GW4567M (HEPL/HE) week 1

Question 1

Reasons for increased HC spending

Answer 1

• ageing populations
• advanced medical science & technology
• increased welfare –> more expectations
• increased health insurance coverage
• shift towards more chronic diseases
• flawed (financial) incentives
• Baumol’s cost disease

Question 2

What is the goal of Health Economics

Answer 2

Health economics provides concepts and tools to understand difficult trade-offs involved in organizing the allocation of helathcare resources, which may help to improve health policy and health system design.

Question 3

Does economics apply to health care?

Answer 3

Yes! Economics studies the production and distribution of scarce resources. HC is scarce, and certainly produced and distributed.

Question 4

Relevance of HE

Answer 4

• economic organization of healthcare systems has a significant impact on the efficiency and equity of healthcare allocation
• health care is a large and expanding sector of national economies
• healthcare is not a regular (economic) commodity; it is widely considered a right, not a privilige
• specific features of health care can easliy result in market failure as well as in government failure.

Question 5

Baumol’s cost disease

Answer 5

Labor intensive services, are becoming more expensive compared to other industries. Productivity cannot increase at the same pace, compared to other markets. So increase in wages cannot be earned back, by increased in productivity, making HC increasingly more expensive.

Demand for HC is unlikely to decline, despite increasing cost price.
Policy makers have difficult choices which is navigating between Scylla and Charybids.

Question 6

Why would increased HC spending harm the economy?

Answer 6

Because of higher taxed and/or premiums.

Those will result in increased labor costs and bring competitiveness down

Crowd out other public services (Cuckoos young)

Question 7

distinctive features of health care

Answer 7

• presence and extent of uncertainty
• problems of information
• presence of insurance / risk-bearing third parties
• large role of nonprofit firms
• restrictions on competition
• importance of equity and solidarity
• government subsidies and public provision
• ethical concerns

Question 8

Folland, Goodman and Stona 2017 on if healthcare is different

Answer 8

Health care has many distincitve features, but is not unique in any of them. What is unique, is the combination of features and even the sheer number of them.

Question 9

market failure; individual’s persuit of self-interst leads to outcomes that can be improved upon from a societal point-of-view

Answer 9

• uncertainty
• risk-bearing third parties –> moral hazard
  asymmetric information –> agency problems
• externalities

Question 10

sources of government failure

Answer 10

• information problems
• coordination pprlbems
• motivation problems
• special interest groups