Health Economics

Question 1

Health Economics

Answer 1

The study of the allocation of resources to and within the health economy

Question 2

Curative care

Answer 2

The health service we receive when we are sick. It is more expensive than preventive care.

Question 3

Arrow (1963): Is the health market different from other supply/ demand markets?

Answer 3

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.

Question 4

Theory of principal-agent (Is the health market different from other supply/ demand markets?)

Answer 4

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.

Question 5

Akerlof (1970)-The Lemons Principle (Is the health market different from other supply/ demand markets?)

Answer 5

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)

Question 6

Prevention

Answer 6

It has a present cost, but a future benefit

Question 7

Moral Hazard

Answer 7

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”.

Question 8

Demand for health care/services

Answer 8

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.

Question 9

Law of demand

Answer 9

Inverse relationship between price and quantity.

Question 10

The relationship between medical care and health improvements

Answer 10

It is not exact, since there is uncertainty connected with the type of care needed to get better.

Question 11

The effect of income on demand

Answer 11

An increase in income increases the demand, so it shifts the demand curve outwards.

Question 12

The effect of health insurance on demand

Answer 12

The demand is dependent on the type of insurance you have. You can have co-insurance, indemnity insurance or deductibles insurance.

Question 13

Co-insurance

Answer 13

Consumer pays a fixed percent of the cost (say 20%) and the insurance company picks up the rest.

Question 14

Indemnity Insurance

Answer 14

Pays a fixed amount for each type of services (say $150 if you go to the emergency room).

Question 15

Deductibles

Answer 15

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.

Question 16

The effect of education on demand

Answer 16

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.

Question 17

The effect of demography on demand

Answer 17

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.

Question 18

The effect of substitutes and complements on demand

Answer 18

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.

Question 19

The effect of travel time costs on demand

Answer 19

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.

Question 20

Co-payments

Answer 20

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.

Question 21

Behavioral hazards

Answer 21

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.

Question 22

Asymmetric information

Answer 22

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.

Question 23

The agent/principal theory

Answer 23

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).

Question 24

The incentive mechanism

Answer 24

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.

Question 25

Types of payments: Physicians

Answer 25

- 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

Question 26

Pay for performance (P4P)

Answer 26

When a doctor is paid for performance, ex. based on quality or efficiency. Paying for performance would avoid over-treatment.

Question 27

Accountability

Answer 27

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.

Question 28

Video on transparency and accountability TED talk

Answer 28

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.

Question 29

Article: Observer (oecd) – Body Capital

Answer 29

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.

Question 30

Article: The EpiPen Case

Answer 30

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.

Question 31

Ted talk: Meeting e-patient Dave

Answer 31

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

Question 32

Health system

Answer 32

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.

Question 33

Problem in the health system

Answer 33

• 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.

Question 34

Stewardship (Governance)

Answer 34

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

Question 35

A well-functioning health system

Answer 35

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.

Question 36

Beveridge model (Health care system)

Answer 36

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.

Question 37

The Bismarck model (Health care system)

Answer 37

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.

Question 38

The National health insurance model (Health care system)

Answer 38

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.

Question 39

The out of pocket model (Health care system)

Answer 39

It is a system for a country who does not have an organized established health care system. It is in developing countries.

Question 40

Universal health coverage (UHC)

Answer 40

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

Question 41

Global health security (GHS)

Answer 41

GHS is centered on preventing, detecting, and responding to public health threats, particularly by protecting people and societies worldwide from infectious disease threats.

Question 42

4 relevant indicators of a health system

Answer 42

Efficiency, quality, access and financial protection.

Question 43

Conditional Cash transfer (CCT)

Answer 43

• 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.

Question 44

System A: Automatic thinking

Kahneman

Answer 44

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.

Question 45

System B: Deliberative thinking

Kahneman

Answer 45

• 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.

Question 46

Thinking socially

Answer 46

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.

Question 47

Thinking mentally

Answer 47

• 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.

Question 48

Nudging

Answer 48

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.