Economic Evaluation

Cost

Costs are the value of the resources used for any particular course of action. The type and scope of costs depend on the analysis viewpoint (i.e., society, government, patient, employer, program agency). When in doubt, it is best to go to the broadest or societal viewpoint. The real cost of any alternative is measured not by the budgetary allocations but by the health output that could have been achieved through some other alternative that has been foregone because of the commitment of resources or inputs to the alternative in question. This cost is the opportunity cost of the alternative considered and is compared with the alternative's benefits.

Direct costs are the actual expenses incurred by participating in the alternative. This includes the medical expenses, transportation costs, and other training costs that can be part of implementing the alternative. Indirect costs are the productivity losses associated with the course of action, which reflect the opportunity costs of using one alternative and foregoing another. For example, this could include the waiting time for appointments and the transportation time as part of the participation in a course of action. In the private perspective, transfer costs are also included since they reflect changes in payments for individuals, providers, or organizations. From the societal view, direct and indirect costs are included but not transfer costs, since these are not resources used. Overall, economic costs go beyond simply listing expenditures, since opportunity costs need to be reflected.

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