IDSB04H3 Study Guide - Consumer Sovereignty, Naturopathy, Moral Hazard

International Development Studies
Course Code
Anne- Emanuelle Birn

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Week Nine- Chapter 11- Health Economics and the Economics of Heatlh
How health care differs from other kinds of markets:
Suppliers (doctors/physicians) create their own demands in limitless fashion
In economic terms, "producer sovereignty" overshadows "consumer sovereignty"
Conflict of interest between producer and consumer making for a complicated and
imperfect relationships
Why do health care markets differ from other markets:
Consumers cannot control when/how they spend money on care
Money spent or allocated by the physician may be third-party money from an insurance
company or a government program- They may in fact “provide maximum level of
services” because they don’t have financial considerations because someone else pays for
their costs- moral hazard
Varying amounts of money charged for health services may go to purposes having no
health benefit
Money is not the only consideration when analyzing health markets 1) It may be far
better not to need health services than to need them 2) the special nature of health care
also derives from human vulnerability at times of illness, pain, or impeding death
Health System financing:
Three main means of financing health care:
1) Revenues fathered by national/ local governments through taxation
2) Tax based or salary deducted contributions to public insurance
3) Private payment to private insurance schemes or out of pocket
expenditure at the point of health care provision
Health system financing yield different levels of progressivity (fairness)
1) Financing through taxation is most fair
2) Depending on how contributions rates are established, mandatory
health services may be regressive
3) Private voluntary health insurance is more regressive than mandatory
health insurance since ‘risk’ is at the individual rather than the
community level
The Health Insurance Model:
Insurance plans holds the promise that funding for health care will be available when it is
needed by the individual
Many premiums into a common pool, from which any one individual may withdraw
funds when needed; this is known as risk pooling
Private insurers may select who they will provide coverage for, or may decide to delay or
reduce benefits paid. This is known as risk selection
The share costs by an insurance that pay one out of their own pocket. This known as cost
Community based
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