Why economic evaluation?

Healthcare systems are highly regulated, with a high degree of government involvement in funding, provision and ownership. The main reason for this is that in many countries access to healthcare is seen as a human right. No one should die or suffer from serious disease just because she cannot afford relevant health services. In most developed countries, social health insurance covers basically everything that is needed (with some exceptions in, e.g. the US – see below). In most other markets, one simply does not get the goods one wants but cannot afford. Price decides what you get and thus works as a rationing instrument. In medicine, such a form of rationing is widely rejected. Besides this societal decision to provide what is needed (not what the patient is able and willing to pay for), there are a number of reasons for market failure, such as a high level of asymmetric information, moral hazard, the uno actu principle (which means that a service is consumed at the same time it is produced). This makes it more difficult for consumers to estimate quality, in contrast to “normal” products for which a consumer has enough time to study their properties (see Section 10.2 for more details).

In essence, the healthcare market does not allocate resources based on market prices. Rather, public institutions need to decide on resource provision and allocation. Therefore, it is typically not the patient who decides which services she consumes at what cost. She will often not even know the costs of the treatment. There is no “market” where the patients can buy care. Rather, at least in most developed countries, they ask for help and get what they need.

But what does a patient “need”? For example, should society provide (and pay for) toothpaste, spas, a two-bed room (see Section 2.1 on this subject)? Public bodies must decide which services are covered by insurance and which are to be paid by the patient herself. One aspect of this is whether the patient is able to pay (as in toothpaste) or not (as in dialysis). Other aspects are the benefit of the treatment to the patient and the question of whether the treatment is worth it. If a drug that costs $50,000 prolongs life only by two weeks, should society pay?