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Essentials of health economics: Part I--What is economics?

The growing interest in health economics is not surprising. National Health Service (NHS) funds have risen relatively slowly in real terms over the last few years. At the same time technological developments in medicine have conspired to increase costs, not only because they often require more expensive procedures but also because they increase the patient population who, at least potentially, could benefit from treatment. All this serves to put pressure on a health service which has stated priorities for quite different services-such as community care for the elderly, mentally ill, and mentally handicapped-and which is still reeling from the suggestions in the Black Report' that social inequalities remain. Various solutions have been proposed for the ills of the NHS. The first group, which might be termed "radical surgery," suggests changing the system of financing the NHS more towards those existing in other countries or attempting to promote health outside the confines of the NHS. The second group, which might be termed "medical management," is more concerned with finding ways to use resources within the NHS more rationally. This is clear from the recent guidance from the Department of Health and Social Security (DHSS) on the appraisal of capital developments,9 the new emphasis on monitoring performance at all levels,3 and the growing interest among doctors and others to find more cost-effective ways of deploying clinical resources.