Health economics addresses, at its most basic, one of the fundamental issues in economics: deciding how to allocate limited resources to meet unlimited needs. In health economics specifically, we aim to evaluate and achieve 'efficiency, effectiveness, value and behavior in the production and consumption of health and healthcare' .
How can we balance maximizing benefits while minimising resource use? Here we run into one of the primary principles, and most confusing concepts for non-health economists, that governs health economics as a discipline:
Value for money is not the same as affordability.
What is value for money in the healthcare space? To provide a very simplified example, let’s think of wound dressing selection in a clinical setting. It would be easy to assume that because wound dressing A is cheaper than wound dressing B, dressing A is the best choice because it is least expensive. But health economics takes numerous factors – not just item price – into consideration to make determinations about value for money.
Health economics is not about the price of care but takes into consideration both the outcomes important to patients, and the cost of the resources invested in delivering that care.
A true measure takes both into account. For example: