An Introduction to Costing and the Types of Costs Used within Health Economic Studies

The number of published health economic analyses, especially economic evaluations, has rapidly expanded globally since the 1990s, and costs are an essential component of such studies. Cost is a general term that refers to the value of the resources/inputs used to produce a good or service. However, within health economics, there are several different types of costs (such as financial, economic, unit, average, etc.). The terminology and application of these cost types often differ, leading to inconsistencies in the health economics literature. These inconsistencies create challenges in comparing studies and hinder the use of health economic analyses to effectively inform policy decisions. This paper aims to provide an up-to-date overview of the cost types, key cost terms, and definitions of different cost measures used within health economics, while highlighting key inconsistencies in the literature. We also discuss common adjustments made to cost data, such as accounting for inflation, discounting, and currency conversions, as well as the influence of economies of scale and scope on cost estimates. We highlight that the different definitions/categories for the different types of costs are not mutually exclusive and that the type of cost that should be used will depend on the purpose of the study, highlighting recommendations of what to do in practice where relevant. The content was tailored to be relevant across both high-income and LMIC contexts.