ECON 3510 Chapter Notes - Chapter 1: Generic Drug, Marginal Cost, Canada Health Act
30 Jun 2019
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ECON 3510 MIDTERM REVIEW
Topic 1/ Chapter 1
-Chapter 1 (Health and Health Care Systems: An Introduction) provides a brief
introduction to health systems and some of their essential features and activities;
mainly focussing on the Canadian system, but placing it in an international context
among selected other developed countries.
-The term “health” is thought of in terms of health status which can range from
good to poor. “Health” enters into people’s utility functions giving them happiness
and letting them live longer, more productive lives.
-The term “health care” is simply a good/service that people demand due to its
effect on “health”. While “health care” may have a negative direct impact (few
people like needles) it often has a positive indirect impact through its effect on
“health”.
-Understanding the causes, or determinants, of health is a major part of health
economics and health research generally. These determinants can be usefully
divided into two broad categories: individual-level determinants and
community-level determinants.
-Individual-level determinants are of two types: individual characteristics
and individual behaviours. An important individual characteristic, for
example, is a person’s genetic make-up. In rare cases (e.g., Huntington’s
disease), a specific genetic mutation will determine with certainty if a person
will contract a disease. But more generally, genetic research has
demonstrated that people’s genetic make-up can predispose them to
certain types of diseases, a predisposition that may be triggered only by
exposure to physical or emotional stresses during their lifetimes.
-But while people cannot control their genetic make-up, individuals can
(mostly) control their behaviours, and these can expose them to a wide
variety of health risks. Economic analyses of individual-level determinants of
health focus on individual-level choices and actions. Every day, we make
many decisions that have potential health effects, decisions such as what to
eat for breakfast, how fast to drive to school, and whether to take the
elevator or the stairs.
-Community-level determinants of health operate at a higher aggregate
level beyond individual choices with respect to specific behaviours. Such
determinants include public health investments in urban water systems,
which deliver clean water to households and remove and dispose of waste
water in a safe manner; broad forces such as climate change; or even, as
evidence increasingly documents, simply being low in the social hierarchy
(measured, for example, by income, education, or occupation) of a modern
society and experiencing the stresses that this creates. In these cases, it is
difficult for individuals to modify their behaviour in a way that will reduce the
risks associated with these determinants. The source of the problem lies
beyond the individual. Effectively addressing such determinants of health
requires collective action because the forces are largely driven by factors
other than individual choices.
-Health care is different from other commodities in that it is unique in the
combination of features and the sheer number of them.
-Price does matter in health care like it does in other commodities.
-There are four distinctive features of Economic Analysis:
-Scarcity of societal resources
-Economic analysis is based on the premise that individuals must
give up some of one resource to get more of another
-If scarcity were not a problem we could all get whatever we want
and there would be no economic problems.
-At the heart, is the concept of “opportunity cost”
-The opportunity cost of a decision is what must be given up (value
of the next best alternative) as a result of the decision [even time
has a (intangible) cost]
-Ex: Many people pass up “free” health care because the travel and
waiting time costs are too high.
-Assumption of rational decision making
-“Rationality” is effectively defined as “making choices that best
further one’s own ends given one’s resources”
-Rationality involves the assumption that individuals make consistent
choices that maximize their utility (i.e. happiness) subject to their
budget constraints
-So-called irrational behaviour often makes sense when the
incentives and preferences facing the decision maker are properly
understood.
-Ex: It may seem irrational that a sick person does not see the doctor
but it makes sense if they have no public or private health care/
insurance and have no income/wealth to pay for the doctor
-Concept of marginal analysis
-Economic analyses assume reasoning at the margin
-To make an appropriate choice, decision makers must understand
the cost and benefits of the next (i.e. marginal) unit/decision
Document Summary
The term health is thought of in terms of health status which can range from good to poor. Health enters into people"s utility functions giving them happiness and letting them live longer, more productive lives. The term health care is simply a good/service that people demand due to its effect on health . While health care may have a negative direct impact (few people like needles) it often has a positive indirect impact through its effect on. Understanding the causes, or determinants, of health is a major part of health economics and health research generally. These determinants can be usefully divided into two broad categories: individual-level determinants and community-level determinants. Individual-level determinants are of two types: individual characteristics and individual behaviours. An important individual characteristic, for example, is a person"s genetic make-up. In rare cases (e. g. , huntington"s disease), a speci c genetic mutation will determine with certainty if a person will contract a disease.
