Chapter 2: Cost minimization and the definition of ‘cost’
We begin our account of health care evaluations with the cost part of CBA. All four evaluation types rely on these costs, which makes an analysis of costs common to all. We will be first focusing on CM because an estimation of costs is all that is required to use this evaluation type. We start by defining economic costs and explain how they depend on the time period being considered. The role of discounting is then introduced. From there we present a detailed account of how CM fits in with economic theory, explaining cost curves in the short and long runs. The first section closes with an analysis of how discounted costs at different times are combined into a present value figure. Cost minimization and its relationship with CEA and CBA criteria are explored in the next section. Cost minimization applications follow and the chapter ends with the problems and final comments section.
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