Transcript Part I: Basic Economics Tools

Part I: Basic Economics Tools
1. Introduction
2. Microeconomic Tools for Health
Economics
3. Statistical Tools for Health Economics
4. Economic Efficiency and Cost Benefit
Analysis
Chapter I Introduction
• The Relevance of Health Economics
1. The size of the contributions of the health
sector to the overall economy
2. The national policy concerns resulting
from the importance many people attach
to the economic problems they face in
pursuing and maintaining health
3. Many health issues that have a
substantial economic elements
The size and scope of the health
economy
• Health care spending has grown rapidly in
absolute and relative terms. It accounts for over
one-seven of the GDP in the USA. See Figure 11
• Three possibilities to explain this figure
(1) More service (2) higher quality service
(3)relative expensive
• Health care spending in other countries
(1) the health care share of GDP in the US is
approximately twice as large as that in the UK
=> Is care costlier, higher quality or more simply
being consumed in the US?
• The size of the health economy is also
reflected through other measurements
(1) the number of jobs in the health care
sector (Table 1-3A: 10 percent of the labor
force; almost 42 percent of them worked in
hospitals)
(2)The amount of capital investment
The number of nursing home beds
increased from about 1.3 million in 1976 to
1.8 million in 2002
• Time spent obtaining and providing health care
represents a key “unpriced” input factor in the
health economy
• The importance attached to economic problems
of health care delivery are reflected by various
way such as NHE (national health care
expenditures), Growth in NHE, NHE per capital,
NHE/GDP share.
• Nominal vs real expenditure? NHE per capita
rose by 40 times from 1960 to 2003. After
deflating by CPI, the real expenditure were just
6.38 times
• There are significant policy concerns not only
with the growth of spending but also with access
and quality
• Access: 45 million people in the US lack
insurance
• Quality: increases in quality of care contributes
to spending increases.
• The Economic side to other health issues:
The choice of a health care treatment seems
purely medical to many people, but physicians
are also increasingly sensitive to the economic
side of the patient-physician relationship
Economic methods and example of
analysis
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Health economics is the study of the
allocation of resources to and within the
health economy.
Features of Economic Analysis
Scarcity of society resources
Assumption of rational decision making
Concept of marginal analysis
Use of Economic models
Two features of health economics
• 1 The interdisciplinary nature of heath
resources. Economics must knows how
health care is delivered. This information
comes from health care providers, as well
as other disciplines, such as public health,
sociology and psychology.
• 2. The second features concerns the
institutions in the health care system.
Does Economics Apply to Health
care?
• Are health care resources scarce?
• Are health care consumers rational?
• Do they calculate optimally at the margin?
The emergency medical need does not fit in the
these economic analysis.
An example: Does price matter? (Figure 1.2)
The negative sloping curve means that people
consuming more care as the care becoming less
costly to the consumer in terms of dollars paid
out-of-pocket
Is health care different?
• Health care services and the health economy
possess a unique set of distinguishing features .
The uniqueness of health care are the
prevalence of uncertainty or insurance coverage.
• Arrow (1963) stressed the prevalence of
uncertainty in health care on both demand and
supply sides. Consumers are uncertain their
health status. Physicians cannot predict the
treatment outcome with certainty. This
uncertainty might lead to the result that
insurance markets for various risks would often
fail to arise. These factors suggested a role for
government.
• Prominence of insurance: In 1960, 48 percent
was paid by third-party payers. In 2003, almost
86 percent was paid.
• Problem of information: asymmertric information
exist between physicians and patients.
• Large role of nonprofit firms
• Restriction on competition
• Role of equity and need: people need health
care regardless of whether they can afford it.
• Government subsidies and public provision:
Medicare and Medicaid
New challenges to Health
economists
• The changing impact of managed care: FFS
(point-for-service).
Managed care has profoundly influenced the US
health system. Analysts use economic models to
predict its impact on health care spending.
• The demographic increases in older Americans
who need more care
• Costly medical technology: Technological
change through procedures, and new drugs,
provides potential improvement in health care,
but also possibilities of increasing costs.