The document discusses key concepts in health economics including definitions, microeconomics, economic evaluation of healthcare, and different structures of economic evaluation such as cost-minimization analysis, cost-effectiveness analysis, cost-utility analysis, and cost-benefit analysis. It also covers topics like health financing, health care externalities, positive and negative externalities, investment in health and healthcare, and problems with health financing. Major programs for health financing in the US include Medicare which covers those over age 65 and Medicaid which provides coverage for the indigent.

1. UNIT 3
Health Determinants Unique
Nature Of Health

2. Definition of Health economics
Health economics is the study of how scarce resources are
allocated among alternative uses for the care of sickness and the
promotion, maintenance and improvement of health, including
the study of how health care and health-related services, their
costs and benefits, and health itself are distributed among
individuals and groups in society. It can, broadly, be defined as
'the application of the theories, concepts and techniques of
economics to the health sector'.

3. Concepts in Health Economics
 Resources
 Scarcity opportunity of cost
efficiency in
production of health and health care
 health care market

4. Microeconomics
•Microeconomics is the study of economic behavior of
individual decision making units such as: consumers, resource
owners and business firms in a free enterprise economy.
• This can be measured by conducting market surveys, pilot
and feasibility studies.
Health Microeconomics
• Health microeconomics is concerned with how individuals
choose, minimize costs or maximize profit or utilities within a
given health care system within a set of rules and prices.

5. ECONOMIC EVALUATION OF HEALTHCARE ?
• Economic evaluation is the process of systematic
identification, measurement and valuation of the inputs and
outcomes of two alternative activities, and the subsequent
comparative analysis of these.
• Health economic studies provide information to decision
makers for efficient use of available resources for maximizing
health benefits. Economic evaluation is one part of health
economics, and it is a tool for comparing costs and
consequences of different interventions.

6. Different Structures Of Economic
Evaluation
The four main approaches that are currently in use are:
1. Cost-minimization analysis
2. Cost-effectiveness analysis
3. Cost-utility analysis
4. Cost-benefit analysis.

7. Cost-minimization Analysis(CMA)
1.Cost minimization analysis (CMA) comprises for the least costly
alternatives when the outcomes of two or more therapies are virtually
identical.
2.This method of cost evaluation is the one used most often in evaluating
the cost of a specific drug. This method can only be used to compare two
products that have been shown to be equivalent in dose and
therapeutic effect.
3.finding the least expensive way of obtaining the health benefit.
4.Example: The costs of laparoscopic and ‘open’ procedures to treat
appendicitis are compared. Both types of procedure have an equivalent
outcome but laparoscopic appendicectomy has a higher cost

8. Cost-effectiveness Analysis(CEA)
1.Cost-effectiveness analysis is a way to examine both the costs and
health outcomes of one or more interventions. It compares an
intervention to another intervention by estimating how much it costs to
gain a unit of a health outcome, like a life year gained or a death
prevented.
2.This type of analysis is used to compare health care technologies that
have different outcomes , common one dimensional health benefits and
which are measured in the same units.
3. For example, costs can be compared using common units, such as ‘per
lives saved’ or ‘per death prevented’. CEA can therefore be used to
compare heart surgery and kidney transplantation.

9. Cost Utility Analysis (CUA)
1.Cost utility analysis is an economic analysis in which the incremental
cost of a program from a particular point of view is compared to the
incremental health improvement expressed in the unit of quality
adjusted life years (QALYs).
2.To overcome the concerns of expressing all benefits in terms of money
an alternative measure used is this concept of utility.
3.To compare the costs and benefits of health care technologies.

10. Cost Benefit Analysis (CBA)
1.A cost-benefit analysis is a process businesses use to analyze decisions.
The business or analyst sums the benefits of a situation or action and
then subtracts the costs associated with taking that action.
2.CBA seeks to place monetary values on both the inputs and outputs i.e.
treatment costs and consequence costs.
3.Since both costs and consequences are measured in monetary units, it
is possible to calculate whether a treatment delivers an overall gain to
society.
4.The effects of treatments, such as complications, number of disability
days, and number of life years gained, need to be converted into costs.

11. Investment in health and health care
• investment in health increases the total amount of time available for
the production of goods and services. the health state of the individual
is influenced by prices, income, and tastes which are factors influencing
the demand for health inputs. These factors have impact upon the
consumption decisions individuals make about health inputs which
determine the health state. Thus, the extent to which individuals
choose to alter the consumption of health inputs depends on factors
such as prices, income, and preferences.
For example, those with higher income are able to afford quality
healthcare than persons with lower income; also, the lower the price of
health inputs the higher the demand for them.

12. • Individuals will invest in their health if they have access to the
available health inputs. Stakeholders should make facilities available
and accessible to employees for health investment.
• Governments should introduce more health programs to make
healthcare accessible to also the low income employees, firms should
establish clinics at their workplaces to provide primary healthcare
services to their employees since primary care provides greater access
to needed services, greater focus on prevention, and early
management of health problems.
• Perhaps, most importantly, health can be treated both as a
consumption good and an investment good. As a consumption good,
health is desired because it makes people feel better. As an investment
good, health is desired because it increases the number of healthy
days available to work and to earn income.

13. • Benefits of investing in health and health care:
- They feel better when well.
- They lose less time to illness, and hence can work more.
- They are more productive when they work and can earn
more for each hour they work.
- They may live longer.

14. Health Care Externalities
• An externality is any impact, be it positive or negative, on individuals
or groups not involved in a given economic transaction. That is to say,
an externality is something that affects other people outside of the
particular parties involved in an exchange.
• In health care, the critical externality in most systems is the care
provided to others. You benefit from others being healthy because it
reduces the likelihood of you catching their illness (assuming it’s
contagious). You benefit from a positive externality of others receiving
health care.
• Your health care costs are also affected by others choosing to purchase
health care. The healthy pay more to the insurance company than they
receive in treatment, while the opposite is true for the sick. Insurance
fundamentally operates by taking the money from healthy people to
pay for the procedures required by sick people.

15. • For example: education directly benefits the
individual and also provides benefits to society as a
whole through the provision of more.(positive
externality)
• the production or consumption of a product results in
a cost to a third party. Air and noise pollution are
commonly cited examples of negative externalities.

16. Positive Externalities Include:
• Health Affects Wealth: Healthy workers are absent from work
less and are more productive. A health care market that
effectively helps workers can lead to positive economic gains.
• Technology and Information: The study of health care, and the
research involved in generating new solutions, has dramatically
increased the knowledge and technological capacity of society in
general.
• Vaccinations: An interesting new development in health care is
the advent of vaccines. Vaccination results in herd immunity, or
essentially the fact that many individuals will become immune
and thus reduce the likelihood that everyone in the population
will contract certain diseases.

17. Negative Externalities Include:
• Infectious Disease: One of the largest reasons why health care is
so critical is the fact that disease are infectious. Untreated
disease will result higher population vulnerability to that disease
due to increased exposure.
• Environmental Degradation: Health care produces a great deal of
chemical waste, requires a great deal of emissions (ambulances,
etc.) and alters the natural ecological environment of bacteria.
• Antibiotic Resistance: An interesting byproduct of the newer
solutions to medical dilemmas is the slowly growing resistance of
antibiotics in bacteria. Due to the way in which the health care
industry has been operating, bacteria are dramatically altering to
resist our solutions

18. Health Financing
• Health financing is a core function of health systems that
can enable progress towards universal health coverage by
improving effective service coverage and financial protection.
• Function of a health system concerned with the
accumulation, mobilization and allocation of money to cover
the health needs of the people, individually and collectively,
in the health system.”
• It refers to the raising of resources to pay for goods and
services related to health. These resources may be in the
form of “cash” or “kind”.

19. PURPOSE
1. Make funding available
2. Set the right financial incentives for providers
3. To ensure that all individuals have access to effective public
health and personal health care.
4. Health is a human right.
5. Key focus area : making healthcare affordable and
accessible for all.

20. Major Problems In Health Financing:-
Lack of funds.
Unequal distribution of health finances.
Rising health costs.
Lack of coordination of health financing units.
Wastage and insufficiency in spending the funds.

21. The social security act created Medicare, and Medicaid
respectively.
• Medicare: - Medicare is a federal government health
insurance program that subsidizes healthcare services. The
plan covers people over age 65, younger people who meet
specific criteria, and individuals with certain diseases.
• Medicaid: - It provides universal health care coverage for the
indigent and children. Priority participation is given to
children, pregnant women, and the disabled.

22. Thank you