BY SAHAR AHMED DEWEDAR

ASSISTANT PROFESSOR OF PUBLIC HEALTH ASU

The need for health economics

Economics, Health and Health Economics

What is economics? What isn’t economics? What is “Health”? What is “Health Economics”? Uses of health economics in disease measurements Uses of health economics in health care evaluation

Economic Definition. The Economics is the science that deals with the consequences of resources scarcity.

The discipline of economics deals with use of scarce resources to satisfy human wants and needs how best to use the resources available.

Economics is a social science that studies how individuals and organizations in society engage in the production distribution and consumption of goods and services.

Types Of Economics

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.

We can measure that by some studies such as market , pilot and feasibility studies.

Types Of Economics

Macroeconomics:- is the study of aggregate economic activities, such as: 1. The economy level of outputs; We can measure that by some variables such as; GDP, Rate of depression, Rate of slackness ..ets.

Real GDP is the market value of all final goods and services produced in the domestic economy during a one year period measured with constant prices.

Types Of Economics

Macroeconomics is the study of aggregate economic activities, such as: 2. Level of national income; We can measure that by some variables such as N.I.

National income (N.I) is the income earned by the factors of production.

Income earned of the sold or consumed GDP.

Types Of Economics

Macroeconomics is the study of aggregate economic activities, such as: 3. Level of employment; We can measure that by some variables such as the rate of unemployment.

The Rate of Unemployment is the percent of the total labor force which is unemployed.

Types Of Economics

Macroeconomics is the study of aggregate economic activities, such as: 4. General price level; We can measure that by some variables such as Inflation or Deflation Rate ets.

Inflation is the annual rate of increase in a price index.

Deflation is the annual rate of decrease in the price level.

Economic Analysis in Health Care by Morris, Devlin and Parkin © 2007 John Wiley & Sons Ltd

Production function

Outputs (Goods or services)

Inputs (Resources

)

Mediating factors

Three Major Tasks Of Economics.

i . Descriptive Economics; Refers to the identification, definition, and measurement of phenomena.

Concerned with determining the nature of the phenomena as well as obtaining estimates of their magnitudes.

No explanation.

Three Major Tasks Of Economics.

i i . Explanatory Economics; Involves explaining and predicting certain

phenomena. Conducting an analysis in a cause-effect format. Performed with the aid of models that classify various causal factors in a systematic framework (e.g. the health status and the price of the medical services).

Three Major Tasks Of Economics.

i i i . Evaluation; Involves judging or ranking alternative phenomena according to some standard.

An acceptable standard must be obtained.

Based on this standard, alternative ways of using scarce resources are then ranked.

In choosing the standard, one major criterion is acceptability.

Health economics

is a branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and health care.

In broad terms, health economists study the functioning of the health care systems as well as health-affecting behaviors such as smoking.

What differentiates health care are?

Health economics deals with a specific portion of “the”

economic problem, that concerned with health and health care.

1. The very personal and often urgent needs the service meets.

2. dealing with pain and suffering and with life and death decision.

3. access to the service is often considered to be a basic human right irrespective of ability to pay.

What differentiates health care are;

4. The many treatments are unproven. Encouraging

the move towards evidence based medicine where decisions about medical interventions will be more firmly based on research evidence about their effectiveness .

5. It is not the consumer who demands the treatment but the doctor acting as the agent of the patient which rise special problems In demand and resource allocation studies.

Basic principles of the health care services

One of the basic principles of the public health care systems is that treatment should be provided on the base of need rather than on the base of that funds are available.

And on the base of that equity should be one of the objectives of the service.

The purpose of health care is to produce an improvement in health, the maintenance of good health and or a reduction in suffering.

Basic principles of the health care services

Health care services can be bought and sold, while health cannot .Health difficult to define and even more difficult to measure .

According to the world health organization {WHO} good health is “a state of complete physical and mental well-being and not merely the absence of disease or infirmity”.

Poor health in an individual will have an impact on and may pose threats to others.

Factors that distinguish health economics from other areas

include extensive government intervention, intractable uncertainty ,several dimensions, asymmetric information, barriers, externalities and the presence of a third party agent. In healthcare, the third party agent is the physician, who makes purchasing decisions (e.g., whether to order a lab test, prescribe a medication, perform a surgery, etc.) while being insulated from the price of the product or service.

Economics is about …

Limited resources

Unlimited “wants”

Choosing between which ‘wants’ we can ‘afford’ given our resource ‘budget’

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opportunity cost • “ The value of forgone benefit which could be obtained from a resource in its next-best alternative use”.

• The aim is to choose activities where benefits outweigh opportunity cost.

Pg ‘B’ Pg ‘A’

Budget

efficiency

Efficiency = maximising benefit for resources used

Technical = meeting a given objective Efficiency at least cost (resources)

Allocative = producing the pattern of Efficiency output (supply) that matches the pattern of consumer want (demand)

Some misconceptions

Economics is … concerned with money the same as accountancy only practised by economists objective

The ‘practice’ of economics

Economics is concerned with… costs (resource use) benefits choice efficiency

Everyone… weighs the relative benefits of each course of action and choose the action which maximises well-being

Health economics ‘map’

B. What influences Health? (other

than health care)

E. Market Analysis

A. What is Health? What is it’s value?

D. Supply of Health Care

G. Planning, budgeting, regulation mechanisms

H. Micro-Economic Appraisal

C. Demand for Health Care

F. Macro-Economic Appraisal

Health economics and health measurements

researches (burden of disease)

History of Health measurements

1940s-1950s- Studies of mortality, survival. Limited medical technology. Scant literature.

1960s-1990s – Shift to a focus on health status, functional status, Detailed medical assessment, Medical technology .

1990s-present-Further shift to patient reported outcomes (PROs), shift to multidimensional (subjective). Depth of concept is lacking in 90s but begins to shift somewhat in the new century.

Categories of Patient Outcomes

Source: Acquadro et al. Value in Health 2003;5:522-531

Patient Outcomes Assessment Sources and Examples

For example,

Global

impressions Observations & tests of function

For example,

FEV1 HbA1c

Tumor size

For example,

Dependency

Functional status

Functional status Well-being Symptoms HRQL

Satisfaction with TX

Treatment adherence

Utility/preference-based measures

Clinician-Reported Patient-Reported

Physiological Caregiver-Reported

Measures of Health

Mortality-based measures death rates, life expectancies, etc.

All the familiar stuff

Measures of Health – a quick typology Mortality-based measures

death rates, life expectancies, etc.

Morbidity-based measures indicators

Indicators: › Single, countable things

Prevalence of disease C-section rates % population who exercise

Measures of Health – a quick typology Mortality-based measures

death rates, life expectancies, etc. Morbidity-based measures

indicators health status measures

disease-, organ-specific

Health Status Measures Disease-, organ-specific....

Created to be sensitive to changes in symptoms or functional impairment

due to a particular disease process

Some physician-reported, others

patient-reported Satisfaction with Treatment Treatment adherence Utility/preference-based

measurements

Measures of Health – a quick typology Mortality-based measures

death rates, life expectancies, etc.

Morbidity-based measures indicators health status measures

disease-, organ-specific QOL “generic”

Generic Health Status Measures Most famous: SF-36 health profile

One questionnaire with many questions Several questions about each of 8 different domains of health multiple scales to cover broad scope of health, not tied to one disease or organ system

Scoring:

Separate scores for each subscale or health concept

PF, RP, BP, GH, VT, SF, RE, MH PCS MCS

Outcomes from Different Perspectives

Clinical Perspective Patient Perspective

› Subjective health status › Quality of life › Satisfaction

Societal Perspective › Utilization › Cost

Data Pyramid for Population Health

explanation

Full evaluation HRQoL Indexes preference-weighted aggregate scores

summarizing overall health

Generic Health Status Profiles Vector of health status domain scales

Disease-specific Scales Do not necessarily cover all health

domains

Multitude of health indicators

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Economists view of the world… Pessimist: bottle ½ empty Optimist: bottle ½ full Economist: bottle ½ WASTED!!

Which category has the largest share of health care expenditures?

Hospital Care

Physician Care

Prescription Drugs

The demand and supply

Economic Analysis in Health Care by Morris, Devlin and Parkin © 2007 John Wiley & Sons Ltd

Number of procedures per month

Price Supply

Utilisation: observed met demands

Unobserved unmet wants

P

Q

Demand

The Six “D’s” of Outcomes Research

Death Disease Disability Discomfort Dissatisfaction Dollars

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Assessment of health effects Overview of the process:

Identification Which outcome measure is employed depends on the objective of the evaluation. This then determines the type of evaluation.

Measurement Measure effectiveness not efficacy. Measure (count) in natural physical units. Measure final not intermediate outcomes.

Valuing Human Life( examples)

One can also estimate a VHL based on the prices that people pay for safety devices that reduce the risk of death.

Price of smoke detectors vs. reduction in fire fatality risks.

Premium paid for areas with low air pollution vs. reduction in death from clean air.

Price of children’s car seats vs. reduction in auto fatalities when in use.

Requirements of health services

1. Economy. 2. Effectiveness. 3. Efficiency. 4.Value for money {VFM}. 5. Equity. 6. Ethical issues.

Requirements of health services

1. Economy; We would like the services to be inexpensive. Somebody always pays either directly or indirectly. 2. Effectiveness; We expect the service to be effective we want each procedure to produce perceptible health gains {or reductions in suffering}.

The evidence based medicine beginning to influence health care providers.

Requirements of health services

3. Efficiency; We expect our services to be efficient. If we can deliver an equally effective service in different ways then we would want to choose the least expensive.

4. Value for money {VFM}; These three requirements, economy, effectiveness and efficiency, come under the heading of value for money {VFM}.

Requirements of health services

5. Equity; Three broad ways of defining equity in health care; A. Equality of health status attained. B. Equality of use of health care {for equal need}. C. Equality of access to health care {for equal need}. Horizontal equity the principal of equal treatment for equal need.

Vertical equity provision of unequal treatment for unequal need.

Requirements of health services

6. Ethical issues; The behavior of doctors and other health care

professional and may put them into conflict with those who manage resources.

The doctor could manipulate the situation for financial gain.

The patient is protected from these abuses by the doctor's ethical and professional codes of conduct.

Conclusion Because resources are limited, health economists are concerned with determining what medical services to produce, how they should be produced, and who should receive them

As we will see in this course, the tools of economics can be applied to the health care sector to derive valuable insights about our health care system

Point of discussion

Can each group put a health care problem in his local community discussing

1- inputs of such problem 2- needed outcomes 3- factors affecting

Thank you