Economic appraisal in public healthcare: assessing efficiency and equity

Abstract

This chapter is an introduction to economic appraisal. It explains underlying concepts, describes methods used, and discusses the application to public health. Economic appraisal comprises techniques that weigh up the costs of an action, such as providing a public health intervention to an at-risk population group, against the benefits that it provides. Important underlying principles are opportunity cost, social versus private costs and benefits, marginal costs and benefits, efficiency, and equity. There are different types of economic appraisal, each of which measures the costs and benefits of options being compared. Measuring costs involves identifying and describing resource use changes, quantifying them in physical units and valuing them. Issues in cost measurement include use of macro or micro-costing and dealing with inflation and time preference. There are several approaches that can be used to measure benefits depending on the type of economic appraisal being used; a measure of special interest is quality-adjusted life years (QALYs). Modelling is often used in economic appraisal to combine data on the costs and benefits of an intervention. Given the inherent uncertainties involved in economic appraisal it is good practice to undertake sensitivity analyses that investigate the impact of uncertainty. Methodological challenges in undertaking economic appraisals of public health interventions include the importance of equity and inequality considerations, establishing robust evidence of the effect of public health programmes, the relevance of QALYs, and accounting for multisectoral costs and benefits.