04/09/2304/09/23 11

Healthcare Economics & Healthcare Economics & FinancingFinancing

S. A. TabishS. A. Tabish

04/09/2304/09/23 22

Health Economics Health Economics The application of the theories, concepts and The application of the theories, concepts and techniques of economics to the health sector.techniques of economics to the health sector.

It is concerned with :It is concerned with :

_ allocation of resources between various health _ allocation of resources between various health promoting activitiespromoting activities

_ quantity of resources used in health delivery_ quantity of resources used in health delivery

_ organization and funding of h. institutions_ organization and funding of h. institutions

_ the efficiency _ the efficiency

_ the outcome _ the outcome

04/09/2304/09/23 33

The scope of health economicsThe scope of health economics

Economic development and healthEconomic development and health

Role of the state in health care provisionRole of the state in health care provision

Economic evaluation concepts & techniquesEconomic evaluation concepts & techniques

Economic information relevant to healthEconomic information relevant to health

Health financing issues Health financing issues

Financial planning & budgeting Financial planning & budgeting

04/09/2304/09/23 44

Demand, Supply & the MarketDemand, Supply & the Market

Society has to find some way of deciding what, how, & Society has to find some way of deciding what, how, & for whom to producefor whom to produce

Market – A set of arrangements by which buyers & Market – A set of arrangements by which buyers & sellers are in contact to exchange services/goodssellers are in contact to exchange services/goods

_ free markets in HC are rear, almost all systems_ free markets in HC are rear, almost all systems

in the world operating with some level of government in the world operating with some level of government interventionintervention

_ free market solutions are upheld as efficient_ free market solutions are upheld as efficient

_ the perfect market system would work best for HC & _ the perfect market system would work best for HC & delivers the highly desirable outcome of consumer delivers the highly desirable outcome of consumer satisfaction. satisfaction.

04/09/2304/09/23 55

How does a market work?How does a market work?

Markets are made up of a demand side, Markets are made up of a demand side, and a supply side with consumers acting and a supply side with consumers acting on the side of demand and producers on on the side of demand and producers on that of supplythat of supply

Markets adjust price signalsMarkets adjust price signals

Consumer is sovereign Consumer is sovereign

04/09/2304/09/23 66

Demand, Supply, & Equilibrium Demand, Supply, & Equilibrium

Demand is the quantity of the good buyers Demand is the quantity of the good buyers wish to purchase at each conceivable price wish to purchase at each conceivable price

Supply is the quantity of a good sellers wish Supply is the quantity of a good sellers wish to sell at each conceivable priceto sell at each conceivable price

At the equilibrium price, the quantity At the equilibrium price, the quantity demanded just equals the quantity supplied demanded just equals the quantity supplied

04/09/2304/09/23 77

Economic Objectives of Health Economic Objectives of Health CareCare

Efficiency : consumer satisfaction Efficiency : consumer satisfaction maximized at least cost to society maximized at least cost to society

_ effectiveness (effective HC is about _ effectiveness (effective HC is about improving health status). CEA/CUA/QALYimproving health status). CEA/CUA/QALY

_ operational efficiency asks the question, _ operational efficiency asks the question, given that some activity is worth doing, given that some activity is worth doing, what is the best way of providing it what is the best way of providing it

_ allocative efficiency judges whether an _ allocative efficiency judges whether an activity is worth doing. (CBA) activity is worth doing. (CBA)

04/09/2304/09/23 88

Economic objectives (contd.)Economic objectives (contd.)

Equity : HC resources and benefits should Equity : HC resources and benefits should be distributed in some fair or just way.be distributed in some fair or just way.Basic types of HC Basic types of HC

_ libertarian values consumer sovereignty _ libertarian values consumer sovereignty and market forces and market forces

_ egalitarian is committed to the pursuit of _ egalitarian is committed to the pursuit of community healthcommunity healthIn setting the objectives, both efficiency In setting the objectives, both efficiency and equity must be taken into account and equity must be taken into account

04/09/2304/09/23 99

Economic Development & HealthEconomic Development & Health

ED refers to an historical process that has ED refers to an historical process that has many aspects including economic, many aspects including economic, demographic & health.demographic & health.

To arrange nations on a scale from poor To arrange nations on a scale from poor (less developed) to rich (developed). And the (less developed) to rich (developed). And the process by which poor nations become richerprocess by which poor nations become richer

Health development is the process by which Health development is the process by which populations move from a lower level to a high populations move from a lower level to a high level of health.level of health.

04/09/2304/09/23 1010

Consumption and Health Consumption and Health

HC :- Responsibility of the state HC :- Responsibility of the state

Private consumption patterns Private consumption patterns

Public consumption patterns Public consumption patterns

Developed nations spend 7 to 15% of Developed nations spend 7 to 15% of GDPGDP

Developing nations spend 3 to 6% of GDPDeveloping nations spend 3 to 6% of GDP

Foreign aid Foreign aid

04/09/2304/09/23 1111

Concepts of Economic Efficiency Concepts of Economic Efficiency Economic analysis/the evaluation of HS Economic analysis/the evaluation of HS Are limited resources used in the best ways Are limited resources used in the best ways possible?possible?Is value for money achieved in their use?Is value for money achieved in their use?It is necessary to have a clear understanding It is necessary to have a clear understanding of objectives, evaluative criteria, of objectives, evaluative criteria, measurement & valuation techniquesmeasurement & valuation techniquesInput, process & outcomeInput, process & outcomeInput, resources & costs Input, resources & costs Outputs, health & health indicators Outputs, health & health indicators

04/09/2304/09/23 1212

Hospital Economics Hospital Economics

Hospitals of developing countries utilize Hospitals of developing countries utilize nearly half of the total national expenditure nearly half of the total national expenditure for the health sectorfor the health sector

Hospitals account for 50 t0 80% of Hospitals account for 50 t0 80% of government recurrent HS expendituregovernment recurrent HS expenditure

Hospitals use a large proportion of the most Hospitals use a large proportion of the most highly trained health professionals highly trained health professionals

For obtaining additional resources insurance For obtaining additional resources insurance and user fees are seen the meansand user fees are seen the means

04/09/2304/09/23 1313

Resource Management by Resource Management by HospitalsHospitals

Poor management leads to wastage of Poor management leads to wastage of resources resources

Economic concepts – efficiency Economic concepts – efficiency

_ technical efficiency (mix of inputs) _ technical efficiency (mix of inputs)

_ economic efficiency (least-cost combination _ economic efficiency (least-cost combination of the inputs) of the inputs)

_ scale efficiency (whether a system is _ scale efficiency (whether a system is producing services at least cost)producing services at least cost)

_ efficiency relationships_ efficiency relationships

04/09/2304/09/23 1414

Resource generation for hospitalsResource generation for hospitals

User charges User charges

Insurance Insurance

Defining the role of hospitals Defining the role of hospitals

Improving information about hospitalsImproving information about hospitals

Developing hospital performance indicators Developing hospital performance indicators

Enhancing hospital management capacityEnhancing hospital management capacity

04/09/2304/09/23 1515

WE LIVE IN A WORLD OF DISTURBING WE LIVE IN A WORLD OF DISTURBING CONTRASTSCONTRASTS

3/4ths of the world’s people live in developing 3/4ths of the world’s people live in developing countries enjoy only 16% of the world’s income countries enjoy only 16% of the world’s income

More than 17 M people die every year from More than 17 M people die every year from infectious & parasitic diseases(D,M,TB) infectious & parasitic diseases(D,M,TB)

More than 90% of HIV infected cases live in More than 90% of HIV infected cases live in developing countrydeveloping country

Resources to be generated by cutting excessive Resources to be generated by cutting excessive military spending & privatizing inefficient pub. military spending & privatizing inefficient pub. enterprisesenterprises

Challenges: reducing pop. growth, providing basic Challenges: reducing pop. growth, providing basic social servicessocial services

04/09/2304/09/23 1616

Healthcare ExpenditureHealthcare ExpenditureHC system absorb 8% of the total world productHC system absorb 8% of the total world productIndustrial countries spend 90% of this amount, Industrial countries spend 90% of this amount, with average per capita exp. of $1500 on HC as with average per capita exp. of $1500 on HC as compared to $41 in developing countriescompared to $41 in developing countriesIndia spends 1.6% of GDP (even lower prop. India spends 1.6% of GDP (even lower prop. spent on PHspent on PHThe institutional base is weak, NGO’s are The institutional base is weak, NGO’s are underutilized, & finally pvt. sector is gigantic, underutilized, & finally pvt. sector is gigantic, virtually completely unregulated & offers some of virtually completely unregulated & offers some of the best & worst care seen anywhere. the best & worst care seen anywhere.

04/09/2304/09/23 1717

INVESTING IN HUMAN DEVELOPMENTINVESTING 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 justComponents of Human Development paradigm:Productivity, Equity, Sustainability, Empowerment

04/09/2304/09/23 1818

MANAGED CAREMANAGED CAREDeveloped in response to ever increasing HC Developed in response to ever increasing HC

costscostsImportant Tools of MC:Important Tools of MC:

For managed demandFor managed demand1.1. CapitationCapitation2.2. GatekeeperGatekeeper3.3. Advice line to patientsAdvice line to patients4.4. User feesUser fees5.5. Consumer educationConsumer education

For medical managementFor medical management1.1. Utilization reviewUtilization review2.2. Preadmission certificationPreadmission certification3.3. Greater use of cl. PathwaysGreater use of cl. Pathways

04/09/2304/09/23 1919

Managed Care (Contd.)Managed Care (Contd.)

HC system can be grouped intoHC system can be grouped into4 archetypes:4 archetypes:Socialized medicine (UK)Socialized medicine (UK)Socialized insurance (Canada)Socialized insurance (Canada)Mandatory Insurance (Japan)Mandatory Insurance (Japan)Voluntary Insurance (USA)Voluntary Insurance (USA)An integrated & virtual system (brought about by An integrated & virtual system (brought about by Disney & Microsoft). With this system service Disney & Microsoft). With this system service can be provided any where, anytime by HC can be provided any where, anytime by HC provider.provider.Informed ConsumerInformed Consumer

04/09/2304/09/23 2020

INVESTING IN HEALTHINVESTING IN HEALTH

PRIRITY AREAS FOR FUTURE ACTIONPRIRITY AREAS FOR FUTURE ACTION::

Ensuring value for moneyEnsuring value for money

Poverty reductionPoverty reduction

Public health policyPublic health policy

Strengthening national capabilities for Strengthening national capabilities for emergency reliefemergency relief

Emphasis of long-term & comprehensive Emphasis of long-term & comprehensive strategiesstrategies

Investing in health should be considered Investing in health should be considered as an investment in HRD to enhance as an investment in HRD to enhance productivity.productivity.