Discover the significant impact of health economics, particularly in the context of the UK, and understand its crucial role in shaping improved healthcare outcomes.

Why is health economics important? 

Health economics is the application of economic theory, models, and empirical research methods to analyse decision-making related to health and healthcare. It plays a pivotal role in shaping healthcare systems, resource allocation, and policy design. Here’s why health economics matters:

Healthcare systems worldwide face resource constraints, especially in countries relying on national health systems like the UK. Efficiently allocating limited resources is crucial for maintaining the health of national populations. Inefficient allocation can lead to missed opportunities, where funds are not used optimally, resulting in worse health outcomes for certain groups.

The UK’s National Health Service (NHS) faces mounting pressures due to factors like an ageing population and rising costs of medicines and technologies. Health economics helps address these challenges by optimising resource allocation and ensuring equitable access to healthcare innovations.

A subdiscipline within health economics, economic evaluation, focuses on allocating resources effectively for health interventions. By assessing costs, benefits, and outcomes, economic evaluation guides decisions on where to allocate funds for maximum impact.

Beyond health outcomes alone, the impact of healthcare extends to other areas, such as labour market productivity, education rates, and overall economic growth. Economists refer to these indirect benefits as positive externalities of health.

In summary, health economics is critical worldwide for making informed decisions that balance health needs, resource availability, and economic considerations. This is especially important for low- and middle-income countries where health problems are some of the most significant barriers to economic growth and prosperity.

How is the UK a leader in health economics? 

The UK hosts many of the world’s leading research institutions for health economics and has been a global leader in both the development and practice of the discipline for decades. One source of its influence is its prominent role in the training of new health economists at renowned academic centres by world-leading researchers. Opportunities for training in health economic methods exist at the undergraduate, master’s, and PhD levels, making it a hub for experts and the curious alike.

Health economics also plays a key role in decisions made by the UK’s largest healthcare provider, the National Health Service (NHS).

The National Institute for Health and Care Excellence (NICE) makes recommendations to the NHS about which treatments should be available based on explicit, rigorous health economic analysis and stakeholder engagement. As a result, UK-based researchers have been instrumental drivers of innovations around methods for cost-effectiveness analysis and its praxis. In addition to their influence domestically, UK research institutions have a global reach, collaborating with NGOs and health systems worldwide. NICE has inspired other health systems to use similar methods (broadly referred to as Health Technology Assessment) to make informed decisions about population health.

The UK’s embrace of health economic analysis, together with its strong innovative capacities owing to its vibrant life sciences sector, make it well-positioned to continue leading the charge for decades to come.

Key areas of impact in health economics

Health economics has a significant impact on various industries and areas. Let’s explore some of the key domains influenced by the work of health economists:

  1. Healthcare Providers and Hospitals: Health economists help hospitals and healthcare providers optimise resource allocation. They analyse costs, staffing levels, and treatment effectiveness to enhance efficiency and quality of care. Pricing strategies, reimbursement models, and decisions related to medical equipment acquisition are also influenced by health economics.
  2. Pharmaceutical and Biotechnology Companies: Health economists evaluate the cost-effectiveness of new drugs and therapies. Their research informs pricing decisions, market access strategies, and drug development priorities. Pharmaceutical companies collaborate with health economists to demonstrate the value of their products to payers and policymakers.
  3. Health Insurance and Payers: Health insurers rely on health economics to design benefit packages, set premiums, and manage risk. Cost-sharing arrangements, coverage policies, and network design are influenced by economic analyses. Payers use health economic evidence to negotiate with providers and make coverage decisions.
  4. Government and Public Health Agencies: Health economics guides public health policies and resource allocation. Governments use economic evaluations to prioritise interventions (e.g., vaccination programs, disease prevention). Policymakers also consider health economics when designing healthcare financing systems, regulating pharmaceutical markets, and addressing health disparities.
  1. Health Technology Assessment (HTA) Bodies: HTA agencies assess the value of medical technologies (drugs, devices, diagnostics). Health economists contribute to these assessments by evaluating clinical outcomes, costs, and patient preferences. HTA findings influence reimbursement decisions and adoption of innovations within healthcare systems.
  1. Global Health and Development Organisations: Health economics plays a role in global health initiatives. Organisations like the World Health Organization (WHO) use economic analyses to allocate resources effectively. Addressing health challenges in low- and middle-income countries relies on understanding economic constraints and opportunities.
  2. Positive Externalities and Economic Productivity: Better healthcare has positive externalities beyond individual health. Healthier workers take fewer sick days, are more productive, and contribute to economic growth. Improved health leads to higher human capital (education and training), positively affecting a country’s Gross Domestic Product (GDP) and overall welfare.
  3. Well-Being and Human Development: Health economics contributes to overall well-being. Health is a key component of measures like the Human Development Index (HDI). A healthier population enhances well-being, productivity, and societal welfare.

Health economic policy – what is next?