Lecture 8: Chapter 11

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Published on 16 Nov 2010
International Development Studies
Lecture 8: Chapter 11 Health Economics and Economics of Health Care
Table 11.1 Spending on Health
Why Health Economics? P537
- Spending is soaring. Why?
- Need to max value for spending (efficiency) better outcomes at same or lower cost
- Health economics is driving health care policy and health systems planning
- Other factors are as important: education, housing etc.
- Low cost interventions for developing countries (orthodox, neoclassical approach) versus:
- Comprehensive primary-care oriented redistributive systems (heterodox social justice approach)
Health Economics 101
Expenditure t Price x Quantity
Profits/Losses = Revenue t Expenditures
Neo-Classical Economics Says:
Prices links supply with demand
If supply is fixed and demand high t Prices increase
If price free t demand skyrockets (moral hazard = overuse)
Why the difference? P542-3
1) W]v}v[}v}oZoZv]vP~µvoooZÇ}Z}v]
2) Physician often spending 3rd party money (OHIP)
3) Some heath spending has no medical benefits (unnecessary services, profits etc)
4) Health is special (beyond $) may be better not to need health care: vulnerability
5) ,oZv]vPZÇÀoµUv}Ç^]}vo_}vµu
6) Most societies deem health care to be a human right
Table 11.2: How Health Care Sectors Differs from Markets
Means of Financing Health Care:
1) Revenues gathered by natural or local government thru taxation
2) Tax-based or salary-deducted contributions to public insurance systems
3) Private payment to private insurance schemes or out-of-pocket expenditure at point-of-service
- General taxation is more progressive (most fair)
- Mandatory health insurance less fair, especially if one premium for all
- Private insurance even less fair: sickest (poorest) pay higher premium
- Out-of-pocket least fair (most regressive): no risk sharing at all
Inadequate health financing is an important cause of poverty and insecurity
Health Insurance Model p 546-7
- Guilds and workers t mutual protection/friendly societies
o Social insurance (national or community based)
- Risk Pooling (to reduce costs of expected illness, burial etc)
- Risk Selection (private companies select young and healthy): community vs. experience rating
Cost Sharing p547
- Co-payments t every time go to health provider you pay money out of pocket
- Co-insurance t pay % out of pocket
- Deductibles t pay amount out of pocket before insurance kicks in (prevent hypochondriacs)
Limits to care (ceilings, lifetime maximum, pre-existing conditions, uncovered services)
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