Common issues in health economics include whether a plan of action is technically efficient, whether it is allocatively efficient, and whether it results in both vertical and horizontal equality. The goal of health economics is to provide analytical techniques to assist decision making.
The issue of how best to achieve a health care objective is technical efficiency. This deals with maximizing the output received in terms of patient health while minimizing the cost. Technically efficient courses of action are cost-effective.
Allocation of resources in the field of health in a way that maximizes the benefit of the health system is allocative efficiency. The aim of achieving allocative efficiency is for the ratio of marginal benefits to marginal costs to be equal across the health care system.
Equity addresses whether health care policies are fair. For a health policy to result in horizontal equity, those who have the same level of need must have the same access to treatment. Vertical equity is achieved when people of different groups with different levels of social privilege are treated unequally in a manner that results in a leveling of the playing field. An example of this is the allocation of more health care resources to lower-income communities.