Published: October 2018

Last updated: October 2018

Chapter 20: The Mechanics of Basic Health Economics

Health economics allows decision-makers to identify the most efficient allocation of limited resources. It involves measuring the benefits of different health care interventions in such a way that they can be compared across the whole health system. Quality-adjusted life years (QALYS) allow us to measure the benefires that acrue from both increased length of life (i.e. life expectancy) and improved quality of life – or even a combination of both. Once we have estimated the QALYS gains from a particular intervention, these can be compared against the QALYS that must be lost elsewhere in the health system in order to release funds to pay for a new intervention. If the QALY gains from a new intervention outweigh the opportunity costs of moving that money form where it is currently spent, then the health care system as a whole will benefit from the new intervention.

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