Productivity Costs in Economic Evaluations

The increase in health expenditures has raised important questions about the appropriate height of health care spending as well as the justification of these expenditures. One tool in the search of ensuring the optimal allocation of scarce societal and health care resources is economic evaluation of health care interventions, such as new pharmaceuticals, diagnostics or preventive measures. In economic evaluations, the costs of an intervention are compared to its benefits, expressed in some meaningful manner. Consistently applying these evaluations, in theory, would ensure an optimal level of spending in the health care sector (that is, the size of the budget, or how much to spend on health) as well as an optimal use of the available resources within the budget (that is, on what the budget is spent). This optimal spending can be defined in light of the twin goals of health care policy; efficiency and equity. As such, economic evaluations can be seen as applied welfare economics, aimed at informing social choices to come to a maximization of broadly defined welfare.

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