Health Economics 2009

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HEALTH

ECONOMICS

Dr. NASSER AL JARALLAH


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HEALTH ECONOMICS1) INTRODUCTION TO ECONOMICS.

2) THE BASIC ECONOMIC

QUESTIONS.3) BASIC ECONOMIC CONCEPTS.

4) EFFICIENCY.

5) DEMAND AND SUPPLY ANALYSIS.

6) THE DETERMINATION OF PRICE.


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HEALTH ECONOMICS5) THE ECONOMIC ANALYSIS OF

PRODUCTION.

6) THE ECONOMIC ANALYSIS OFCOSTS.

9) MARGINAL ANALYSIS.

10) MARKET STRUCTURES.

11) THE FIRM AND ITS OBJECTIVES.


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HEALTH ECONOMICS12) MEASUREMENT AND VALUATION

IN HEALTH CARE.

13) FINANCIAL ANALYSIS ANDECONOMIC APPRAISAL.

14) FINANCING HEALTH CARE.

15) SAUDI NATIONAL HEALTH

SYSTEM.

16) STUDENT PROJECTS.


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1.a. 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.


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1.b. 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.


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ii. Explanatory Economics; Involves explaining and predicting certain

phenomena. Conducting an analysis in a cause-effect

format.

Performed with the aid of models thatclassify various causal factors in a

systematic framework (e.g. the health status

and the price of the medical services).



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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.



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1. Economic Variables;

Examples ( prices, costs, incomes, and

quantities of commodities)

Can be measured along a scale.

Once appropriate unites of measurement

have been chosen ( Riyals, visits, days).

1.c.Tools Used In Economic Analysis


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2. Relationships between economic

variables;

Relationship show how one variableschanges in relation to another variable.

The relationships can be specified in a

causal or non-causal manner. Causal relationships if ., then.


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3. Graphical representation of

relationships;

Step function is solid line relatesdiagrammatically to only specified

values.

We can draw a continuous curve joiningall the points specified in the

relationship.


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4. The direction of the relationships;

Positive relationship.

Opposite or negative relationship.

Non-relation or constant relationship in

Y.

Non-relation or constant relationship in

X.


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0

2

4

6

8

10

12

1 2 3 4

constant

positivenegative

constant


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5. The slope of the relationships;

6. The position of the relationship;

7. The shape of the relationships;

8. The nature of economic propositions;


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1.d. Types Of Economics

Economics offers an overall

viewpoint about toward

understanding many problems, all

of which relate to scarcity in one

form or another.Economics can be Macroeconomics

or Microeconomics.


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A. Macroeconomics is the study of aggregateeconomic activities, such as:

1. The economy level of outputs; We can measure that by some variables

such as; GDP, Rate of depression, Rate ofslackness ..ets.

Real GDP is the market value of all finalgoods and services produced in thedomestic economy during a one year periodmeasured with constant prices.


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Macroeconomics is the study of aggregateeconomic 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 incomeearned by the factors of production.

Income earned of the sold or consumed

GDP.


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Macroeconomics is the study of

aggregate economic activities, such as:

3. Levelofemployment; We can measure that by some variables

such as the rate of unemployment.

The Rate of Unemployment is thepercent of the total labor force which is

unemployed.


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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 aprice index.

Deflation is the annual rate of decrease in

the price level.


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B. Microeconomics the study of economicbehavior of individual decision making unitssuch 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.


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2.BASIC ECONOMIC QUISTIONS.

2.a. Economic Problem.

2.b. Health Care And Health.

2.c. The Demand For Health Care.2.d. The Production Of Health.

2.e. The Demand For Health Care.

2.f. Requirements Of Health Services.2.g. Health Care And Economics.

2.h. Economics And Management.


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2.a. Economic Problem

Economic problem based on that

because of limited productive

capabilities, there is a need to makedecision about:

what to produce,

how to produce and

the distribution of out put.


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Factors of production are land,

laborcapital

They are the inputs necessary for the

production of good and services . The terms factors of production and

economic resources are interchangeable.


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The problem is solved by different

ways.

Capitalism or Free Enterprise.

Socialism or Communism.

Islamic or Sharia.Discussion about each one.


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Health economics deals with a specific portion of

the economic problem, that concerned with health

and health care.

What differentiates health care are;

1. The very personal and often urgent needs the

service meets.

2. dealing with pain and suffering and with life anddeath decision.

3. access to the service is often considered to be a

basic human right irrespective of ability to pay.


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What differentiates health care are;

4. The many treatments are unproven.Encouraging the move towards evidence

based medicine where decisions aboutmedical interventions will be more firmlybased on research evidence about theireffectiveness .

5. It is not the consumer who demands thetreatment but the doctor acting as the agent ofthe patient which rise special problems In

demand and resource allocation studies.


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The UK National health service both

purchasing and providing health care.

In 1989 separates the functions ofpurchasers and providers with the aim of

introducing greater incentives for

efficiency and greater choice for patientswith less government intervention.

Highly regulated with strict guidelines.


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One of the basic principles of the public healthcare 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.


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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.


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2.c. The demand for health care The demand for health care services will

depend on the demand for health and on the

perception of the link between health care and

health.

One complication of trying to model or predict

this demand is that individuals value

apparently equal health states differently.

Most health care is carried out by families

within the home.


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2.c. The demand for health care

Health care systems may produce outputs

other than health (Comfort, Security, etc).

The demand for health care will also varyaccording to the age structure of the

population.


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The production of health

It is assumed that the individual seeks to

maximize life time utility.

Health care is only one input into theproduction of health.

Weather privately insured or dependent upon

public services, we seek a comprehensiveservice for examination and diagnosis.


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The demand for health care

We expect to be effective public and environmentalhealth services which will protect us from infectiousdiseases

A diverse and sometime conflicting set of interestsmay happened between;

1. Those who pay for health services.

2. Those who provide them.3. Those who shape them through strategic and

operational management.

4. Those who would like to benefit from them, if

necessary.


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Requirements of health services

1. Economy.

2. Effectiveness.3. Efficiency.

4. Value for money {VFM}.

5. Equity.

6. Ethical issues.


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1. Economy; We would like the services to be inexpensive.

Somebody always pays either directly or indirectly.

2. Effectiveness; We expect the service to be effective we want each

procedure to produce perceptible health gains {orreductions in suffering}.

The evidence based medicine beginning to influence

health care providers.


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6. Ethical issues; The behavior of doctors and other health

care professional and may put them intoconflict with those who manage resources.

The doctor could manipulate the situation for

financial gain. The patient is protected from these abuses

by the doctor's ethical and professionalcodes of conduct.


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Health care and economics

1. Which goods and services to

produce?

E.g. How many resources should

be allocated to the different

specialties?. Should cosmeticsurgery or infertility treatment be

provided at public expense?


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2. How to produce the goods and

services?

E.g. Will the mentally ill be cared

for in small community based units

or in large hospitals?. Whatproportion of surgical procedures

will be carried out on a day care

basis?


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3. Who receives the good and

services?

E.g. Should the state provide

health services only for the poor?

When funds are scare willpreference be given to patients of

fund holding practitioners?


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Basic economic questions

Whatever the methods of

finance organization and

delivery, health care systems

throughout the developed world

have been facing the sameproblems of ever increasing

demand and rising costs.


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This increasing pressure on

resources has had many sources

which include;1. Medical advances, such as organ

transplants and gene therapy, have

provided new treatments and

therefore created greater

expectations and new needs.


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2.As life expectancy

increase, more resourcesare required for medical

treatments andcontinuing care for the

elderly


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3.Changes in family

structure in thedeveloped world mean

that it is ever more likelythat the elderly will not be

cared for by their


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4.Populations in developed

countries have higherexpectation about levels

of health and havedemanded more and

better health care


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Economics and management

These days managersare required to beaccountable.

They have to be able toprovide justification fortheir decisions.


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Demand and Supply

In a market economy , output is distributedthrough a system of prices.

Each good and service produced is sold to

those who are willing and able to pay themarket price.

The market demand for a good or service is

presented as a schedule which relates thenumber of units (quantities) that will bepurchased at alternative prices, holdingconstant other variables that influence the

purchase decision.


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Demand and Supply

Change market supply is a shift of the market

supply curve that results from:

a change in the number and or size ofproducers.

a change in the technology a change in the

price of a factor of a production

a change in the price of other commodities

used in production.

Health Economics 2009

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