The difficult problem of choice

The fundamental issue in Economics is scarcity. And it comes up everywhere, everyday.

The issue is especially unfortunate when applied to the NHS. Despite what the Americans think the NHS is the finest idea in medical provision in the world - treatment is free at the point of use. But that means very high demand - wants are infinite and free is the price that gets that level of demand. But the budget of the NHS is limited by what the government can afford.

Therefore not all treatments can be afforded by the NHS and they have to make a choice about which to provide.

The article below tells of the provision of a cancer treatment for children. At £210,000 its just too much to be given to everyone. Of course this is a value judgement, but an excellent of scarcity, choice and opportunity cost.

The Telegraph article is here

Opportunity cost at work

NICE, the National Institute for Health and Clinical Excellence, have the job of deciding if treatments are value for money for the NHS. It's a pretty thankless job. The NHS has a fixed budget and that has to be allocated to the most effective use.

The problem is that new treatments are very expensive and so take a lot of money. The case of a new prostate cancer drug illustrates the dilemma.

Prostate cancer is the most common cancer in men and kills 10,000 a year. A new drug that costs £3,000 a month will extend the life, but not cure, those with advanced prostate cancer. This very effective drug will cost a great deal of money, reduce suffering, but save no lives.

NICE have decided that, at the preliminary stage, the drug should not be available on the NHS. The decision is based on opportunity cost. How many more treatments can be provided to other patients instead of giving this drug to prostate cancer patients?

NICE are applying a cost-benefit approach and living with the problem of scarce resources. But that is little comfort to those with prostate cancer.

The BBC cover the story here

The price of life?

Every year I look for a story that illustrates opportunity cost. This year I have recycled one from last summer. It is a classic one on how to best use the NHS's limited resources and comes from a decision of NICE (NICE decides which treatments should be available on the NHS).

There are many such tough decisions and this time it is a drug that helps those with late stage bowel cancer. This decision is to deny a drug to patients that will extend their life by six weeks to a few months. It costs £21,000 per patient.

The opportunity cost of allowing the drug for general use would be the treatments that could be funded instead. The article suggests 6500 patients could benefit a year. Thats £136.5 million a year available to patients who might live a lot longer.

This is not a pleasant decision for anyone to make. But it does bring home the real cost of a decision on resource use.

The BBC story is here

Opportunity Cost and the price of life

The BBC has followed the assessment of a new drug by NICE for use in the NHS. The clear problem for them is 'is it worth the money?' However how can you put a price on life.

This is relevent to the concepts of opportunity cost and the assessment of the value of life for Cost-Benefit Analysis.

The Price of Life