This document discusses key concepts in health economics. It begins by defining health economics as the branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and health care services. It then examines topics like the costs of health care including capital, operating and opportunity costs. It also explores the demand and supply of health care, health care markets and financing, health plans and budgets. The document emphasizes the importance of cost containment and optimal resource utilization in health economics.

1. HEALTH ECONOMICS
Anuradha S
Associate Professor
St.Gregorios College Of Nursing
Parumala’

2. ECONOMICS
▪Economics is the study of wealth, study of welfare
and study of scarcity
▪It is a social science that studies the production
,distribution and consumption of goods and services

3. Health economics
▪Health economics is a branch of economics
concerned with issues related to the scarcity in the
allocation of health and health care
▪It is the study of how resources are allocated to and
within the market for health care

4. Definition
▪It is the application of the principles and tools of
economics to health care services .
▪It is the study of how resources are allocated among
the care of sickness and the promotion,
maintenance and improvement of health
▪Health economics is a branch of economics
concerned with the issue related to efficiency,
effectiveness, value and behavior in the production
and consumption of health and health care services

5. ▪ To provide maximum benefits
▪ Reduction in the disease burden of the community and
▪ Improvement in peoples health and welfare

6. ▪Maximum benefit with least cost
▪The health economics mainly concentrates on how
to extract maximum benefits from health industry
from least cost
▪Maximum use of goods and services
▪

7. resources
scarcity opportunity

8. ▪ Medical advances
▪ Organ transplantation, gene therapy, new needs aroused
▪ Increased life expectancy
▪ More resources needed for medical and continuing care of elderly
▪ Change in family structure and norms
▪ Elderly may not cared by their families at home
▪ Higher expectation from general people
▪ Advance in health research and concerns for the cost effectiveness
programme in health care market
▪ Public awareness about their rights: about their rights for health and
health care facilities

9. ▪To formulate health policies
▪To estimate real cost of health care delivery system
▪To evaluate the relative cost and effect
▪To evaluate the effect of economic variables like
user charge, time and distance, cost accessibility etc
on the utilisation of health services
▪To evaluate planning and budgeting system

10. ▪Resources:
▪Inputs:eg-land,labour,capital
▪Scarcity:
▪Unlimited nature of human needs and limited
available resources
▪Opportunity:
▪Maximum benefits from resources-best alternative
use of resources

11. ▪ Cost of health care
▪ Health problems
▪ Demand of health care supply analysis in health care
▪ Health care service market
▪ Financing for health care industry
▪ Health plans and outlays
▪ Optimum utilisation of resources

12. COST OF HEALTH CARE

13. ▪It refers to the expenses incurred by the producer to
produce the goods and services
▪The health care costs are incurred by both
producers of health services , through their use of
staff, buildings , equipment, materials and supplies
etc. and by consumers for drugs, transport etc.

14. Types of costs
▪ Capital cost-
▪ These are fixed cost irrespective of the workload of any health
centre Eg: building cost, equipment cost
▪ Operating cost:
▪ These costs are related to the type of activity in health
institution Eg: salaries, maintenance, repair, medical supplies
▪ Opportunity costs
▪ It refers to the value of alternatives which could have been
chosen instead of one item which has incurred the specific cost
▪ Average cost
▪ It is the cost per unit of output produced
▪ Sunk cost
▪ Sunk costs are which one incurred can’t be recovered Eg:
Equipments

15. Total cost
▪The sum total of all the cost is called total cost
▪The various cost related to health care are the
money spend on health care facilities, cost of
identifying and treating diseases, cost of machinery
and equipments, treatment charges, cost of building
and other facilities and payment to various
categories of personnel

16. ▪The total cost has 2 components
▪Fixed cost
▪Variable cost

17. Variable cost
▪It vary with amount of services rendered
▪Fixed and variable costs together termed as total
costs

18. ▪ Health problems
▪ Every country has its own health problems depending upon
size of population, standard of living, geographical
condition of the country etc
▪ India has the second highest population and 17.7% of world
population
▪ Main health problems in India are communicable disease
problem, non communicable disease problem, nutrition
problems, environmental sanitation problems, medical care
problems population problems etc

19. DEMAND
It is the willingness and ability of a consumer to
purchase a given product in a given frame of time
▪Demand is a need or desire backed by the ability and
willingness to pay.
▪Supply- The quantity of goods that seller is willing &
able to sell at different prices.

20. ▪Law of demand
▪A fall in price increases demand, when prize
increases demand falls
▪Demand schedule
▪A statement which gives information of demand by
the consumer at different levels of price

22. ▪Change in trend
▪Change in size of population
▪Climate/weather change
▪Awareness
▪Change in income
▪Product improvement

23. ▪Demand for the health care derived from demand
for health
▪Health viewed as a sort of capital ,asset, wealth and
right, thus demand has increased

24. ▪Patient factor
▪Health status, demographic characteristics and
economic status of the person
▪Physician factor
▪Physician is a factor by prescribing drugs, tests and
admitting patients and

26. ▪ Supply of health care depends on external and internal
factors
▪ Internal factors
▪ Availability of funds, budget,govt subsidy grant in aids
▪ External factors
▪ Existence of medical paramedical personnels, drugs
,equipments
▪ Existence of pharmaceutical companies, lab/investigating
centres, blood banks etc

27. Demand of health care Supply of health care
The willingness and ability of a
consumer to purchase a product in a
given frame of time
Supply: provision of access or
availability
Health care demand: health care
demand is derived from the demand of
health
Availability of HCDS from govt
and private sector
A fall in price increases demand, when
prize increases demand falls
Increase in demand of health care
decreases the supply
Factors influencing health care demand:
Patient factor, physicians factor
Supply of health care depends on
external and internal factor
As the population increases the health
problems increases that bleads to
increase demand of health care
As population increases the supply
of health care is in short than the
demand

28. HEALTH CARE INDUSTRY &
HEALTH CARE MARKETS
▪ It is an economic activity of purchase and sale of goods and
services at a particular level of prize
▪ Markets are composed of buyers & sellers.
▪ Buyers – public.
▪ Sellers- Care providers.
▪

29. FIVE HEALTH MARKETS IDENTIFIED:-
▪Health care financing market.(Budget for health care
services )
▪Physician & nurses services market.(Health personnel)
▪Institutional services market.(Health Centres/hospitals)
▪Input factors market.(resources)
▪Professional education market.(Quality and stds)

30. ▪Health care market is controlled by the government
▪Ministry of health controls various private and
public sector health care market
▪The private sector is controlled through legislation
passed by Indian parliament
▪Consumers of health care market often suffer from
lack of adequate information about what services
they need to buy and which providers offer the best

31. ▪There is a constant demand for health care services
▪As population increases, health problems increases
and the demand of health care services increases

32. ▪ There is a a scarcity of hospitals ,health centres and
dispensaries in rural areas
▪ As private sectors concentrate on profit, poor patients can
not avail facilities from private hospitals, nursing homes,
clinics etc as it is costly for them
▪ The supply of health care is less than the demand
▪ Hence it is the responsibility of the government to provide
primary health care to all the villages throughout the country

33. ▪Source of health finance
▪Commercial banks
▪Public sector banks
▪Private banks
▪Private foreign banks
▪Co-operative sector banks

34. ▪Health plans are a well designed schemes and
programme for better health for the entire
population are called health plans
▪Health planning is an integral part of national socio
economic planning
▪The guidelines for organising national health
planning and health services were provided by a
number of health planning committees

35. ▪ 3MMM
▪ MAN
▪ MONEY
▪ MATERIAL

37. ▪Cost containment is the business practice of
maintaining expense levels to prevent unnecessary
spending, or thoughtfully reducing expenses to
improve profitability without risking long-term
damage to the company.

38. ❑ It refers to effective & efficient delivery
of services while generating needed revenues
for continued organizational productivity.
❑ It is the responsibility of every health
care provider.

39. 1. Understanding what is required to remain financially sound.
2. Knowing costs & reimbursement practices.
3. Capturing all charges in a timely fashion.
4. Using time efficiently.
5. Discussing the cost of care with patients .
6. Meeting patient rather than provider needs.
7. Evaluating cost effectiveness of new technologies.
8. Predicting & using nursing resources efficiently.
9. Using research to evaluate standard nursing practices.

40. 1. Economic factors.
2. Social factors.
3. Demographic factors.

41. ▪ Control of cost.
▪ Direct involvement.
▪ Employee benefit programme.
▪ Standard criteria for diagnostic measures, testing etc.
▪ Local coalitions with health providers & consumers.
▪ Wellness programme – reduce the cost.
▪ Evaluation of cost & quality outcome.
▪ Continuous focus on care & access to care.

42. Social factors:-
Patient participation in health care planning.
Demographic factors:-
▪Resources assessment.
▪Assessment of insurance of health.
▪Primary care link to urban health centres.
▪Extend the care to elderly patients.

43. 1. Knowledge of health care trends.
2. Knowledge about budget.
3. Understand the health care market.
4. Understand the fiscal responsibilities in health care.
5. Understand the economic status of health care.

44. FAMILY BUDGET:-
Pre plan of our action.
Merits:-
1. Priority to basic needs.
2. Improvement in living.
3.Control over the wasteful expenditure.
4. Savings.
5. Idea for economic limitation.
6. Freedom
7. Provide cordial relationship.
8. Helps to form health policy.
9. Enhancement of family health.

45. ➢Family income like salary, land, rent share, mess etc.
➢Expenses like food, clothing, housing, electricity,
education, water,health,recreation and expenses for fulfilling
other obligations are included.
➢Savings for future needs.

46. Illness in the family:-
Delivery, chronic illness, epidemics, accidents & injuries.
Risk:-
Nutrition, drugs, mental illness, occupation, maternal & infant health,
chronic illness.
Family crisis:-
Disturbance in family coping.
Family dysfunction & disorganization
Demand to family resource.
Need financial assistance & emotional support.

47. ▪ Reimbursement mechanisms.
▪ Medicare.
▪ Medicaid.
▪ Private insurance.
▪ Payment by the individuals.

48. ▪ Family budget should always be a balanced and saving
budget
▪ A family budget should should consider all sources of
income and all items of usual expenses
▪ Should foresee extraordinary expenses and provision must
be made for them
▪ There should be a possibility of miscellaneous expenses in
the budget
▪ Budget should be made according to the needs ,size and
immediate and future goals of the family
▪ Budget should be evaluated for its merits and demerits