Marginal analysis is an economic appraisal technique that evaluates incremental changes in costs and benefits when resources in programmes are increased, decreased or deployed in different ways.
Source: Brambleby P, Jackson A, Gray JAM (2007) Better Allocation for Better Health and Healthcare: The First Annual Population Value Review. NHS National Knowledge Service and Commissioning Directorate, Department of Health. Page 8. https://www1.bps.org.uk/system/files/user-files/Division%20of%20Clinical%20Psychology/public/appendices.pdf
Three examples of the term in use:
Programme budgeting and marginal analysis is an approach to commissioning and redesign of services that can accommodate both medical and managerial cultures and the widest constituency of professional, patient, and public values within a single decision making framework. It allows for the complexities of health care while adhering to the two key economic concepts of opportunity cost and the margin.
Ruta D, Mitton C, Bate A, Donaldson C (2005) Programme budgeting and marginal analysis: bridging the divide between doctors and managers. BMJ 2005; 330: 1501-1504. doi: https://doi.org/10.1136/bmj.330.7506.1501 (Published 23 June 2005)
The task of measuring costs and benefits should be done through marginal analysis. This involves starting with a particular mix of services and analysing changes in that mix. If resources can be shifted to produce greater benefit then this should be done.
Mitton C, Donaldson C (2004) Priority setting toolkit. A guide to the use of economics in healthcare decision making. Pahe 18. BMJ Publishing Group.
Alain Enthoven (1988) makes this point nicely, writing: “An efficient allocation of health care resources to and within the health care sector is one that minimizes the social cost of illness, including its treatment. This is achieved when the marginal dollar spent on health care produces the same value to society as the marginal dollar spent on education, defense, personal consumption, and other uses. Relevant costs include the suffering and inconvenience of patients, as well as the resources used in producing health care. This goal should not be confused with minimizing or containing health care services, often as a share of gross national product (GNP). But, a lower percentage of GNP spent on health care does not necessarily mean greater efficiency. If the reduced share of GNP is achieved by denial or postponement of services that consumers would value at more than their marginal cost, then efficiency is not achieved or enhanced by the cut in spending” (p.11).
Rice T (1998) The Economics of Health Reconsidered. Page 2. Health Administration Press, Chicago.