What is an economic model?

An economic model is a predictive tool that is used to assess the economic impact or cost-effectiveness of healthcare. These models can quantify the costs and benefits of healthcare, which in turn allows comparisons to be made between competing healthcare options.

Health economic models incorporate as many details about the costs and benefits as possible into the model in order to try and reflect reality. For instance, costs may include the cost of hospital appointments that a patient needs, the cost of medications they take, and the cost of surgical procedures. The benefits that may be included in a model try to accurately reflect the expected impact of healthcare on patients, for example, on their quality and length of life. Any wider societal costs and benefits, such as the societal impact of a patient’s inability to work may also be considered.

When are economic models useful in healthcare?

Economic models are useful when trying to make objective and informed decisions about the provision of healthcare in the future. This can be achieved with an economic model by extrapolating data from the past to make predictions about the future. As there will always be uncertainty about the future, models can produce a range of results for a variety of scenarios, and test the sensitivity of the model results by using different inputs and assumptions.

Economic models are often used to help make decisions between different treatment options. Models can provide estimates about hypothetical scenarios, such as the implications of implementing a new treatment routine on the National Health Service (NHS), by using results from a clinical trial to predict final outcomes beyond the trial period, which would help the NHS understand whether a prospective new treatment represents value for money. This is the process by which new treatments are currently assessed when the NHS is deciding whether to reimburse these treatments, and economic models form an important part of this process.