health economics- lecture ch01
TRANSCRIPT
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Introduction to Health Economics
Dr. Katherine Sauer
Metropolitan State College of Denver
Health Economics
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Outline:
I. What is Health Economics?
II. The Relevance of Health Economics
III. Economic Methods of Analysis
IV. Does Economics Really Apply to Health Care?
V. Is health care so different that it needs its own
branch of economics?
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I. What is Health Economics?
Health economics is the study of how (scarce)
resources are allocated to and within the health
economy.
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Who are the health economists?
- 96% hold Ph.D.s, nearly in economics
- 64% work in a university setting (24% in
econ departments, 26% in public health, 18% in
med schools)
- 15% work for nonprofit organizations and
-12% work for government (mostly federal)
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What do health economists do?
50% study the behavior of individuals
34% study the behavior of firms50% study government policies
48% study health insurance
50% study outcomes research
31% study other issues
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II. The Relevance of Health Economics
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Health Spending in the US
National Health Expenditures (NHE)
Source: Centers for Medicare and Medicaid Services , Offices of the Actuary: Data from the National Health Statistics
Group
http://www.cms.hhs.gov/NationalHealthExpendData/
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Health Care Spending as a share of GDP
Source: OECD Health Data 2008
In ashare calculation, general inflation is cancelled out.
Why has the health care share been increasing?
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Health Care and the Labor Force (2007)
Source:
BLS.gov
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Capital Investment
Source: OECD Health Data 2008
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III. Economic Methods of Analysis
A. Features of Economic Analysis
- Scarcity of societal resources
- Assumption of rational decision making- Concept of marginal analysis
- Use of economic models
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B. An Example
(1975) Milton Friedman and Simon Kuznets (both later
Nobel laureates) studied the so-called physician
shortage of the 1930s.- physicians earned 32 % per year more than dentists
- training costs were 17 % higher
- attributed part of the higher returns on investment tobarriers to entry into the medical profession
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IV. Does Economics Really Apply to Health Care?
Are health care consumers rational?
Do they calculate optimally at the margin?
Does price matter?
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The coinsurance rate is
the percent that the patient
pays out of pocket.
As the coinsurance rate
falls, people are paying
less out of pocket.
What is the impact on
utilizing services?
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V. Is health care so different that it needs its own
branch of economics?
distinctive features of the health sector:
- presence and extent of uncertainty
- prominence of insurance- information asymmetry
- role of nonprofit firms
- restrictions on competition
- role of equity and need- government subsidies and public provision