Health Economics Flashcards
Health Economics
The study of the allocation of resources to and within the health economy
Curative care
The health service we receive when we are sick. It is more expensive than preventive care.
Arrow (1963): Is the health market different from other supply/ demand markets?
There is uncertainty on both the supply and demand side. Demand is in regular in nature, since consumers cannot know if they are sick before they go. Supply is uncertain since the physician´s cannot predict the outcome of treatments with certainty.
Theory of principal-agent (Is the health market different from other supply/ demand markets?)
There is asymmetry of information, since patients cannot know the quality of the health care they receive. Incentives towards reducing the problem can be better information providing and more transparency.
Akerlof (1970)-The Lemons Principle (Is the health market different from other supply/ demand markets?)
In the used car market, the potential buyers only know the average quality of used cars, so the prices are lower than the true value of the top-quality car. It makes the top-quality car owners hold back their car from sales. The good cars are therefore driven out of the market by the lemons. There is no market left. (Look in the notes for seeing how to apply it to the health insurance market)
Prevention
It has a present cost, but a future benefit
Moral Hazard
Ex ante: If you are insured, you are less risk averse because you know the consequences are limited.
Ex post: If you are insured, you are more likely to go to the hospital every time some little thing is wrong, which will have you overusing the system “Just because you can”.
Example on a moral hazard in health care: In the case that a doctor or a patient order an extra test “Just because it is free”.
Demand for health care/services
It is a derived demand, since what we really want is the demand for good health and not just a visit to the doctor. It can be influenced by the price of health services, income, type of insurance, educational level, age, lifestyle, quality of care, health condition, time costs to reach the medical care and the prices of alternative treatments.
Law of demand
Inverse relationship between price and quantity.
The relationship between medical care and health improvements
It is not exact, since there is uncertainty connected with the type of care needed to get better.
The effect of income on demand
An increase in income increases the demand, so it shifts the demand curve outwards.
The effect of health insurance on demand
The demand is dependent on the type of insurance you have. You can have co-insurance, indemnity insurance or deductibles insurance.
Co-insurance
Consumer pays a fixed percent of the cost (say 20%) and the insurance company picks up the rest.
Indemnity Insurance
Pays a fixed amount for each type of services (say $150 if you go to the emergency room).
Deductibles
Consumer must pay out of pocket for all health care, until reaches a threshold (such as $1000), then is fully reimbursed for expenses above the threshold.
The effect of education on demand
The effect of education on demand be either positive or negative. Educated people tend to be more proactive to keep themselves healthy, so they need less medical care. They want to stay healthy so they can work more and earn more. Besides that, they might also know more about when they need to get medical care, so they go more often. There is although empirically evidence showing that educated people tend to demand more medical care.
The effect of demography on demand
Very young people and elderly demand more medical care. They are typically also the ones with a lower health status. Also, females demand more health services, during their child bearing.
The effect of substitutes and complements on demand
Substitutes and complements can have the prices both decrease or increase. Substitutes can be herbal or non-western medicine. If prices of that goes up, then the demand for health care will go up as well. Complements can be drugs. If a person cannot afford to pay for the drugs, then they might not bother going to the doctor. So, if the price of a complement rises, the demand for health care will decrease.
The effect of travel time costs on demand
The demand of health care depends on how long it takes to get to the doctor and if there is any waiting time there. If there is a long way, then people will only go in urgent cases and the demand will therefore decrease. It is an important factor in developing countries.
Co-payments
Additional payments for the health care services paid every time you go. Co-payments can be good if they were income decided, since they would prevent people from misusing the system and thereby make the system more efficient. They would constitute to a more sustainable health care system. Arguments against co-payments are that poor people would not go, or they would go but so late that they would need an even bigger treatment.
Behavioral hazards
We have an example that behavioral hazard suggest that we need an even larger co-payments for the overused drugs. (Elaborate more). Behavioral hazard is the opposite of moral hazard.
Asymmetric information
When one party in a trade knows more about the other, which is of relevance to the trade. Ex. when a doctor knows more than the patient, but simply choose not to tell the patient everything.
The agent/principal theory
It is the conflict between clinical freedom and social efficiency. The objective of the principal is to minimize the costs and getting the agent to apply with the goals of the organization. The double agency relation is when doctors are the agent of the financer, and the patient (Or the doctor) has a dominant position in the market. There are 4 different levels of the principal agent: Taxpayers (1), government (2), health manager (3) and doctors (4).
The incentive mechanism
The physicians have intrinsic motivation since they are aware of the relevance of their performance and have a high intellectual level. Most of them are unsatisfied since they work under an incentive mechanism, where they are either monetary rewarded or punished.
Types of payments: Physicians
- Fee for service Result of this is overprovision of healthcare Induced demand - Capitation Patients are allowed to choose which doctor they want. Therefore, Doctors are focused on capturing many patients but this leads to decreasing quality. - Salary Fixed salary could lead to low effort. No risk of overprovision
Pay for performance (P4P)
When a doctor is paid for performance, ex. based on quality or efficiency. Paying for performance would avoid over-treatment.
Accountability
It is about taking responsibility for your actions, always ensuring that you are competent to do the activity you have been asked to perform, and always putting patients’ interest first. It is a key element for improvement of health care system performance.
Video on transparency and accountability TED talk
A doctor talks about the advantages and disadvantages about having more transparency at the doctor. The transparency would show conflicts of interest, such as if the doctor gets paid from a specific pharmaceutical company or if they have specific opinions about LGDT. The only disadvantage is the disappearing privacy of the doctor.
Article: Observer (oecd) – Body Capital
Health performance and economic performance are interlinked. Wealthier countries have healthier populations for a start. Health expenditures are determined mainly by national income, however they increase faster than income. To have a good health system we need institutional backup. Ex. increases in taxes on tobacco could reinforce other public health policies like rule-based restrictions. Countries with weak health systems and education have a harder time to reach sustainable growth. So the challenge is to: harmonize health and economic policies to improve health outcomes.
Article: The EpiPen Case
The Case Study of EpiPen looks at health system dysfunction. In the market for EpiPens, there is little to no competition and therefore almost a monopoly. They slowly increase the prices and the US government does nothing to regulate the prices. The price level is so high that many people, especially the poor, cannot afford it. The FDA promotes the use of EpiPen, and health plans only allow the use of EpiPen, and not a similar product, if they want to be covered. So the cost for patients that are not covered is either out-of-pocket or doing nothing, and patients that are insured are co-payments with higher risk prime.
Ted talk: Meeting e-patient Dave
Some doctors talk as if the patients aren’t there. An idea would be to let patients play a more active role in health care, when it is about themselves. But what holds us back is the lack of information. People should be able to get data on their own health, so they can “let patients help”. Also, health care should get more and better updates. Like google earth, why not a google body
Health system
It is the sum of all the organizations, institutions and resources whose primary purpose is to improve health. A health system needs straff, funds, information, supplies, transport, communications and overall guidance and direction. And it needs to provide services that are responsive and financially fair, while treating people decently.
Problem in the health system
- It is not confined to poor countries.
- Some rich countries have large populations without access to care because of inequitable arrangements for social protection. Others are struggling with escalating costs because of inefficient use of resources.
Stewardship (Governance)
The wide range of functions carried out by governments as they seek to achieve national health policy objectives. It is a government issue about how to move against “Universal health care” using policies
A well-functioning health system
It is built on having trained and motivated health workers, a well-maintained infrastructure, and a reliable supply of medicines and technologies, backed by adequate funding, strong health plans and evidence-based policies.
Beveridge model (Health care system)
Health care is provided and financed by the government through taxes. Many hospitals are owned by the governments and some doctors are government employees. It is in countries like the UK, Spain, Scandinavia, New Zealand, Hong Kong and Cuba.
The Bismarck model (Health care system)
Health care is based on an insurance system, financed by employers and employees through payroll deduction. The government controls them through tight regulations. It is in countries like Germany, Japan, France, Belgium, Switzerland, the Netherlands and Colombia.
The National health insurance model (Health care system)
With elements from the Beveridge and Bismarck model. It has private-sector providers, but with payments coming from a government-run insurance program that all citizens pay to. It is Canada.
The out of pocket model (Health care system)
It is a system for a country who does not have an organized established health care system. It is in developing countries.
Universal health coverage (UHC)
That all people can use promotive, preventive, curative, rehabilitative and palliative health services they need, of a sufficient quality to be effective, but also for a payable fair price.
- Equity to get it
- Good quality
- Payable price
Global health security (GHS)
GHS is centered on preventing, detecting, and responding to public health threats, particularly by protecting people and societies worldwide from infectious disease threats.
4 relevant indicators of a health system
Efficiency, quality, access and financial protection.
Conditional Cash transfer (CCT)
- It is cash transfers to poor families, where the family can use it to enroll kids in school or health programs. It can also require women to attend health and nutrition training workshops.
- They are found in developing countries, where they aim to reduce current poverty, while improving human capital formation and reducing the intergenerational transmission of poverty.
System A: Automatic thinking
Kahneman
It is fast, effortless, associative and not subject to voluntary control.
Humans engage in this system when they identify an emotion by a facial expression, or understand the point of a discussion in a second.
It creates feelings and impressions.
System B: Deliberative thinking
Kahneman
- It is slow, effortful and reflective.
- Engaging in this system requires high concentration and cognitive capacities.
- Humans find it difficult to engage in this system for a continued period of time.
- Ex. It works when we solve math or when we aim to self-control an impulse
It evaluates the feelings and expressions made in system A.
Thinking socially
Here the consideration that human behavior has social micro-foundations, has been considered. People have social preferences rather than self-centered, self-interested preferences only, so most people fail to be self-interested at all times.
People value non-monetary regards such as status, recognition and friendly working environments.
Ex. The president of Columbia, who took a shower with his wife.
Thinking mentally
- The mental models are the shared understandings in a community. It includes identities and stereotypes. It also includes discourses of causality.
- Mental models have an impact on integration, since the common belief is that immigrants make greater use of public services than the native population even though it might not be true. Mental models do NOT require to be true in order to exist and spread.
Nudging
The idea behind nodging is to affect the context so that people make decisions that increase their well-being.
Nudge theory argues that if we wish to alter people’s behaviour in a particular direction, it is more effective to encourage positive choices rather than restricting unwanted behaviour with sanctions.