COST, CONTEXT, AND DECISIONS IN HEALTH ECONOMICS AND HEALTH TECHNOLOGY ASSESSMENT

Abstract

Objectives: This study is an attempt to demystify and clarify the idea of cost in health economics and health technology assessment (HTA).

Methods: Its method draws on standard concepts in economics. Cost is a more elusive concept than is commonly thought and can be particularly elusive in multidisciplinary territory like HTA.

Results: The article explains that cost is more completely defined as opportunity cost, why cost is necessarily associated with a decision, and that it will always vary according to the context of that decision: whether choice is about inputs or outputs, what the alternatives are, the timing of the consequences of the decision, the nature of the commitment to which a decision maker is committed, who the decision maker is, and the constraints and discretion limiting or liberating the decision maker. Distinctions between short and long runs and between fixed and variable inputs are matters of choice, not technology, and are similarly context-dependent. Harms or negative consequences are, in general, not costs. Whether so-called "clinically unrelated" future costs and benefits should be counted in current decisions again depends on context.

Conclusions: The costs of entire health programs are context-dependent, relating to planned rates of activity, volumes, and timings. The implications for the methods of HTA are different in the contexts of low- and middle-income countries compared with high-income countries, and further differ contextually according to the budget constraints (fixed or variable) facing decision makers.

Keywords: Context; Fixed/variable costs; LMICs; Opportunity cost; Short/long runs; Unrelated costs.