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students wonder exactly what health economics is. is it about money in health, more health for the same money ? about health in hospitals or health of the country.
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Dr (Gp Capt retd) Suchitra Mankar MD
Health Economics
Economics - definition
• Best use of available resources against competing demands - attain given goals.
• Resources- six Ms• Economics –macro; micro; managerial.
Economics
• Macro - GDP; percentage expenditure; policy; universal coverage; national programs; fund allocation; budgeting; equality; equity; access etc
• Micro- cost per unit; utility; break even point; cost of package etc
• Managerial tools to analyze for microeconomics
Health Economics-Defn
• A branch of economics concerned with issues related to allocation of resources for health and health care
• Also referred to as health financing• Manpower, time and money key issues• More money for health; more health for the
money!
Why study Health Economics?
• Benefits of economic growth-well known • Determinants of economic growth– labour force – Physical capital– technological change – the quality and quantity of labour (human capital)• extent of education• level of its health
• Healthier workers -work longer, more productive
• Healthy children better learning abilities & better educational outcomes
• Higher incomes permit better nutrition, better health care and, presumably, achieve better health
• Health Economy
• A thousand rupee increase in per capita health expenditure would lead to a 1.3% increase in LEB
• A 10% increase in per capita income is required to increase the LEB by about 2%.
Why is health so important?
Prevention
Treatment
PaymentFertility
DyingNutrition
Sanitation
Technology Health
What is human development?
• Difference between development and growth• Development for us to achieve goals of humanity, our
own ambitions and what we are all about.• For this we need education, health, social security,
comfort etc.• HDI –more to life than income..GDP and HDI position
is not the same
Scope of Health economics • Factors influencing health (other than health care) • Definition of health and its value • The demand for health care • The supply of health care • Microeconomic evaluation at Treatment level • Market Equilibrium• Evaluation at whole system level; and, • Planning, Budgeting and monitoring mechanisms.
Macro HE
• Who is covered• What services are covered; • How much of the cost is covered. • How funds are to be raised and administered• Broad picture –for direction
• Taskforce on Innovative International Financing for Health Systems, US$ 44 per capita (unweighted) in 2009, ; US$ 60 per capita by 2015
Data on Macroeconomic Health Expenditure Indicators-India
• Data now easily available– Enables better understanding– Policy direction– Weightage– Comparison across years and across ccountries
Total Health Expenditure as % of GDP
1999 2001 2003 2005 2007 20093.6
3.8
4
4.2
4.4
4.6
4.8
India Total health expenditure (THE) % Gross Domestic Product (GDP)
India Total health expenditure (THE) % Gross Domestic Product (GDP)
http://apps.who.int/nha/database/ChoiceDataExplorerRegime.aspx
Year wise Government vs Private expenditure as % of THE
1999 2001 2003 2005 2007 20090
10
20
30
40
50
60
70
80
90
India General government expenditure on health (GGHE) as % of THE
India Private expenditure on health (PvtHE) as % of THE
Total/Govt/Pvt expenditure on Health
1999 2001 2003 2005 2007 20090
500000
1000000
1500000
2000000
2500000
3000000
Total expenditure on healthGeneral government expenditure on healthPrivate expenditure on health
Financing Agents
Ministry of H
ealth
Social se
curit
y funds
Private in
surance
Non-profit in
stitutions s
erving households (e.g. N
GOs)0.00
40,000.00
80,000.00
120,000.00
20012009
Indian Scenario
• Total Health expenditure increasing • Private sector 70-80%• Insurance and Social security increasing• Equity, access, responsiveness of care • Microeconomic policies can be planned
Micro HE
• Study of how individual units of production consumption and industry act and react to change in the macro picture.
• Hospitals, patients, processes, machines, drugs etc
Characteristics of Health Care Industry
• Capital Intensive• Long gestation periods• Dynamic, interactive, intangible • Manpower Shortage• High Obsolescence Costs• Complex Business Model– high risk environment involving human lives – managing doctor &-corporate management
interface
Managerial economics
• Resources- Highest output• Objectives- Minimum Resources• Objectives and resources-Highest utility• Utility- capacity to satisfy human need.• Tools to aid decision making– Cost analysis– Production analysis– Utility Analysis
Costs
• Opportunity Cost• Sunk Costs• Life cycle costs• Incremental costs• Marginal Costs• Variable Costs, fixed Costs• Direct costs, Indirect costs
Analysis Tools
• Cost effectiveness• Cost benefit• Production Curves• Equi marginal utility• Indifference curves• Time dimension– Decisions in time– Money value over time
Managerial Health Economic Evaluations
• Cost Minimization Analysis• Cost Effectiveness Analysis• Cost Benefit Analysis• Cost Utility Analysis
Cost Minimization Analysis
• It is based on prior epidemiological findings. The technique identifies the least cost intervention.
• If health effects are known to be equal, only costs are analyzed and the least costly alternative is chosen.
Cost Effectiveness Analysis
• Cost-effectiveness analysis (CEA) is a technique for selecting among competing wants wherever resources are limited.
• Developed in the military, CEA was first applied to health care in the mid-1960s and was introduced to clinicians by Weinstein and Stason in 1977
• CEA compares alternatives and measures (in natural units) the primary objective of the program (i.e. morbidity reduction, life years saved, functional ability on a scale).
Cost Effectiveness Analysis
• A new strategy is compared with current practice (the "low-cost alternative") in calculation of the cost-effectiveness ratio
• CE ratio = Cost of new strategy- cost of existing strategy/ effectiveness of new- effectiveness of old
• Cost effective does not mean that the strategy saves money
• CEA is only relevant if the new strategy is both more effective and more costly
• For simplicity, we will assume that doing nothing has no cost and no effectiveness.
Cost Effectiveness Analysis
Cost Effectiveness Analysis
• To lengthen life in patients with heart disease- aspirin and blockers vs the more complex, more expensive, and more effective (e.g., medication plus cardiac catheterization, angioplasty, stents, and bypass).
• CEA is about marginal/ incremental) costs and benefits.
• CBA estimates and totals up the equivalent money value of the benefits and costs to the community of projects.
• Jules Dupuit, a French engineer proposed this in an article in 1848
Cost Benefit Analysis
• All aspects of the project- positive or negative must be expressed
• If benefits not expressable in rupees, some value that the beneficiaries consider as good must be considered
• Money must be expressed with time
Cost Benefit Analysis
Cost Benefit Analysis
• In cost benefit analysis objectives can be questioned.
• Establishing a service, a department, full time employees etc
Cost Utility Analysis
• It is a form of cost effectiveness analysis • Preferred when there are multiple objectives of
a program, when quality of life is an important outcome, and when quality of life and quantity of life are both important outcomes.
• Allows comparison of different health outcomes (prolongation of life, relief of suffering, blindness) by measuring them all in terms of a single unit — QALY.
• Limitation- QALY is partly subjective
• QALY should be meaningful, valid, reliable, relevant to the population in question
Cost Utility Analysis
•Marginal utility•Diminishing Marginal utility•Equi Marginal utility•Indifference Curves
UTILITY ANALYSIS
PRODUCTION ANALYSIS
• LAW OF VARIABLE PROPORTIONS• LAW OF RETURN TO SCALE• PRODUCTION ANALYSIS– PRODUCTION POSSIBILITY ANALYSIS– ISO-COST / ISO-QUANT ANALYSIS
Problems of Economic Evaluation
• “Efficient is not always sufficient” as the sole criterion for decision making.
• The economic evaluation techniques are used inappropriately to impose judgments of specialists on the whole community.
Conclusion
• Study of Health Economics essential for planning and evaluation
• While complex problems may be worked out by experts, decision makers require a sound understanding of health economics fundamentals
• More health from the money and more money for health- Economic Imperative
Questions
