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  1. 1. HEALTH ECONOMICS Professor Syed Amin Tabish FRCP (London), FRCP (Edin), FAMS, MD(AIIMS)
  2. 2. What is Health Economics The application of the theories, concepts and techniques of economics to the health sector
  3. 3. It is concerned with Allocation of resources between various health promoting activities The quantity of resources used in health delivery The organization and funding of health institutions
  4. 4. It is concerned with The efficiency with which the resources are allocated and used for health purposes The effect of Preventive, Curative & Rehabilitative services on individuals & society
  5. 5. The scope of health economics Economic development and health Role of the state in health care provision Economic evaluation concepts & techniques
  6. 6. The Scope Economic information relevant to health Health financing issues Financial planning & budgeting
  7. 7. Scope (contd.)  By conducting targeted studies and data analysis, quantifying optimum outcomes, and transferring timely, reliable information to scientists and decision-makers, health care can be delivered effectively, equitably, and efficiently – now and in the future.
  8. 8. 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
  9. 9. Demand, Supply & the Market 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 satisfaction.
  10. 10. 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
  11. 11. 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
  12. 12. 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)
  13. 13. 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
  14. 14. 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.
  15. 15. 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
  16. 16. 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?
  17. 17. Concepts of Economic Efficiency  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
  18. 18. 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 means
  19. 19. 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) efficiency relationships
  20. 20. Resource generation for hospitals  User charges  Insurance  Defining the role of hospitals  Improving information about hospitals  Developing hospital performance indicators  Enhancing hospital management capacity
  21. 21. 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
  22. 22. World of Disturbing Contrasts Resources to be generated by cutting excessive military spending & privatizing inefficient pub. enterprises Challenges: reducing pop. growth, providing basic social services
  23. 23. 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.
  24. 24. 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
  25. 25. 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
  26. 26. 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
  27. 27. Economic Evaluation  Cost-minimization analysis: based on prior epidemiological findings which show that the outcome of interest (e.g. reduction of disability) is achieved to the same degree by two or more interventions.  The technique is used to identify the least cost intervention
  28. 28. Economic Evaluation  Cost-effectiveness Analysis (CEA)  Investigates the best way of achieving a single objective by comparing effects and costs.  It evaluates either which of a number of possible interventions will achieve a given health objective at least cost, or given a fixed budget, the intervention that maximizes the effectiveness of the expenditure
  29. 29. Economic Evaluation  Cost-benefit Analysis (CBA)  CBA values both costs and benefits in monetary terms, and compares them, assessing whether the project/program is desirable through the use of decision criteria [if the benefit cost ratio (benefit divided by cost) is greater than 1, the project is worthwhile
  30. 30. Economic Evaluation  Cost-utility Analysis  It measures the effects of a project/program in terms of utilities [the quality adjusted health outcome caused or averted]  It can focus on either minimizing effect, and its results are expressed in terms of cost per Quality Adjusted Life Years per monetary unit
  31. 31. Steps in Healthcare Finance Define the Health Sector Describe the scope and objectives of the survey Collect and tabulate the data Present the results
  32. 32. Public Sources of Finance  General Tax Revenue  Deficit Financing  Earmarked Taxes  Social Insurance: imposing mandatory insurance payments on employed workers as a percentage of their wages, and by imposing a similar somewhat higher payroll tax on their employers
  33. 33. Private Sources of Finance  Private Health Insurance  Employer Financed Schemes  Charity and Voluntary Contributions  Community financing & self- help  Direct Household expenditure
  34. 34. Strategic Research Themes Humanistic and economic outcomes of health care interventions, including pharmaceuticals and disease management programs. Impacts of reorganization of health services delivery.
  35. 35. Strategic Research Themes  The value and appropriate use of innovation and new technology.  Pharmaceutical and biotechnology policy in Canada,  with a special emphasis on the preparation of policy analyses for health care decision- makers.
  36. 36. Thank you Very much