Chapter 2 Flashcards
studies the allocation of resources to and within the health economy.
- Health economics
- is the application of economic theory, models, and empirical techniques to the analysis of decision-making by individuals, health care providers and governments with respect to health and health care.
Health economics
Who define health economics as the application of economic theory, models, and empirical techniques to the analysis of decision-making by individuals, health care providers and governments with respect to health and health care.
- MORRIS, PARKIN & SPENCER (2012)
Why did it
Emerge?
- Health and health care sector plays a major role in the economy.
- Because health care
sector is SIMILAR to other sectors and industry. - Because health care
sector is different from
other sectors.
Why Economic theory and models may also be used to examine the behavior of the health care sector
- Because health care sector is SIMILAR to other sectors and industry.
Why Health economics emerged as aseparate and specialized
discipline of economics because Health has special features.
- Because health care
sector is different from
other sectors.
may be defined by who
health economists are,
and what they do.
Health
Economics
WHO ARE THE HEALTH ECONOMISTS?
- TRAINING
- EMPLOYMENT
- ACADEMIC UNIT
Almost all (96 percent) held academic doctorate degrees.
▪ Nearly ¾ have received Economics
degree.
- TRAINING
University setting (64%), Nonprofit Organizations (15%), Government (12%)
- EMPLOYMENT
26% are assigned in schools of public health, 18%in school of medicine, 24% in economic department.
ACADEMIC UNIT
professionals who apply economic principles and methods to study and address issues in the healthcare sector.
Health economist
Their work involves analyzing data, designing policies, and providing recommendations to improve healthcare systems, reduce costs, and enhance health outcomes.
Health economist
ROLES AND RESPONSIBILITIES OF
HEALTH ECONOMICS
- Policy analysis
- Economic Evaluation
- Data Analysis
- Research
- Advisory Roles
Developing and evaluating health policies to ensure
efficiency and equity
- Policy analysis
Conducting cost-effectiveness, cost-utility, and costbenefit
analyses of healthcare programs and
treatments.
Economic Evaluation
Using statistical tools to interpret healthcare data and
trends
Data Analysis
Investigating the economic impact of diseases, interventions, or healthcare reforms.
Research
Providing insights to governments, healthcare organizations, and international bodies like WHO
- Advisory Roles
WORKPLACE FOR HEALTH
ECONOMIST
Government health departments
International organizations (e.g.,
WHO, World Bank)
Academic institutions and research centers
Healthcare companies (e.g.,pharmaceuticals, insurance firms)
Non-governmental organizations( NGOs)
SKILLS OF HEALTH
ECONOMIST
Strong background in economics,
statistics, and data analysis.
Understanding of public health and
healthcare systems
Ability to conduct economic
modeling and policy evaluation
What do health
economists do?
Who seek to
determine whether spending on new technology is
worth it.
Policymakers and health economists
A vote for today’s medicine is validation of the improvement and willingness to pay for improved quality
DANA GOLDMAN’S SURVEY:
1960s vs. Today?
THE RELEVANCE OF
HEALTH ECONOMICS
- The Size and Scope of the
Health Economy - the Importance Attached to
Economic Problems of Health
Care Delivery - the many health issues that
have a substantial economic
element
- The Size and Scope of Health Economy
a. Health Care’s Shareof GDP
b. Importance of the Health
Economy in Personal Spending
b Importance of labor and capital in Health Economy
c. Time
is a
large and growing portion of
our economy.
The health care sector
Reasons for the
substantially
increased ratios
People may be buying more
health services
People may be buying higherquality
health services,
including products and
services that previously were
not available.
Health care inflation may be
higher than the general
inflation rate.
Patients may be consulting with health care providers more frequently, doctors may be ordering more tests, or they may be
prescribing more drugs.
People may be buying more
health services
-increased prevalence of insurance,
including government programs.
Health care inflation may be
higher than the general
inflation rate
consumers spent __________of
their budgets on health care, as
opposed to 13.8 percent on
food, and 18.8 percent on housing.
17.9 percent
- 1% of all employed civilians worked at various health services sites.
b. Importance of Labor & Capital in the Health Economy
The ultimate resource
Time
must also be added to our measurement
of health care costs.
Time costs
Economic Problems of Health Care Delivery
INFLATION
ACCESS
QUALITY
Although we have deflated the spending values using the
CPI, medical care prices (hospital and physician care
prices) have grown faster historically than prices overall
INFLATION
is a common problem for
maintaining health programs, and it has spurred
numerous cost-containment efforts by the government
▪ Medical price inflation
The rising costs significantly reduces what?
accessibility to
health care (i.e health insurance)
The problems of cost, inflation, and uninsured people
▪ have led to numerous proposals for some form of
national health insurance.
ACCESS
Increases in the quality of care contribute to spending increases.
▪ Physicians (Professional licensure and certification)
▪ Hospitals (Quality-Assurance Programs)
QUALITY
Features of
Economic
Analysis
Scarcity of societal resources
Assumption of rational decision making
Concept of marginal analysis
Use of economic models
Economic analysis is based on the premise that individuals must give up some of one resource in order to get some of another.
-Consider the opportunity cost of the shares of GDP going to health care.
-NOTE: Time, ultimate scare resource.
- SCARCITY OF RESOURCES
ASSUMPTION: The decision maker is a rational being.
RATIONAL DECISION MAKING
is defined as “making choices that best further one’s own ends given one’s resource constraints.”
Rationality
“Irrational behavior”- .
understand incentive
Mainstream economic analyses feature reasoning at the margin.
- MARGINAL ANALYSIS
To make an appropriate choice, decision makers must understand the cost as well as the benefit of the next,
or marginal, unit. (ex: brand-name drugs)
- MARGINAL ANALYSIS
economics characteristically develops models to depict its subject matter.
-Economic models may be in the form of words, graphs, or equations.
- USE OF MODELS
(Metaphors of reality)
Economic models
__________ that tell us what firms do, and how they combine resources to maximize profits, provide insights into how the health care sector works.
Economic theories
Consumers must often depend on health care providers to tell them whether they are ill, and, if so, what they should do. Providers often prescribe treatments seemingly irrespective of their costs.
Health sector is complicated
They discovered that although physicians earned 32
percent per year more than dentists, their training
costs were 17 percent higher.
Milton Friedman and Simon Kuznets (1945)
PHYSICIAN SHORTAGE OF THE 1930S
Higher Return of Investments- Higher barriers to
Entry- Lower the Supply of Physicians-Raising
Incomes and Rate of Return.
Milton Friedman and Simon Kuznets (1945)
PHYSICIAN SHORTAGE OF THE 1930S
The pricing fits neatly into a model of a _______________. Price discrimination that
allowed physicians to increase their profits by charging more to those patients with greater ability
to pay. (NOTE: large number of practitioners
price discriminating
monopolist
WHY DO PHYSICIANS CHARGE DIFFERENTLY?
Reuben Kessel (1958)
TWO FEATURES OF HEALTH ECONOMICS
The nature of heath care and health research is interdisciplinary.
The institutions in the health care system, including hospitals,
insurers, or regulators play major role in the analysis of health care.
––––relations of doctors to hospitals
——the organization and practices of the health insurance industry
——licensing and certification of health care providers
The institutions in the health care system, including hospitals,
insurers, or regulators play major role in the analysis of health care.
Is Health Care Different?
- Presence and Extent of Uncertainty
- Prominence of Insurance
- Problems of Information
- Large Role of Nonprofit
Firms - Restrictions on
Competition - Role of Equity & Need
- Government Subsidies and
Public Provision
He stressed
the prevalence of uncertainty in
health care, on both the demand
side and the supply side
KENNETH ARROW (1963):
Consumers are uncertain
of their health status and need for
health care in any coming period.
Demand:
Physicians themselves
cannot predict the outcomes of
treatments with certainty.
Supply:
Consumers purchase _______________ to
guard against this uncertainty and
risk.
insurance
The costs are paid indirectly
through coinsurance and through
insurance premiums that are often,
although not always, purchased
through participation in the
labor force.
- Prominence of Insurance
This lack of information often
makes an individual consumer,
sometimes referred to as the
______________, dependent on the
provider, as an agent, in a particular
way.
principal
The provider offers both the
information and the service, leading
to the possibility of conflicting
interests.
- Problems of Information
Economists often assume that firms
maximize profits.
Large Role of Nonprofit
Firms
many health care providers,
including many hospitals, insurers,
and nursing homes, have nonprofit
status.
Large Role of Nonprofit
Firms
the entry of
firms or providers will cause the
other firms or providers to lower
their prices.
competitive market,
Restrict competition in Health Care:
Practices include ____________,______________.________
that enjoin providers from
competing with each other.
licensure
requirements for providers,
restrictions on provider advertising,
and standards of ethical behavior
Many advocates believe that people
ought to get the health care they
need regardless of whether they can
afford it
Role of Equity & Need
In most countries, the government
plays a major role in the provision
or financing of health services
- Government Subsidies and
Public Provision
