Markov Chain Model in Health Economics

A Markov model is a decision-analytic tool that simulates disease progression through defined health states over time, calculating cumulative costs and quality-adjusted life years (QALYs) to enable cost-effectiveness analysis. Developed by Beck and Pauker in 1983, Markov models are now the standard framework for projecting long-term outcomes of health interventions, especially chronic diseases where patients transition between clinical states (treatment response, disease progression, remission, death). Used by health technology assessment bodies and pharmaceutical companies to predict intervention value beyond trial duration.