Ioan Humphreys

Introduction to Health Economics in the UK

In recent years the United Kingdom has experienced a disproportionate increase
in healthcare costs, this has been caused by many factors, such as increased life
expectancy and a decline in childhood mortality. However, healthcare
expenditure growth does not necessarily result in better healthcare and therefore
the health of a population does not always improve automatically.
Many factors combine to determine the health of an individual. These can
include the physical environment in which the individual lives, such as the
adequacy of their housing or their working conditions, and socioeconomic factors
such as level of employment. Therefore both objective and subjective notions of
value must be considered when calculating the real cost of healthcare.
As a consequence of fixed NHS budgets a system of rationing is used to decide
how the healthcare budget is spent. Therefore not every patient will receive the
drugs and interventions needed to survive. This has caused major health
scandals in the UK, for instance the case of Child B in which an 8 year old
leukaemia patient died as a result of the NHS refusing to pay for her treatment.
Recent years has seen tabloid newspapers bring cases such as these into public
focus making rationing a common topic of current debate.
The main cause of this healthcare dilemma is the fact that there are not enough
resources available for everyone and as a result sacrifices have to be made. This
problem stems from the demand outweighing the supply. An increase in demand
has resulted from demographic changes, frequent flyers, wastage, increasing
expectations and technological advance.
Related to this dilemma is the economic concept of opportunity cost which
considers the value of what would be gained from using resources elsewhere. For
example the more money is spent on drugs, the less money is spent on police
and it could be argued therefore that crime has increased as a result of that
initial purchase.
Health economics involves evaluating opportunity cost and cost effectiveness. In
order to make decisions direct patient costs, direct health service costs, indirect
costs and intangible costs such as the impact on quality of life must be
considered. Economic evaluation compares a variety of alternatives focusing on
both costs and consequences. Deciding that one of these alternatives is cost
effective does not necessarily mean that it is the cheapest option and is not
related to being effective at reducing costs.
Health economic evaluation techniques measure both cost and quality of life
(QOL). Assessment of health related quality of life in the UK has been part of
economic evaluations for over 30 years and a variety data collection instruments
have been devised. These include questionnaires EQ-5D and SF-36, which are
used as a measure of healthcare outcome and QALYs which measure both the
quality and quantity of life gained from a given treatment or intervention.
Humpheys, I. (July, 2015). Introduction to Healthcare Economics in the UK.
Lecture at Swansea University. Pre-sessional English Programme, Swansea.

Humpheys, I. (July, 2015). Introduction to Rationing, Heath Economics and

Economic Evaluation. Lecture at Swansea University. Pre-sessional English
Programme, Swansea
*** Please accept both of the above as title in pre-lecture and title of actual
lecture do not match.