Intended for healthcare professionals

Analysis And Comment Health economics

Using economics to set pragmatic and ethical priorities

BMJ 2006; 332 doi: (Published 23 February 2006) Cite this as: BMJ 2006;332:482
  1. Stuart Peacock, senior research scientist in health economics (,
  2. Danny Ruta, senior lecturer in epidemiology and public health2,
  3. Craig Mitton, assistant professor3,
  4. Cam Donaldson, Health Foundation chair in health economics2,
  5. Angela Bate, research associate in health economics2,
  6. Madeleine Murtagh, lecturer in social science and public health2
  1. 1 Cancer Control Research, British Columbia Cancer Research Centre, Vancouver, BC, Canada V5Z 1L3
  2. 2 School of Population and Health Sciences, University of Newcastle upon Tyne NE2 4AA
  3. 3 Faculty of Health and Social Development, University of British Columbia Okanagan, Kelowna, Canada
  1. Correspondence to: S Peacock
  • Accepted 14 October 2005

Doctors and managers have to make tough decisions about what services to provide from their budgets. Economic approaches can help, but they also need to take into account the practical and ethical challenges faced by healthcare professionals

Doctors and managers in hospitals and primary care have to manage competing claims on their limited budgets. They have to decide what services to fund and what not to fund as well as the extent of funding. Extra resources will not remove the fundamental need to make such choices because healthcare needs and wants will always outstrip the resources available. Economic approaches to resource management at the local level have had limited success, partly because economists have failed to consider properly the practical challenges that managers and doctors face in making rational priority setting decisions.1 Ruta and colleagues described an approach called programme budgeting and marginal analysis, which they argue recognises the need to balance clinical autonomy with financial responsibility.2 We describe two checklists to aid managers and doctors in implementing local frameworks for resource management based on this approach. These checklists deal with pragmatic and ethical considerations that are central to the successful design and implementation of priority setting processes.

Why do we need an economic approach?

The challenge of setting health service priorities is greater than ever. In the United Kingdom, despite the Wanless recommendation for up to a £29bn (43%) real increase in health spending over five years3 many primary care trusts are overspent, with the total deficit estimated to be £500m ($870m; €727m) in 2005.4 At the same time, important questions remain as to what managers and doctors are meant to do with national health technology guidance in their local contexts of resource management.5 There is a missing link between priority setting at national and local levels. This is highlighted in …

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