WELFARISM VS. EXTRA-WELFARISM

Question 1

Example of Perfect Competition in healthcare?

Answer 1

Internet pharmacies

+ve: access to drugs for those unable to go to pharmacy; convenience to purchase whenever; privacy and anonymity; lower prices

• ve: 3 types of internet pharmacies … 2 and 3 - sale of unapproved new drugs, marketing of products without fraudulent health claims … no regulation
  1) pharmacies that only fill prescriptions written by patient’s doctor
  2) pharmacies that charge for a ‘cyber-consultation’ and whose cyber-doctor then writes a prescription
  3) pharmacies that dispense prescription drugs without a physician’s prescription

Question 2

Example of Monopolistic Competition in healthcare?

Answer 2

Medicines in medium and long run

Question 3

Example of Oligopoly in healthcare?

Answer 3

Patent Rights

• Few companies control the patents … e.g. insulin drug: 3 companies own the 90% of global insulin market … hike the prices: US – 1996: common type of insulin costs $21 … 2019: same type costs $295
• E.g. pharmaceutical company researchers in the USA est. that developing a new molecular entity from discovery to launch takes av. 13.5 years and costs $1.8bn

Question 4

Example of Monopoly in healthcare?

Answer 4

Public health insurance

Question 5

Definition of Welfarism?

Answer 5

Systematic analysis of the social desirability of any set of arrangements solely in terms of the utility obtained by individual people

1. individual utility-maximisers acting rationally
2. conditions of perfect competition
3. only consequences matter
4. prices carry social value & are the only source of social value

Question 6

Definition of Pareto improvement?

Answer 6

If a change can be made to the health care system making one individual better off without making at least one other person worse off

Question 7

Definition of Pareto optimality/efficiency?

Answer 7

Once all such improvements have been exhausted, we have reached a resource allocation that is Pareto efficient

Question 8

What is the Kaldor-Hicks Test?

Answer 8

Compensation/potential Pareto improvement test to see ‘can & would those who gain from a change acceptably compensate those who lose?’

If this test is passed, the proposed change is said to be “potentially Pareto improving”

Question 9

Definition of Extra-Welfarism?

Answer 9

Basing of policy evaluation on values (drawn from those responsible for policy) attached to the characteristics of individuals

• Paying more attention to characteristics of people rather than utilities is important as it will encompass both efficiency and distributional types of concern and it transcends traditional utilitarianism

Question 10

Relevant Outcome in Welfarism vs. Extra-Welfarism?

Answer 10

WELFARISM: Only indv. utility

EXTRA-WELFARISM: Indv. utility + extra measures/indicators of well-being [health/health gain, distribution of health/health gain, patient satisfaction, caregiver burden]

Question 11

Source of valuation of relevant outcomes in Welfarism vs. Extra-Welfarism?

Answer 11

WELFARISM: Affected person

EXTRA-WELFARISM: Affected person; Expert; Representative sample of general public; Decision maker

Question 12

Weighting of relevant outcomes in Welfarism vs. Extra-Welfarism?

Answer 12

WELFARISM: Sometimes weighted according to distribution of indv. utilities

EXTRA-WELFARISM: Allowed and considered important as means of incorporating equity considerations
Weights based on variety of considerations e.g. wealth or need

Question 13

Intertemporal comparability of relevant outcomes in Welfarism vs. Extra-Welfarism?

Answer 13

WELFARISM: Theoretically possible through social welfare function

EXTRA-WELFARISM: Explicit comparisons made in terms of characteristics such as health