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Objectives

To be able to: Discuss the defnition and basic concepts

o economics including the assumptionsthat lie behind economics

Describe the scope o health economics

Analyze the economic characteristic o

the health industry, and Describe various ways o fnancing the

health system

Defnition o Economics ( Samuelson)

the study o how people and society

end up choosing, with or without the use omoney, to employ scarce productiveresources that could have alternative uses to produce various commodities anddistribute them or consumption, now and inthe uture, among persons and groups insociety.

The key words and phrases in thisdefnition are

with or without the use o money

scarce productive resources

alternative uses:opportunity costs

Scarcity

resources land, labor, capital! are

limited

"hoices must be made as to what

health care should be provided, how itshould be provided, in what #uantitiesand how it might be distributed

!oncept o opportunity costsThe value o oregone beneft which

could have been obtained rom a resource inits ne$t%best alternative use

Opportunity costs

&y choosing to use resources in one

particular way, other opportunities orusing those resources are oregone

'rom a limited budget, the most

e(cient mi$ o services to und will bethat which generates the greatestaggregate beneft

The aim o economics is to ensure that

we do those activities whose beneftsoutweigh their opportunity cost

To choose the options within our

given set o resources! that wilminimize opportunity orgone

"ssumptions

man is rational he wants toma$imize his benefts in ma)ingchoices or decisions

man*s wants are insatiable but

resources are limited to satisy althese wants

Overview o #ealth Economics

+ature o the "ommodity ealth"are

-conomic "haracteristics Dimensions

o the ealth /ndustry

0arious 1ays o 'inancing the ealth

2ystem

$ature o the !ommodity % #ealth !are

!oncepts1. Health care is a commodity

3commodities4 include anything which

there is a demand or productsservices and ideas

health care is a commodity you

purchase or avail o when you need it

& reasons or the demand o health careby consumers

5! it is a consumption commodity itma)es the consumer eel better 6! it is an investment commodity a stateo health will determine the amount o timeavailable to the consumer

6. The kinds, types and amount of healthcare a person needs is not known to him and

the physician determines these for thepatient.

7. The benets of health care and beinghealthy are not limited to the individual

patient himself but also include his familyand community as well.

Economic !haracteristics ' Dimensionso the #ealth ndustry

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/. /n8uence o economics on the*OD+!TO$subsystem

% roduction subsystem providersor producers o health services, i.e.,physicians, hospitals, clinics, laboratories,etc.

1. The supply and demand for the healthproviders is aected by prices and income,as well as the type of health service.

5.5.based on surveys, it is oten oundthat amilies with higher incomes havegreater e$penditures or medical care,although the 9 o income spent on medicalcare declines as income increases

5.6.the price o a service and the useo that service are, according to economictheory, inversely related: as the price isreduced, purchase or use o the service willincrease

5.7. the more sophisticated the healthservice, the more e$pensive

2. The supply of providers is also aected byincome and prices

% cost o education and training ohealth manpower and the prices or cost oproducing the health services such as thecost o e#uipment, supplies and all othermaterials

% the income that can be derived in theoperation o the services including the wagesand salaries o health manpower

!. The supply of health services and healthproviders is aected by the level ofeconomic development of the country.

//. /n8uence o economics on the,"$TE$"$!E subsystem,aintenance subsystem health

organizations, health fnance organizations,proessional education! concern withmechanisms to maintain the health servicesdelivery such as rules and regulations tomaintain standards.

5. The health sector is a very labor%intensiveindustry.e.g. when the price o labor or wages and

salaries go up, many hospitals are aectedadversely because they are not able to

increase the wages and salaries o personneaccordingly6. There is prolieration o over%the%counterdrugs. ;any people sel%medicate to save ondoctor*s ees.

///. /n8uence o economics on the "D"T-Esubsystem

"daptive component how thehealth system adapts to changingenvironment< activities include healthservices and biomedical researches.

a. education and training or research is#uite e$pensiveb. lac) o trained personnel to do research

/0. /n8uence o economics on ,"$".E*"/subsystem

This subsystem is concerned with

organization and fnancing o health caredelivery, which in turn is in8uenced by theeconomic development o the country andthe political outloo) o the government

-arious 0ays o 1inancin2 the #ealthSystem

5. out%o%poc)et e$penditures6. health insurance both government and

private7. employer%provided benefts=. community fnancing>. government ta$ation and oreignfnancing

Out3o3pocket e4penditures

householdsconsumers pay or health care

services out o their own money, either on aee%or%service or on a per case basis

?hilippines: @ o all health care e$penditures

are paid out%o%poc)et

#ealth nsurance

a method o payment wherein consumers orprospective patients pay to a third party inthe orm o a premium which in the event oillness are used to pay the health careproviders or some or all o the e$pensesincurred in diagnosis and treatment o thepatients

a. government provided #/#E"/T#

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% the government pays or the healthcare e$penditures o its citizens with thepremium paid by the people % or employed citizens, the premiumpaid is a sharing between the individualand his employer< or sel%employed, theindividual solely pays or the premium.

b. "rivate % ealth ;aintenancerganizations ;*s! e.g. ;edicard,0alu care, ?hilamcare, etc.

Employer3rovided 5enefts

the frms either employ a physician andor a

nurse or maintains a health provider on theretainer basis< or they enroll their employeeswith an ; or provide health insurancebenefts or them.

!ommunity 1inancin2

a term used or ris) sharing in health care

fnancing including such activities as peopledonating labor or materials to construct ahealth center and contributions to a commonpool in e$change or discounted medicalservices or drugs

usually, unds are provided or a community

health wor)er, and depending onmembership and amount o contribution,

unds could be made available or sic)nessloans

the community itsel provides or the health

needs o its members either through a &2with a &1 andor a boti)a%sa%barangaywhich sell drugs at a discounted price

.overnment Ta4ation and 1orei2n1inancin2

a6 Ta4ation % through ta$es collected, thegovernment could provide health careservices through the ollowing: 5! by putting up hospitals andclinics and employing health personnel on asalary basis and providing ree drugs

6! by employing the services o aprivate health care provider on a capita orper head basis

b6 1orei2n fnancin2

% usually done or preventive healthcare services by international organizationsi.e., 1, B+/"-' Bnited +ation*s "hildren*s'und! % it is the government which see)s theassistance o these agencies through thesubmission o proposals which the latterconsider33333333333333333333333333end olecture333333333333333333333333333333%%%%%%%

I have told you these things, so thatin me you may have peace. In thisworld you will have trouble. But take

heart! I have overcome the world.

-John 16:33, NIV