Subject: Health economic Topic: Principle of Health economic BPH 3rd year

1. PRINCIPLES OF HEALTH ECONOMICS
Health Economic
Ankita Kunwar
Bph 3rd year

2. The central economics problem: Scarcity and Choice. The heart of economics is to solve economic
problems. The economics problems arise from two inter-related facts. (a) men have unlimited wants
to acquire goods and services , (b) the capital and natural resources needed to produce goods and
services are available limited quantity with society .Thus there is , gap between wants and resources.
Hence, it is necessary to make a choice as to what to produce, how to produce, and how much to
produce? Lionel Robbins has defined economics based in the basic problem. According to him
economics is the science of choice.
Scarcity
• Resources are scarce, People have fewer resources than they would like. Choices must be made
among limited set of possibilities. Have more one thing means have less something else (trade-
off).Economics – study to use limited means to pursue unlimited ends. The common meaning of
scarcity refers to unavailability in the market of a certain commodity. A commodity is scarce, in
economic view, not due to its rarity in market but due to its means is limited. Scarcity explains this
relationship between limited resources and unlimited wants and the problem therein. Scarcity raises
national economic problems. There is poverty and human misery due to scarcity. Scarcity tells us
about importance of commodity. The resources are not only scarce but they also have alternative
uses. The resources mean all of the national resources, artificial resource and human resource itself.
However the main economic problems are abused by scarcity of natural resource. The resources
differ from place to place in their types, quantities and the qualities. They are usable for the
production of varieties of goods and services to satisfy different human wants. But they are very in
sufficient to satisfy all of human wants. Their supply is very limited and changeable with the flight
of time. Their quantities and qualities may decrease if we don’t utilize them properly.

3. Choice of best alternatives:-
• Choice is involved in economic activities at both consumption and
production levels. The problem of choice begins with an individual’s
liking of how much time he would allot for work and how much for
leisure. On the income earned, the choice is between how much to
consume now and how much to save for the future. The chain of
choice goes on deeper and deeper referring to the profitable use of
resources at the hand of economic actors. The choice of best
alternative is the selection of best combination of goods producible
with the use of all of the resources available that gives maximum
social benefits to the nation. The problem of choice is accused by
limited resources and unlimited human wants. Since, each resource
can be put for the production of varieties of goods; there is the
possibility of large number of combination of goods producible in
the country. However, they give more or less social benefit or utility
to the nation. As per the requirements, importance or preference of
human needs/ human requirements or importance of the goods the
choice of best alternative is met.

4. Unlimited wants Limited resources
Economics Problems
Make choices in allocation of resources
.
Consumers
Producers
Optimization
Satisfaction
Profit
Welfare
Individual
Private sector
Government

5. Allocation of resources:-
• The allocation of resources means use of the resources dividing
them for the production of the combination of goods that gives
the maximum social benefit or utility to the nation. It is called
appropriation of the resources to satisfy most important wants
out of their unlimited types.
• The allocation of the resources is necessary because of
insufficiency of limited resources for the fulfillment of
unlimited human wants. Allocation is usually made to the basis
of market demand or people’s preference on the goods. For it
the concepts of demand and supply or the concepts of
production possibility curve and preference curve of people are
used.
• The resources have alternative uses. One use can be chosen and
all other have to be satisfied. Allocation is related to the choice
of how much of resource to be allocated in what sector.

6. The whole body of planning, programming and even
budgeting is nothing, but the statement of allocation of
resources. Resource allocation occupies central position
in economics.
Health is priceless: In a crisis, people pay almost anything
for medical care. However, they don't want to make
difficult decisions regarding trading off Rs for health
.This is why virtually every modern economy offers
emergency medical care on demand and extensive
programs of health insurance.
Money still Determines Health: Demographic factors such
as, sex, and race are important factors in determining
health but money has a strong positive important on
physical conditions.

7. Health risks are more public than private: People's
income depends on the economy into which you
are born on your individual skills and effort. So, too
the state of your health. Compared with starting
people's life in Switzerland, being born in a rural
village in the Nepal severely limits both your
earning power and your life expectancy.
Individual choices: Life style is more than medicine:
People's lifestyle plays a large role in their health
care choices. Driving car, motorbike having with
alcohol is more risk than having with juice.

8. Focus/ Important /Relevance of health economics for
Health Workers
Traditionally most of the health policy makers do not consider the importance
of economics in health sectors. Health program formulated isolated
approach rather than integrated approach. Again, most of the health
personnel were clinical imperatives. Data were not available in health
services due to the poor knowledge in economic concept in health
personnel consequently; inefficient resources allocation was occurred in
health sector. Due to the shortage of teaching and training package of
health education especially clinical, BPH, nursing education, most of the
health personnel ignored the concept of economics in health sector.
However, modern economist’s health policy makers and planners considers
health economics is relevant them for policy makers due to the following
reasons.
Increase Rational Capacity
• A rational consumer always requires sound reasoning within a systematic
framework for future health care decisions and thus need training and
knowledge in many areas like biology, chemistry, statistics, epidemiology,
behavioral science, ethics decision analysis, and, economics.

9. Predict human behavior.
• Health economics is one of several social sciences that
attempts to explain and predict human behavior. It is
unique among the social sciences in establishing a
context of scarcity and uncertainty. More specifically,
economics is concerned with the way scarce resources
are allocated among alternative uses of satisfy
unlimited human wants. Helps for the allocation of
resources in the health care.
Useful to understand patient’s utility
• Health economics theory always teaches to the service
provider’s patient’s utility functions then after shows
the road-map how to maximize their limited resources
and thus lead optimal use of limited resources in health
care services.

10. Health planning is basically about choice:
• Health planning is basically about choice between one futures or another,
choice between various ways of achieving that future. Health economics
always support to formulate policy, planning linking between programming
and budgeting. It always provide better approach societies adopt in running
and organizing their health services and provide a road-map to reappraisal
of past health policies, strategies and to prioritize their resources from
individual to national level planning.
• Economics considerations play a key role in all aspects of life: in
agriculture, housing, industry, trade, and health. In addition, the nature and
level of country’s economic development is a major determination of the
health status of its inhabitants and is associated with the level of health
service and health –related activities a country can support. Health policy
and its implementation are thus strongly influenced by macro economic
considerations.
• Health economics is relevance to understand the issue of health and
economic development, organization and delivery systems, finance of the
health sector, demand analysis, supply analysis, health manpower, financial
management, organizational behavior, project evaluation, health policy
equity and social justice, .

11. • Carryout research and innovation activities
• Health economics support to carryout research and
innovation activities and thus support to explore the hidden
issues of society. It tries to link with other disciples e.g.
agriculture, housing, industry, trade, and health and
encourage to use scarce resources more effectively,
efficiency and equity.
• To provide better health care services
• It can change the behavior of health personnel and service
providers for better health care services and increase
competition for the promotion of efficiency in health care
finally, measure the Quality Adjusted Life years, QALYs
(both mortality &morbidity of health)

12. Area Economics Health Economics
Meanings Social science concerned with the
proper uses and allocation of
resources for the achievements and
maintenance of growth and stability.
The application of the theories, concepts and techniques of economics to the health
sectors.
Objectives To increase income, growth, stability,
Identification and distribution of
resources.
To increase health status of people, to bring efficiency resources distribution in
health services, demand for health care services, seek alternative health care finance,
To adjust HALYs and QALYs
To provide an introduction to health promotion economics from the perspective of
social scientists, and clinical and public health researchers. Identification and
distribution of health resources.
Scope./field Wants, efforts, satisfaction
consumption, production, exchange,
distribution, macro and micro
What influences health? (other than health care), what is health and what is its
value, the demand and supply theory, production of health services, economics
evaluation, Cost benefit analysis, national income and national health account micro
economics evaluation at treatment, market mechanism of health care services,
concept of planning, budgeting and monitoring mechanisms, principle of care
Elasticity of demand and supply analysis, exchange of health information,
distribution of resources, funding, Organization.
Sector Macro and Micro, employment,
health, education, industry,
Health, pharmaceutical industry, service industry, traditional health services.
Utilized Fully applied in market analysis
Can be applied cost benefit analysis
Partially utilized foe demand and supply analysis
Only cannot be applied C/B analysis, cost effectiveness. Cost benefit analysis can
be applied health technology information and pharmaceutical industry.