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Uncertainty and the welfare economics of medical care
1. UNCERTAINTY & THE WELFARE
ECONOMICS OF MEDICAL CARE
Presented by:
Dr. S.M. Yasir Arafat
MBBS (DMC), MBA, FCPS (P1)
Psychiatry,
MD Phase A Resident Psychiatry,
BSMMU.
MPH, Batch-11, ID: 14-2-42-0004
ASA University Bangladesh, Dhaka.
Co-Editor – www.HealthTipsEver.com
2. Uncertainty & The Welfare
Economics of Medical Care
Kenneth J. Arrow, December 1963
The American Economic Review
Reproduced by permission of the American Economic
Association
Bulletin of the World Health Organization|February
2004, 82 (2)
3. Introduction: Scope & Method
Explorative & tentative study of medical care
as an object of normative economics
Comparison between medical care industry
with welfare economics
Subject is medical care industry not the health
4. Scope & Method: Complexities
Causal factors in health are many, but the
provision of medical care is only one
Complex services that centered about the
physician, private & group practice, hospitals
& public health
Focus of the discussion is the difference from
the norms
5. The Norms in Competitive Model
Market equilibrium
Open market situation
Economic efficiency
7. Medical Care Market, Competitive &
Welfare Model
The risk and uncertainty
Failure of competitive preconditions as not for
welfare
Societal role in market failure
Special structural characteristics of medical care
market to overcome the differences
8. Characteristics of Medical Care Market
Nature of Demand- Irregular & unpredictable
Expected Behavior of Physicians- Not as like a
sales man at all
Product Uncertainty- Incidence, Treatment
options, Recovery, Outcome, level of knowledge
regarding services all are uncertain
Supply Conditions- High entry barrier
Pricing Practices- Extensive discrimination
9. Medical Care Market & Under Certainty
Competitive Model
Nonmarketable Commodities- Epidemic,
Government funding, Donation
Increasing Returns- Allocation of resources
(low density, low income)
Entry: High entry barrier
Pricing: Extensive discrimination, collective
monopoly
10. Medical Care Market & Under
Uncertainty Competitive Model
Introduction:
Comparison between Medical Care & other
uncertain market conditions
Welfare economics of uncertainty: loss & risk
can be insured
Nonexistence of suitable insurance for such
conditions
11. Problems of Insurance
The moral hazard
Funding-Govt., NGO
Health policy
Professional relationship
Alternative methods of insurance payment
Prepayment
Fixed schedule
Pooling of unequal risk- redistribution of
income
The concepts of trust and delegation
Licensing and educational standards
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