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Counting the CostsKey TermsAnnual Cost the cost of an intervention calculated on a yearly basis including all the capital and recurrent costsAnnualized costs the annual share of the initial cost of capital equipment or investments spread over the life of the project usually modified to take account of depreciationAverage cost total cost divided by quantityCapital cost the value of capital resources which have useful lives greater than one yearDirect cost resources used in the design implementation receipt and continuation of a health care interventionDiscounting rate the rate at which future costs and outcomes are discounted to account for time preferenceDiscounting a method for adjusting the value of costs and outcomes which occur in different time periods into a common time period usually the presentFinancial budgetary cost the accounting cost of a good or service usually representing the actual historical amount paiddistinct from the economic opportunity costIndirect cost the value of resources expended by patients and their carers to enable individuals to receive an interventionIntangible cost the costs of discomfort pain anxiety or inconvenienceMarginal cost the change in the total cost if one additional unit of output is producedOverhead cost a cost that is not incurred directly from providing patient care but is necessary to support the organization overall ex Personnel functionsRecurrent cost the value of resources with useful lives of less than one year that have to be purchased at least once a yearShadow price the true economic price of a good that reflects its value to societyTime preference peoples preference for consumption or use of resources now rather than later because they value present consumption more than the same consumption in the futureTotal economic cost the sum of all costs of an intervention or health problemCostingnot as simple as it may lookit is important to know the cost of things you buy in the health sector Every time a decision is made to implement one intervention instead of another it is the same as making a purchase The cost of the intervention becomes a very important part of the decision to use one intervention rather than another But figuring out the cost of an intervention is often not easyDrummond et al 2005 provide a list of questions that need to be answered when specifying interventions They suggest that to identify costs you need to askwho are the people providing care ex Doctors nurses health workers etcwhat are the different activities of the intervention ex Training drug distribution etcto whom is the intervention delivered ex Different age groups socioeconomic groups ethnic groups or gender where is each part of the intervention delivered ex Inpatient and outpatient carehow long will the intervention run ex Weight loss program for 6 months vs HIV prevention monitoring sexual behavior over a 10 year period How often will individuals or populations be seen annual check upswhen economists talk about cost they are referring to the opportunity cost of producing a good or in this case a health servicein perfectly competitive markets price will equate to opportunity costoften price is used as a proxy for costs however this is not perfect How do you value the time of individualsFinancial and economic costslets look at the case when the price is available but ti does not reflect the true value of the resources to society it a resource is donated the price paid is zero but the value of the equipment is not zero Similarly taxes or subsidies result in the price paid for a resource differing from its opportunity costremember the opportunity cost is the level of benefit we would receive in the next best alternative optionwhen valuing resources eocnomists use this definition to obtain the value of reources to society where price does not reflect the opportunity cost the inputs are valued using a shadow prive reflecting the true value to society Opportunity costs are are also reffered to as economic coststhey are used in economic evaluation and the weighing up of alternatives in health service deliveryfinancial costs are defined as the acual money spent on resourcesStupid activity skip it
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