Whilst ‘cost’ is typically thought of in everyday sense as the monetary price that must be paid in order to acquire something, in economic evaluation it is preferable to consider cost as the (monetary) value of anything that has to be sacrificed in order to acquire something.  Thus, the cost of an item could reflect its monetary price, but could also reflect the time that must be spent in order to obtain the item.  In health economics, costs usually reflect the expenditure of the healthcare system on resources such as treatments, monitoring, staff time and other consumables.  These costs are, however, better thought of as the opportunity cost associated with ‘what other benefits could the use of those same resources have achieved?’  Thus, the true ‘cost’ of the use of a resource may depend upon whether it was already being used to its full capacity.  Costs are often categorised into different types, such as direct and indirect costs (reflecting whether the costs fall to the health and social care provider, or to other sectors) or fixed and variable costs (reflecting the initial payment for equipment and the additional cost per use of the consumables). Another important distinction is between average cost and marginal cost: the latter (more important for economic evaluation) being the additional cost of one further unit of resource, which frequently declines as more resource units are consumed. Incremental cost, denoting the difference in overall costs associated with the use of an intervention compared with the use of an alternative, is usually a key output of an economic evaluation.


How to cite: Cost [online]. (2016). York; York Health Economics Consortium; 2016. http://www.yhec.co.uk/glossary/cost/