Healthcare economics & financing
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  • 1. Healthcare Economics & Financing S. A. Tabish 01/28/14 1
  • 2. Health Economics The application of the theories, concepts and techniques of economics to the health sector. It is concerned with : _ allocation of resources between various health promoting activities _ quantity of resources used in health delivery _ organization and funding of h. institutions _ the efficiency _ the outcome 01/28/14 2
  • 3. The scope of health economics Economic development and health Role of the state in health care provision Economic evaluation concepts & techniques Economic information relevant to health Health financing issues Financial planning & budgeting 01/28/14 3
  • 4. Demand, Supply & the Market Society has to find some way of deciding what, how, & for whom to produce Market – A set of arrangements by which buyers & sellers are in contact to exchange services/goods _ free markets in HC are rear, almost all systems in the world operating with some level of government intervention _ free market solutions are upheld as efficient _ the perfect market system would work best for HC & delivers the highly desirable outcome of consumer 01/28/14 4 satisfaction.
  • 5. How does a market work? Markets are made up of a demand side, and a supply side with consumers acting on the side of demand and producers on that of supply Markets adjust price signals Consumer is sovereign 01/28/14 5
  • 6. Demand, Supply, & Equilibrium Demand is the quantity of the good buyers wish to purchase at each conceivable price Supply is the quantity of a good sellers wish to sell at each conceivable price At the equilibrium price, the quantity demanded just equals the quantity supplied 01/28/14 6
  • 7. Economic Objectives of Health Care Efficiency : consumer satisfaction maximized at least cost to society _ effectiveness (effective HC is about improving health status). CEA/CUA/QALY _ operational efficiency asks the question, given that some activity is worth doing, what is the best way of providing it _ allocative efficiency judges whether an activity is worth doing. (CBA) 01/28/14 7
  • 8. Economic objectives (contd.) Equity : HC resources and benefits should be distributed in some fair or just way. Basic types of HC _ libertarian values consumer sovereignty and market forces _ egalitarian is committed to the pursuit of community health In setting the objectives, both efficiency and equity must be taken into account 01/28/14 8
  • 9. Economic Development & Health ED refers to an historical process that has many aspects including economic, demographic & health. To arrange nations on a scale from poor (less developed) to rich (developed). And the process by which poor nations become richer Health development is the process by which populations move from a lower level to a high level of health. 01/28/14 9
  • 10. Consumption and Health HC :- Responsibility of the state Private consumption patterns Public consumption patterns Developed nations spend 7 to 15% of GDP Developing nations spend 3 to 6% of GDP Foreign aid 01/28/14 10
  • 11. Concepts of Economic Efficiency Economic analysis/the evaluation of HS Are limited resources used in the best ways possible? Is value for money achieved in their use? It is necessary to have a clear understanding of objectives, evaluative criteria, measurement & valuation techniques Input, process & outcome Input, resources & costs Outputs, health & health indicators 01/28/14 11
  • 12. Hospital Economics Hospitals of developing countries utilize nearly half of the total national expenditure for the health sector Hospitals account for 50 t0 80% of government recurrent HS expenditure Hospitals use a large proportion of the most highly trained health professionals For obtaining additional resources insurance and user fees are seen the 01/28/14 12 means
  • 13. Resource Management by Hospitals Poor management leads to wastage of resources Economic concepts – efficiency _ technical efficiency (mix of inputs) _ economic efficiency (least-cost combination of the inputs) _ scale efficiency (whether a system is producing services at least cost) _01/28/14 efficiency relationships 13
  • 14. Resource generation for hospitals User charges Insurance Defining the role of hospitals Improving information about hospitals Developing hospital performance indicators Enhancing hospital management capacity 01/28/14 14
  • 15. WE LIVE IN A WORLD OF DISTURBING CONTRASTS 3/4ths of the world’s people live in developing countries enjoy only 16% of the world’s income More than 17 M people die every year from infectious & parasitic diseases(D,M,TB) More than 90% of HIV infected cases live in developing country Resources to be generated by cutting excessive military spending & privatizing inefficient pub. enterprises Challenges: reducing pop. growth, providing basic social services 01/28/14 15
  • 16. Healthcare Expenditure HC system absorb 8% of the total world product Industrial countries spend 90% of this amount, with average per capita exp. of $1500 on HC as compared to $41 in developing countries India spends 1.6% of GDP (even lower prop. spent on PH The institutional base is weak, NGO’s are underutilized, & finally pvt. sector is gigantic, virtually completely unregulated & offers some of the best & worst care seen anywhere. 01/28/14 16
  • 17. INVESTING IN HUMAN DEVELOPMENT Countries must invest liberally in human development so that they are ready to face the challenge of Globalization Globalization is integrating consuming markets around the world. But it is also creating new inequalities The time has come to create a new world that is more humane, more stable, more just Components of Human Development paradigm: Productivity, Equity, Sustainability, Empowerment 01/28/14 17
  • 18. MANAGED CARE Developed in response to ever increasing HC costs Important Tools of MC: For managed demand 1. Capitation 2. Gatekeeper 3. Advice line to patients 4. User fees 5. Consumer education For medical management 1. Utilization review 2. Preadmission certification 3. Greater use of cl. Pathways 01/28/14 18
  • 19. Managed Care (Contd.) HC system can be grouped into 4 archetypes: Socialized medicine (UK) Socialized insurance (Canada) Mandatory Insurance (Japan) Voluntary Insurance (USA) An integrated & virtual system (brought about by Disney & Microsoft). With this system service can be provided any where, anytime by HC provider. Informed Consumer 01/28/14 19
  • 20. INVESTING IN HEALTH PRIRITY AREAS FOR FUTURE ACTION: Ensuring value for money Poverty reduction Public health policy Strengthening national capabilities for emergency relief Emphasis of long-term & comprehensive strategies Investing in health should be considered as an investment in HRD to enhance productivity. 01/28/14 20