ABSTRACT
This chapter explains three methods of choice-making, Programmed Budgeting and Marginal Analysis (PBMA), Cost-Effectiveness Analysis, and Cost-Benefit Analysis (CBA). PBMA may be described as a non-prescriptive approach to the structure of healthcare choice; value judgements do enter, in the definition of the budget, its sub-budgets, and their associated activities. In PBMA, incremental changes are compared, and a judgement reached, without necessarily measuring costs and outcomes. The development of the quality-adjusted-life-year has been one of the success stories of economics; the concept illustrates what choice means in the health sector, and it has generated a large literature in the fields of medical ethics, decision analysis, and health policy, as well as in health economics. When the CBA approach is applied to the health sector, the setting of money values on health outcomes is a necessary feature. The chapter also presents an overview of the key concepts discussed in this book.
