Chapter 11 Notes


Department
International Development Studies
Course Code
IDSB04H3
Professor
Anne- Emanuelle Birn
Chapter
11

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IDSB04 Chapter 11 – Health Economic and the Economics of Health
Introduction
A key concern is the allocation and spending of resources in order to achieve particular
health related goals and objectives.
In health economics, its not just simply minimizing costs, but obtaining the greatest value
from an efficient use of resources
Many health economists regard health in terms of medical treatment and individual
preventative measures while others understand health investments at the societal level
apropos the underlying determinants of health, including education, safe housing, and
employment
*World bank and other proponents of orthodox (neoclassical) health economics target
low cost intervention for developing countries- - advice is based on evidence of health
improvements that are usually measured by short-term drops in specific disease rates
-allocation decisions must prioritize resources and interventions that have the greatest
impact at the lowest cost b/c health resources are scarce
*Proponents of health & social justice approaches stress the importance of
comprehensive means of improving health that integrate primary health care-oriented
universal health systems w/ social & political investment & redistribution on a broader
scale
Economic approaches to public health and medical spending.
Many orthodox health economists continue to portray and favor health system
organization as individual consumer choices
How (health care) markets work (and their limits)
Neoclassical economic theory holds that the price of a good or service is determined by
demand for that good/service and well as its supply
Scarcity of an item + level of competition = determines price
Two assumptions
oAll players participate voluntarily and can choose to leave
oAll players (suppliers and purchasers) have equal access to information regarding
price, demand, and availability
Health care markets are different from other markets
oSuppliers (doctors/physicians) create their own demand in a limitless fashion.
oIn economic terms, ‘producer sovereignty’ overshadows ‘consumer sovereignty’
oConflict of interest between producer and consumer making for a complicated and
imperfect relationship
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**Table 11-2
Typical Market assumptions Using health care services
buyers use personal resources to purchase
goods & services
in many societies, govt, employers or
privately run insurance companies purchase
health care services with consumers paying
indirectly through taxes, premiums, and/or
coinsurance
buyers and sellers have equal access to info
from which to make rational decisions
asymmetric info btw providers, and
consumers. Pateints are often unaware of
which health good/ser is needed, or which is
most effective or cost effective.
Patients may not always disclose vital health
info to providers.
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
oThey may in factprovide maximum level of services because they don’t have
financial considerations because someone else pays for their costsmoral 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
oIt may be far better not to need health services than to need them
oThe special nature of health care also derives from human vulnerability at times
of illness, pain, or impeding death
Health services reflect the characteristics and values of the societies of which they are a
part.
oHealth resources are shaped by political and cultural factors than by ‘rational
allocation based on consumer decision
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 systems
3. Private payment to private insurance schemes or out of pocket expenditure at the
point of health care provision
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