The economics of good health

For a long time, quality of life was regarded as something that couldn’t be measured. Now, health care is shifting toward a greater appreciation of patients’ views and preferences which are very important, and can’t be ignored.

Perhaps surprisingly, health economics has contributed strongly to the measurement of patient-reported outcomes. And in the past 20 years we’ve come up with reliable, robust and sensitive measures for those intangible things. It’s a challenging field.

I’ll go out on a limb and say every decision made in health care can be improved by the contribution of health economics. Whether that’s decisions by patients, doctors, health care funders, by providers - health economics can improve the availability of evidence for those decisions.

These kind of decisions can be challenging to make. If you’re implementing a new cost-increasing technology, should we focus on what you have to give up in order to implement that? Or should we look at society’s willingness to pay for health improvement?

So, you’ve got two quite strongly opposing schools of thought and no political mechanism to reconcile the two. I would call that a normative area of research because it really relies upon a series of arguments and value judgements about what should count in decision making.

All researchers should engage with people who actually use their research. I was surprised to be given opportunities at quite a young age to directly influence policy. When I was 24, I’d recently joined the economics department at the University of Otago and was invited to go on a national advisory committee to the Ministry of Health.

I had the opportunity to see what the issues were confronting policy makers, and that, in turn, helped to shape my research and make it impactful. You get into quite a good virtuous circle. I don’t know whether it’s so easy nowadays to do that.

Some of the most exciting areas in economics are around behavioural economics - a more nuanced view of how people behave, why they behave in certain ways and how they respond to certain incentives.

We can apply the whole range of microeconomic theory and econometric methods to understanding the behaviour of providers, patients, the relationship between the incentives that affect people and their behaviour, and how that influences the performance of the healthcare system.

We also need to set the right benchmarks in healthcare. A lot of healthcare systems around the world are using cost effectiveness evidence, but we need to make sure we’re setting that bar at the right height.

Otherwise, you might be rejecting technologies that are quite good value for money or accepting ones that are ludicrously expensive and put a huge cost strain on the health system. This is the most difficult but, potentially, most important challenge.

Some big important countries like China are shifting towards a more collective funded healthcare. It’s a transformation worldwide. This shift is creating additional demand for people with skills in my field.

A collectively funded healthcare system relies on having mechanisms in place to determine how resources are spent, how to maximise effectiveness, and ensure that the things we spend our money on are good value for money. I’m delighted to be in a field that can support those developments in a practical way.

We need to disabuse people of the notion that economics is a type of accounting. We can do this by educating clinical leaders about what health economics can contribute - that it’s it’s not just about costs and achieving cost savings. That’s really the tip of the iceberg.

- As told to Elisabeth Lopez

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