HEALTH ECONOMICS

Dr. NASSER AL JARALLAH

HEALTH ECONOMICS
1) 2) 3) 4) 5) 6)

INTRODUCTION TO ECONOMICS. THE BASIC ECONOMIC QUESTIONS. BASIC ECONOMIC CONCEPTS. EFFICIENCY. DEMAND AND SUPPLY ANALYSIS. THE DETERMINATION OF PRICE.

HEALTH ECONOMICS
THE ECONOMIC ANALYSIS OF PRODUCTION. 6) THE ECONOMIC ANALYSIS OF COSTS. 9) MARGINAL ANALYSIS. 10) MARKET STRUCTURES. 11) THE FIRM AND ITS OBJECTIVES.
5)

HEALTH ECONOMICS
MEASUREMENT AND VALUATION IN HEALTH CARE. 13) FINANCIAL ANALYSIS AND ECONOMIC APPRAISAL. 14) FINANCING HEALTH CARE. 15) SAUDI NATIONAL HEALTH SYSTEM. 16) STUDENT PROJECTS.
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INTRODUCTION TO ECONOMICS. 1

1.a. Economic Definition. 1.b. Three Major Tasks Of Economics. 1.c. Tools Used In Economic Analysis. 1.d. Types Of Economics.

1.a. 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.

.b. Three Major Tasks Of Economics.1

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.

.b. Three Major Tasks Of Economics.1

ii.

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).

.b. Three Major Tasks Of Economics.1

iii.

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.

c.Tools Used In Economic Analysis.1

1.

Economic Variables; Examples ( prices, costs, incomes, and quantities of commodities) Can be measured along a scale. Once appropriate unites of measurement have been chosen ( Riyals, visits, days).

1.c.Tools Used In Economic Analysis

2.

Relationships between economic variables; Relationship show how one variables changes in relation to another variable. The relationships can be specified in a causal or non-causal manner. Causal relationships if ., then.

1.c.Tools Used In Economic Analysis

3.

Graphical representation of relationships; Step function is solid line relates diagrammatically to only specified values. We can draw a continuous curve joining all the points specified in the relationship.

1.c.Tools Used In Economic Analysis

4.

The direction of the relationships; Positive relationship. Opposite or negative relationship. Non-relation or constant relationship in Y. Non-relation or constant relationship in X.

12 10 8 6 4 2 0 1 2 3 4

constant Y positive negative constant X

1.c.Tools Used In Economic Analysis

5.

The slope of the relationships; The position of the relationship; The shape of the relationships; The nature of economic propositions;

6.

7.

8.

d. Types Of Economics.1
Economics

offers an overall viewpoint about toward understanding many problems, all of which relate to scarcity in one form or another.
can be Macroeconomics or Microeconomics.

Economics

d. Types Of Economics.1
A.

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.

d. Types Of Economics.1
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.

d. Types Of Economics.1

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.

d. Types Of Economics.1

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.

d. Types Of Economics.1
B.

Microeconomics 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.

2.BASIC ECONOMIC QUISTIONS. 2.a. Economic Problem. 2.b. Health Care And Health. 2.c. The Demand For Health Care. 2.d. The Production Of Health. 2.e. The Demand For Health Care. 2.f. Requirements Of Health Services. 2.g. Health Care And Economics. 2.h. Economics And Management.

a. Economic Problem.2
Economic

problem based on that because of limited productive capabilities, there is a need to make decision about: what to produce, how to produce and the distribution of out put.

a. Economic Problem.2

Factors of production are

land, labor capital

They are the inputs necessary for the production of good and services . The terms factors of production and economic resources are interchangeable.

a. Economic Problem.2
The problem is solved by different ways. Capitalism or Free Enterprise. Socialism or Communism. Islamic or Sharia. Discussion about each one.

a. Economic Problem.2

1. 2. 3.

Health economics deals with a specific portion of the economic problem, that concerned with health and health care. What differentiates health care are; The very personal and often urgent needs the service meets. dealing with pain and suffering and with life and death decision. access to the service is often considered to be a basic human right irrespective of ability to pay.

a. Economic Problem.2
4.

5.

What differentiates health care are; 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 . 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.

a. Economic Problem.2

The UK National health service both purchasing and providing health care. In 1989 separates the functions of purchasers and providers with the aim of introducing greater incentives for efficiency and greater choice for patients with less government intervention. Highly regulated with strict guidelines.

a. Economic Problem.2

In the USA, less highly regulated, and determined by market forces. Positive economics attempts to establish cause and effect in a scientific manner. Normative economics is concerned with establishing the means by which socially desirable outcomes can be achieved. Weather the distribution of incomes and output is equitable health consequences for patients.

2.b. Health Care And Health.

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.

.b. Health Care And Health.2

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.

.b. Health Care And Health.2

Improved health care services thus provide benefits to society as a whole if they result in improved health as well as providing benefits to the individual. The role of medicine in improving the health status of the population has been exaggerated and that factors such as housing, education, diet, hygiene and standard of living have had more significant impact on levels of health than what we conventionally think of as health services.

2.c. The demand for health care

The demand for health care services will depend on the demand for health and on the perception of the link between health care and health. One complication of trying to model or predict this demand is that individuals value apparently equal health states differently. Most health care is carried out by families within the home.

c. The demand for health care.2

Health care systems may produce outputs other than health (Comfort, Security, etc). The demand for health care will also vary according to the age structure of the population.

The production of health

It is assumed that the individual seeks to maximize life time utility. Health care is only one input into the production of health. Weather privately insured or dependent upon public services, we seek a comprehensive service for examination and diagnosis.

The demand for health care

1. 2. 3. 4.

We expect to be effective public and environmental health services which will protect us from infectious diseases A diverse and sometime conflicting set of interests may happened between; Those who pay for health services. Those who provide them. Those who shape them through strategic and operational management. Those who would like to benefit from them, if necessary.

Requirements of health services

1. 2. 3. 4. 5. 6.

Economy. Effectiveness. Efficiency. Value for money {VFM}. Equity. 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.
A. B. C.

Equity;
Three broad ways of defining equity in health care; Equality of health status attained. Equality of use of health care {for equal need}. 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.

Health care and economics

1. Which goods and services to produce? E.g. How many resources should be allocated to the different specialties?. Should cosmetic surgery or infertility treatment be provided at public expense?

Health care and economics

2. How to produce the goods and services? E.g. Will the mentally ill be cared for in small community based units or in large hospitals?. What proportion of surgical procedures will be carried out on a day care basis?

Health care and economics

3. Who receives the good and services? E.g. Should the state provide health services only for the poor? When funds are scare will preference be given to patients of fund holding practitioners?

Basic economic questions

Whatever the methods of finance organization and delivery, health care systems throughout the developed world have been facing the same problems of ever increasing demand and rising costs.

Basic economic questions

This increasing pressure on resources has had many sources which include; 1. Medical advances, such as organ transplants and gene therapy, have provided new treatments and therefore created greater expectations and new needs.

Basic economic questions

2.As life expectancy increase, more resources are required for medical treatments and continuing care for the elderly.

Basic economic questions

3.Changes in family structure in the developed world mean that it is ever more likely that the elderly will not be cared for by their

Basic economic questions

4.Populations in developed countries have higher expectation about levels of health and have demanded more and better health care.

Economics and management

These days managers are required to be accountable. They have to be able to provide justification for their decisions.

Demand and Supply

In a market economy , output is distributed through a system of prices. Each good and service produced is sold to those who are willing and able to pay the market price. The market demand for a good or service is presented as a schedule which relates the number of units (quantities) that will be purchased at alternative prices, holding constant other variables that influence the purchase decision.

Demand and Supply

Change in market demand is a shift the market demand curve that results from: a change in the number of consumers in the market consumer preferences consumer money income the price of a substitute commodity the price of a complementary commodity.

Demand and Supply

Change market supply is a shift of the market supply curve that results from: a change in the number and or size of producers. a change in the technology a change in the price of a factor of a production a change in the price of other commodities used in production.