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Technical note 1: External effects

The discussion so far has been concerned with health outcomes (and their
value) to the individual consumer. But health care conveys benefits to
people other than the specific consumer. Such external effects are readily
incorporated conceptually in economics, though the practical implications
are harder to deal with.

External effects in health care occur at three levels (Culyer 1976). First, I
may benefit directly from your consumption of health care. For example, I
benefit from any steps you take to avoid contracting and spreading an
infectious disease. Second, I may feel better simply knowing that you have
access to health care, whether or not you choose to use it. Third, I may feel
better knowing that you are in better health. Thus, I gain benefit from your
use of effective health services.

External effects are recognised as outcomes of the health care system
though their measurement in practice is difficult.

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