The name is absent

4. Doing better: the importance of costs.

Costs are the missing half of the outcomes framework as developed so far.
Simply if resources were not limited, problems could be solved by providing
more inputs.

The maximisation of health outcomes would mean doing everything for
everybody that had even a small positive impact on their health. Pursuing this
would mean spending a lot more than the 8% of our GDP currently spent on
health care (Richardson 1990). What is important is not that we spend 8%
GDP, but that to spend more would mean giving up other things, such as
housing, education or entertainment. This is the notion of opportunity cost
(note 2). Opportimity cost refers not to the dollar expenditures on these
commodities but to the welfare forgone by using resources, ie the available
inputs, in one production process rather than another. For example, it is the
value of better schooling if additional resources are devoted to health care
rather than education.

Technical note 2: Opportunity cost

The opportunity (or economic) cost of a health care program is equal in
value to the outcomes of the most favoured alternative use of the same
resources. It is not necessarily equal to the financial value of the resources
expended on the program.

As an easy example, if there is an additional $100,000 to be spent on one of
two life saving projects, then the opportunity cost of the preferred program
is equal in value to the lives which could have been saved if resources had
been allocated instead to the alternative.

An economic evaluation is therefore a comparison of outcomes. It compares
the outcomes achieved by one program with the outcomes which could be
achieved by another were it to be provided with the same level of
resourcing.

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