The need for health

economics
By
Enas Aboraya
 Economics, Health and
Health Economics
• What is economics?
• What isn’t economics?
• What is “Health”?
• What is “Health Economics”?
• Uses of health economics in disease
measurements
• Uses of health economics in health care evaluation
• Uses of health economics in health system
evaluation
 Economic Definition.
• The Economics is the science that deals with
the consequences of resources scarcity.
• The discipline of economics deals with use of
scarce resources to satisfy human wants and
needs how best to use the resources available.
• Economics is a social science that studies how
individuals and organizations in society engage in
– the production
– distribution and
– consumption of goods and services.
 Types Of Economics
Microeconomics the study of economic
behavior of individual decision making units
such as:
– Consumers
– resource owners and
– business firms in a free –enterprise economy.
• We can measure that by some studies such
as market , pilot and feasibility studies.
 Types Of Economics
Macroeconomics is the study of aggregate
economic activities, such as:
1. The economy level of outputs;
– We can measure that by some variables such as;
GDP, Rate of depression, Rate of slackness ..ets.
– Real GDP is the market value of all final goods and
services produced in the domestic economy during
a one year period measured with constant prices.
 Types Of Economics
Macroeconomics is the study of aggregate
economic activities, such as:
2. Level of national income;
– We can measure that by some variables
such as N.I.
– National income (N.I) is the income earned
by the factors of production.
– Income earned of the sold or consumed
GDP.
 Types Of Economics
• Macroeconomics is the study of aggregate
economic activities, such as:
3. Level of employment;
– We can measure that by some variables such as the
rate of unemployment.
– The Rate of Unemployment is the percent of the
total labor force which is unemployed.
 Types Of Economics
• Macroeconomics is the study of aggregate
economic activities, such as:
4. General price level;
– We can measure that by some variables such as
Inflation or Deflation Rate ets.
– Inflation is the annual rate of increase in a price
index.
– Deflation is the annual rate of decrease in the price
level.
 Production function
Mediating factors


Outputs
Inputs
  (Goods or
(Resources)
services)

Economic Analysis in Health Care by Morris, Devlin and Parkin © 2007 John Wiley & Sons Ltd
 Three Major Tasks Of Economics.
i. Descriptive Economics;
 Refers to the identification, definition, and
measurement of phenomena.
 Concerned with determining the nature
of the phenomena as well as obtaining
estimates of their magnitudes.
 No explanation.
 Three Major Tasks Of Economics.

ii. Explanatory Economics;

 Involves explaining and predicting certain
phenomena.
 Conducting an analysis in a cause-effect format.
 Performed with the aid of models that classify
various causal factors in a systematic
framework (e.g. the health status and the price
of the medical services).
 Three Major Tasks Of Economics.

iii. Evaluation;
 Involves judging or ranking alternative
phenomena according to some standard.
 An acceptable standard must be obtained.
 Based on this standard, alternative ways of
using scarce resources are then ranked.
 In choosing the standard, one major criterion
is acceptability.
 Health economics
• is a branch of economics concerned with
issues related to efficiency, effectiveness,
value and behavior in the production and
consumption of health and health care. In
broad terms, health economists study the
functioning of the health care systems as well
as health-affecting behaviors such as smoking.
 What differentiates health care are?
Health economics deals with a specific portion of “the”
economic problem, that concerned with health
and health care.
1. The very personal and often urgent needs the
service meets.
2. dealing with pain and suffering and with life and
death decision.
3. access to the service is often considered to be a
basic human right irrespective of ability to pay.
 What differentiates health care are;
4. The many treatments are unproven.
Encouraging the move towards evidence
based medicine where decisions about
medical interventions will be more firmly
based on research evidence about their
effectiveness .
5. It is not the consumer who demands the
treatment but the doctor acting as the agent of
the patient which rise special problems In
demand and resource allocation studies.
 Basic principles of the health care
services
• One of the basic principles of the public health
care systems is that treatment should be
provided on the base of need rather than on
the base of that funds are available.
• And on the base of that equity should be one of
the objectives of the service.
• The purpose of health care is to produce an
improvement in health, the maintenance of
good health and or a reduction in suffering.
 Basic principles of the health care
services
• Health care services can be bought and sold, while
health cannot .Health difficult to define and even
more difficult to measure .
• According to the world health organization {WHO}
good health is “a state of complete physical and
mental well-being and not merely the absence of
disease or infirmity”.
• Poor health in an individual will have an impact on
and may pose threats to others.
Factors that distinguish health economics
from other areas
• include extensive government intervention,
intractable uncertainty ,several
dimensions, asymmetric information, barriers,
externalities and the presence of a third party
agent. In healthcare, the third party agent is
the physician, who makes purchasing decisions
(e.g., whether to order a lab test, prescribe a
medication, perform a surgery, etc.) while
being insulated from the price of the product
or service.
 Economics is about …
• Limited resources

• Unlimited “wants”

• Choosing between which

‘wants’ we can ‘afford’
given our resource
‘budget’
 opportunity cost
• “ The value of forgone benefit which could be obtained from a
resource in its next-best alternative use”.

Pg ‘A’ Pg ‘B’

Budget

• The aim is to choose activities where benefits outweigh

opportunity cost.

20
 efficiency
• Efficiency = maximising benefit for
resources used
• Technical = meeting a given objective
Efficiency at least cost (resources)
• Allocative = producing the pattern of
Efficiency output (supply) that
matches the pattern of
consumer want (demand)
 Some misconceptions
• Economics is …
– concerned with money
– the same as accountancy
– only practised by economists
– objective
 The ‘practice’ of economics
• Economics is concerned with…
– costs (resource use)
– benefits
– choice
– efficiency
• Everyone…
– weighs the relative benefits of each course of action
and choose the action which maximises well-being
 Health economics ‘map’
H. Micro-Economic Appraisal E. Market Analysis

B. What influences A. What is Health?

Health? (other than
What is it’s value?
health care)

C. Demand for D. Supply of

Health Care Health Care

G. Planning, budgeting, F. Macro-Economic

regulation mechanisms Appraisal