence a great many of them – are resource-allocating decisions. While much of medicine is said to be about making ‘clinical decisions’ (i.e. decisions made about patients by or with health professionals), all such decisions usually also commit resources and, therefore, have opportunity costs.
What is economics?
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