Health Economics

Health economics is a branch of economics concerned with issues related to efficiency, effectiveness, value and behaviour in the production and consumption of health and health care.
In broad terms, health economists study the functioning of health care systems and health- affecting behaviour such as smoking.
It is the discipline of economics applied to the health care.

1. HEALTH ECONOMICS Ms. Sharon Treesa Antony Assistant Professor Govt. College of Nursing Alappuzha

2. Health It is a state of complete physical, mental and social well being and not merely the absence of disease or infirmity.

3. Economics Economics is the study of wealth. - -Adam Smith

4. Health economics Health economics is a branch of economics concerned with issues related to efficiency, effectiveness, value and behaviour in the production and consumption of health and healthcare. Lee & Mills

5. HEALTH ECONOMICS DEALS WITH- Allocation of resources between various health activities. Quality of resources used in health-care The efficiency with which the resources are allocated & used for health-care purpose. The effects of comprehensive health services on individual and society. It covers the medical industry as a whole and also extends the economic analysis to costing of disease, benefits of a health programmes and returns from investments. How best the limited resources be used on preventive, curative and rehabilitative services to maximise the health status of a community. Allocation of financial, physical and human resources between different activity with in a hospital. How to promote the efficiency of the health sector.

6. Purpose To study the pattern of allocation of budget effectiveness and efficiency To study health expenditure v/s health status Evaluation of health services Improve collaboration between different administrations To extract maximum benefits from health industry with least cost combination

7. Importance Health and economic development Planning finance aspect of health system Health manpower planning and Demand Analysis Examines the situation where the resources available to us are limited, the alternative uses for these resources are unlimited Promote efficiency and equality in health care sector by providing analytical techniques to decision makers. Organization of health care investment

8. Terminologies in health economics     GNP : is the gross income generated within the country and income received from abroad GDP: it is the gross income generated within the country excluding the money from abroad

9. Poverty line: It is the level of income needed to meet the minimum standard of living. C urrently, poverty line in India is Rs.32 and Rs.47 in rural and urban areas respectively. Per capita income: It is also known as income per person. It is the mean income of people in an economic unit such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or gross national income) and dividing it by the total population.

10. Demand: An economic principle that describes a consumers desire and willingness to pay a price for a specific good / service. Supply : A fundamental economic concept that the total amount of a specific good or service that is available to consumers. Scarcity: When demand overcomes the supply, the scarcity arise Cost: cost refers to the amount of money spent on health services under the various heads of account.

11. Areas of health economics   Cost of health care: Cost of healthcare include all those services or facilities to promote human well being. Health problem: The study of health economics also concentrates on health as an important economic indicator of economic development. It deals with the correlation between health industry and economic development.

12. Demand of health care: Demand refers to desire accompanied by ability to pay and willingness to pay for a product or service in a market. The demand may be elastic or inelastic. For example, the demand for medicines has inelastic demand as it is necessary product which saves life.

13. Cont.. Supply analysis in health care: Supply refers to anything material or non-material which is offered for sale at a particular level of price and at a given period of time. Supply depends on many factors such as price, cost of production, Government policy, demand etc. The healthcare services like hospital, dispensaries etc are all included in the boundary of study of health economics. It also explains the supply of medicines, services of nurses, existence of blood banks, lab testing equipment etc.

14. Health care services market: Market is an economic environment where buyers and sellers of goods and services interact for purchase and sale for mutual benefit. Market is extended forms local to international and covers almost all the goods ( both private and public goods) and services which are consumed directly or indirectly. The scope of Health Economics explains how the market for health services work.

15. Health plans and outlays: One of the primary motives of every country is to give primary importance to health services to make citizen healthy both physically and mentally . For that each country prepares its own plan about the possible health care programs for human wellbeing. For instance, a percentage of expenditure is given for healthcare industry through five year plans. Financing for health care industry: Financing here refers to money invested in health care services. Financing means creation and investment of funds in creating various health care amenities. Health economics studies the various sources of finance available for health industry.

16. Optimum utilization of resources: The optimum allocation of resources is an important element of health economics. As every investor or facilitator expects maximum benefit with minimum cost , the resources play a major role in deciding the path of progress. The resources in health industry include all those men and material used to promote health.  

17. The elements of health economics Microeconomics Macroeconomics

18. Microeconomics : That is how individual choose , minimise cost or maximise profit or utilises with in a given health care system with in a set of rules and prices. Supply and demand influences each other , in turn affect prices . An increase in or over supply of certain products lead to less overall consumption (decreased demand) & lowered prices.  

19. Macroeconomics : It is a study of aggregate national income and expenditure, aggregate demand and consumption aggregate investment level in both private and government sectors.  

20. Cost of healthcare Demand of healthcare Supply of healthcare

21. Cost of healthcare Cost refers to the expenses incurred by the producer to produce goods and service. Objectives of costing: To know whether a commodity or service is worth producing at a given cost or not To ascertain the money value of a product To forecast whether a particular investment should or should not be made To predict the profit of the business concerned To see that whether it is possible to produce with the existing resources

22. Types of cost: Total cost : The various costs related to health care are the money the Govt. spends on health care facilities, costs of identifying & treating diseases, costs of equipments, costs of building & other facilities, treatment charges etc. The sum total of all the costs is known as total cost. It is divided into; Fixed cost : Do not increase due to increase in various functions or activities. Eg ; cost of building, cost of x ray machine etc. Variable cost : Vary with the amount of service rendered. Eg;cost of x ray films according to no. of x rays taken. . Opportunity cost : It is used to describe the loss to the community due to failure to use the available resources/ technologies or institutions in the best possible way.

23. Cont.. Capital cost Represents expenditure of a capital nature: Eg : expenses for hospital building, machines Operating cost: These are the recurring expenses which are occuring from time to time in running the programme . Eg : For providing required items in achieving the particular task Marginal cost: The cost of producing extra unit of service

24. Cost related to heath problem Avoided cost; Cost caused by a health problem or illness which are avoided by a health care intervention. Direct cost: Those cost borne by the health care system, community and patient’s families in addressing the illness. Indirect cost; Mainly productivity loses to society caused by the health problem or diseases. Cost-effectiveness; given output. Cost of illness; The personal cost of acute or chronic disease. This cost may be an economic, social or psychosocial cost or personal loss to self, family or community.

25. Demand of healthcare An individual’s demand for a good is the various quantities of goods and services that the customer is willing and able to buy at each specific price. The demand for healthcare is a derived demand from the demand for health. The demand for health is unlike most other goods because individuals allocate resources in order to consume and produce health.

26. The health care is both a consumption good that yields satisfaction and utility and an investment good which yields satisfaction to consumers indirectly through increased productivity, fewer sick days and higher wages. The demand for healthcare service is uncertain, irregular and unpredictable Illness is costly in itself, when a person is ill he can not go out for work and loses pay in addition to cost of treatment Health care industry produces some external benefit ie , when the consumer engage in an action it yields benefits to the third party. Eg . Immunization – benefits the recipients as well as the society by having reduced probability of getting that disease

27. Government health services are offered at minimal cost and in some cases, the government or private organization agrees to pay a portion or full amount of a bill which is not true for other services. There is uncertainty regarding the outcome. So the fee given is for a service and not for performance.

28. Factors affecting demand for healthcare Patient factors Physician factors

29. Patient factors Health status Demographic characteristics Age, late marriages, educational status Economic standing Its importance in determining medical care demand has dimnished with the increasing publicity of insurance packages.

30. Physician factors Physician acts as advisor to the patients and provider of services !!!!

31. Supply of health care Supply means the quantity of goods the producers wish to offer for sale at a particular price. Health care industry market is regulated by the govt through agencies like Medical council of India, INC etc to ensure quality Health care costs and education costs are subsidized by the govt. In some cases the govt provide incentives to receive the services. Eg : Family planning Advertising and price competition in health care industry are prohibited Govt. hospital are run as non profitable organisation

32. Economic evaluation Economic evaluation is the comparative analysis of alternative causes of action in terms of both their costs and consequences in order to assist policy decisions - Drummond et al,1997

33. Types of Economic Evaluation Cost minimization analysis (CMA) Cost effectiveness analysis (CEA) Cost utility analysis (CUA) Cost benefit analysis (CBA)

34. Cost Effectiveness Analysis (CEA) CEA is a ratio of the difference in costs to the difference in effectiveness of the interventions under consideration. When different health care interventions are not expected to produce the same outcomes both the costs and consequences of the options need to be assessed . This can be done by cost-effectiveness analysis, whereby the costs are compared with outcomes measured in natural units-for example, per life saved, per life year gained, and pain or symptom free day.

35. Cost minimization analysis T his approach compares the costs of alternative forms of treatment or management that produce equivalent health outcomes. It is a specific type of economic evaluation in which outcomes of competing interventions are the same, in which the only inputs that is cost is taken into consideration. Aim is to decide the least costly way of achieving same outcome . Cost minimization analysis is an appropriate evaluation method to use when the need for an intervention has been established and the programmes and procedures under consideration are expected to have the same or similar outcomes . In these circumstances, attention may focus on the cost side of the equation to identify the least costly option . It is regarded as a narrow form of cost effectiveness analysis.

36. 3.Cost utility analysis A special form of cost -effectiveness analysis Measures the effect of an intervention on health units that measures both quantity and quality of life Measures the quality of life, not just the numbers of years lived in a particular health state Eg : QALY

37. 4 . Cost benefit analysis Here, the benefit is measured as the associated economic benefit of an intervention and hence both costs and benefits are expressed in monetary values. In cost-benefit analysis (CBA), costs and benefits are both valued in cash terms It provides a broader comparison between alternative programmes . This allows to assess whether program is economically sound or worthwhile.

38. Cost containment   The process of controlling the expenses to operate an organization/ to perform a project with in pre planned budgetary constraints.

39. Strategies Reducing need for services Primary and secondary prevention Health promotion and education Patient safety and reduced medical error Modifying consumer demands High deductible plans: Low monthly premium payment and increased amount the patient has to pay for care. Progressive cost sharing: sharing the cost of care by insurer and patient Modifying providers behaviour Pay for performance for reimbursement based on the quality of structure, process and outcome standards of care Bundled payment: Providing the health care provider with the cost of health care of a patient for a specific episode of care as a single payment Instrumental measures Electronic health record Clinical effectiveness and cost effectiveness research

40. Family budgeting in health and illness A family spends its money effectively to safeguard their health and welfare. The family can practice health economics in the family in the following ways: Obtain health insurance Follow healthy lifestyle Seek consultation from health care provide, when ill. Routine immunization

41. ECONOMICS OF ILLNESS IN THE FAMILY When serious illness or disability strikes a person, the family as a whole is affected by the disease process and by the entire health care experience. Patients and families have different needs for education and counselling. When a family member becomes ill, other family members must alter their lifestyle and take on some of the role functions of the ill person , which in turn affects their own normal role functioning.

42. Factors influencing economic problem The extent of family disruption depends on the seriousness of the illness the family’s level of functioning before the illness, socioeconomic considerations the extent to which other family members can absorb the role of the person who is ill.

43. Steps for good home economics (cost containment strategy at home) 1. Record expenses. 2. Make a budget. 3. Plan on saving money. 4. Set savings goals. 5. Decide on priorities. 6. Different savings and investment strategies for different goals. 7. Make saving money easier with automatic transfers. 8. Watch your savings grow

44. Record expenses The first step in saving money is to know how much you’re spending. For one month, keep a record of everything you spend. That means every coffee, every newspaper and every snack you purchase for the entire month. Once you have your data, organize these numbers by category—for example, gas, groceries, mortgage and so on—and get the total amount for each.

45. Make a budget Now that you have a good idea of what you spend in a month, you can build a budget to plan your spending, limit over-spending and make sure that you put money away in an emergency savings fund . Remember to include expenses that happen regularly, but not every month, like car maintenance check-ups.

46. . Plan on saving money Taking into consideration your monthly expenses and earnings, create a savings category within your budget and try to make it at least 10-15 percent of your net income . If your expenses won’t let you save that much, it might be time to cut back. Look for non-essentials that you can spend less on—for example, entertainment and dining out—before thinking about saving money on essentials such as your vehicle or home.

47. Set savings goals Setting savings goals makes it much easier to get started. Begin by deciding how long it will take to reach each goal. Some short-term goals (which can usually take 1-3 years) include: Starting an emergency fund to cover 6 months to a year of living expenses (in case of job loss or other emergencies Saving money for a vacation Saving to buy a new car Long-term savings goals are often several years or even decades away and can include: Saving for retirement Putting money away for your child’s college education

48. Decide on priorities Different people have different priorities when it comes to saving money, so it makes sense to decide which savings goals are most important to you

49. Make saving money easier with automatic transfers Automatic transfers to your savings account can make saving money much easier. You choose how often you want to transfer money and which accounts you want to use for the transfers.

50. Watch your savings grow Check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly. With these simple ways to save money, it may even inspire you to save more and hit your goals fast.

51. RESPONSIBILITY OF NURSE 1. Teaching Make the family part of your teaching plan. For example, if your patient’s wife does all the cooking in the home, it is vital to include her in diet teaching. Involving family members may be an important future source of support for the patient as he or she works at behavioural change. 2. Counselling 3. Recognize changes Long-term illness, even in the most stable and supportive families, brings changes in family relationships. Illness produces disequilibrium in the family structure until adjustments can occur.If the nurse does not recognize the change, what it might mean to the patient and family, and how it might affect the patient’s willingness and ability to carry out health care recommendations, the goals of the teaching process will be diminished.

52. 4. Identify patterns of relationships When teaching the patient and family, it is important to identify patterns of relationships and to be alert to attitudes of family members. You may be able to identify resources within the group and help family members mobilize their resources to help the patient. 5. Identify resources A nurse may be able to identify resources within the group and help family members mobilize their resources to help the patient. It’s also important to be alert to some of the factors in family members that act as a barrier to education. Illness in a family member tends to raise the anxiety of all those close to the patient.

53. Thank you !!!