Transcript Introduction to health economics

Health Economic Course Series: 1 of 12
INTRODUCTION TO
HEALTH ECONOMICS
March 2007
http://diankusuma.wordpress.com
Table of Contents
1. What health is.
2. What public health is.
3. What health economics is.
What is health?
Health
• A state of complete physical, mental, and
social well being and not merely the
absence of disease and infirmity.
(WHO, 1993)
Health
• Can be expressed in functional terms as a
resource which permits people to lead an
individually, socially and economically
productive life.
(Addition in: health promotion glossary,
WHO 1998)
Health
• Health is a resource for everyday life, NOT
the objective for living.
• It is a positive concept emphasizing social
and personal resources as well as
physical capabilities.
Disease
• An impairment of health and well being as
perceived and described from a
professional perspective.
Illness
• An impairment of health and well being as
perceived and described from a
patient’s/client’s perspective.
Sickness
• A social category, the sick role in a
particular society, the role to which
individuals who are ill are expected to
conform.
Impairment
• Any loss of physical, physiological or
anatomical function or structure.
Disability
• A restriction or lack of ability to perform an
activity within the range considered normal
for a human being.
Handicap
• A disadvantage for an individual, resulting
from an impairment or disability, that limits
the role that is normal for that individual.
• Discuss with your neighbor:
– How do you measure health (think of practical
method),
– What are possibilities,
– What are advantages and disadvantages of
these measurements?
Different indicators to measure
health:
• Single measures:
– Self assessed health status
– Symptom incidence and prevalence
– Disease incidence and prevalence
– Disability, impairment, handicap
– Morbidity, mortality
Different indicators to measure
health:
• Composite measures:
– Life expectancy
– QUALY (Quality-adjusted life years)
– DALE (Disability-adjusted life expectancy)
– DALY (Disability-adjusted life years)
What is Public Health?
Public health
Community medicine
Public hygiene
Social medicine
Sanitary medicine
definitions…
• Public health is one of the efforts
organized by society to protect, promote,
and restore the people’s health.
• It is the combination of sciences, skills,
and beliefs that is directed to the
maintenance and the improvement of the
health of the people through collective or
social actions.
(Last, 1988)
• ‘Public health is the science and art of
preventing disease, prolonging life and
promoting health through the organized
efforts of society.’
(Acheson, 1988)
• ‘The role of public health is to contribute to
the health of the public through
assessment of health and health needs,
policy formulation, and the assurance of
the availability of services.’
(IOM, 1988)
Public health vs. Medical care
• Public health considers medical care as
one of the means of protecting and
improving the health of the people;
• Public health is especially concerned
about the interplay between costs and
financing, access, quality and equity of the
care.
• No artificial separation between the two
disciplines!
Public Health Professionals
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Epidemiologists
Statisticians
Nurses
Environmental health
specialists
Food and drug
inspectors
Industrial hygienists
Physicians
Toxicologists
Laboratory Technicians
Veterinarians
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Economists
Social scientists
Attorneys
Nutritionists
Health educators
Dentists
Sanitarians
Social workers
Administrators
Managers
Demographers
…
What is health economics?
Economics
• Study of the use of scarce resources
(human, financial, material)
• Health economics =
– “Connection between health and the
resources which are consumed in
promoting it.”
Health economics
• Concern : health – resources.
• Resources  not just money; but also
people, materials, and time.
• Underlying problem = infinite needs (for
health, food, shelter, entertainment, etc)
BUT finite (limited) resources to satisfy
them.
• Therefore  must choose (health
economics)
Health economics is about?
• Judging the performance of health sector;
• Raising finance for health sector;
• Evaluating different health care
intervention;
• Informing priority setting;
• Allocation of resources;
• Improving the performance of service
providers.
Fundamental concepts
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Resources
Scarcity
Prices
Demand
Supply
Elasticity
Market
Efficiency
Equity
Fundamental Concepts I
• Resources
– Input to production: human, natural, capital, time
• Scarcity
– Not freely available, to obtain something of value has
to be given up.
– Opportunity costs.
• Price
– What has to be given up to obtain a certain quantity of
scarce resources.
– Price mechanism to allocate resources between
different possible uses.
Fundamental Concepts I
• Demand
– Willingness to pay and ability to pay
– Relationship between price and quantity purchased or
used.
• Need
– Amount required based on independent criteria 
health professional judgement
• Want
– Amount individuals think they need  patient’s
judgement
Health care demand
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Derived from demand for health
Income
Education/knowledge
Substitutes
Complementary costs (travel, drugs)
Technology
Determinants of demand
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Price (Law of demand = negative)
Income
Price of substitutes and complements
Taste and preference
Other influence (seasonality)
Health care demand?
Price
Demand curve
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
20
A demand curve shows
how price influences the
amount people want to buy.
40
60
Quantity
80
100
Supply curve
5000
Price
4000
3000
2000
1000
0
20
40
60
80
Quantity
• Relationship between price and quantity provided.
Willingness to produce.
100
Determinants of Supply
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Price (positive)
Production process and technology
Price of inputs
Government policies and regulation
Expectations of future prices/demand
Market structure and competition.
Health care supply?
Price elasticity on demand (supply)
• Responsiveness of demand to price
changes =
% change in quantity demanded
-------------------------------------------% change in price
• Assuming other prices and income stay
the same, then:
• Elastic E > 1
• Inelastic E < 1
Fundamental Concepts III
Technical efficiency (how)
• Output produced with minimum inputs
• Maximum output produced given inputs
Allocative efficiency (what)
• Selection of goods to be produced in order to
maximize total value
Cost-effectiveness efficiency
• Maximum output given costs of inputs.
Fundamental Concepts IV
• Equity?
– Efficiency = no one can be made better off without
making someone worse off (Pareto)
– Equity = “fairness” in allocation of resources among
different individuals
• Definition of equity?
– Horizontal
= equal treatment/access for equal needs
– Vertical
= different circumstances, different treatment
Fundamental Concept V
Economic growth and development
Macro-economy
= economic variables aggregated at country-level
National income
= total value of goods and services produced in a country
(e.g. GNP, GDP, growth, GDP per capita)
Economic impact of health
Example: HIV/AIDS
Micro impact
Individual
Demographic
Impact
HIV/AIDS
Household
labour
firms
industries
government
trade
Poverty
Macro impact
National
income
Thank you