Economic Principles Flashcards
What is the fundamental problem of economics?
How to allocate resources to satisfy human wants, acknowledging that resources are scarce, resources have alternative uses, and the relative important of resources varies by person
Describe the production function
A positive relationship between health and health care with diminishing marginal returns on health from increasing health care costs
What can cause a pivot of the production function?
Exogenous shocks (Ex. New vaccine)
What can move you up or down the production function curve?
Increases in the quantity of an input
What is the 1st Welfare Theorem of Economics?
If a competitive equilibrium exists and if the prices have incorporated all relevant costs and benefits, the equilibrium is Pareto optimal
Or in English: no allocation of resources will make everyone better off without making someone worse off
What is the 2nd Welfare Theorem of Economics?
Policies can reallocate purchasing power from the best off to the worst off so that a socially desired competitive equilibrium is reached (usually via taxes and subsidies)
What are the two margins of redistribution for welfare?
Extensive margin (simply getting coverage) and intensive margin (getting more converse once you have coverage)
Why is linking health care to health outcomes so difficult?
- self selection is rampant
- many studies dont have randomization
What is a market?
Buyer and sellers of a given product, service, or info can interact and exchange
Why is it difficult to just slap the label that healthcare should be as much as people are willing to pay?
Patients lack info and the ability to judge underlying health, so their takes on price may not be great
When do you move along the supply curve?
When price of a good or a quantity of the good rises
When do you move down the demand curve?
When the price of a good rises
What does Pareto optimal mean?
Better in every possible way (waste minimized and economy is efficient)
What is a fee-for-service?
Each visit/treatment is reimbursed separately
What is pay-for-performance?
Providers are rewarded or penalized based on whether they met pre-determined benchmarks
What are bundled payments?
Providers receive a lump sum per episode
What is capitation?
Providers receive a lump sum per person and agree to coordinate care and meet pre-determined benchmarks for a specified period of time