Chapter 2-Introduction To Health Economics

DIPLOMA OF HEALTHCARE
MANAGEMENT
DHM 2133
HEALTH ECONOMICS
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DHM 2133
Lecture by: LALITA
ANBARASEN
CHAPTER
2:INTRODUCTION TO
HEALTH ECONOMICS
Health Care
Health care is an output in which certain inputs or factors of production are combined in varying
quantities—usually under a physician’s supervision.
The inputs include provider services, medical equipment, and pharmaceuticals.
Much of the difficulty in measuring the healthcare process stems from the issue of quality and
intensity.
Quality
Quality is a broad term and is elusive in its meaning (Donabedian, 1988).
For example, organizations can have very different structural characteristics. They can differ in
the training of their staff or their equipment.
They can also differ in their processes of delivering health care, such as the amount of personal
attention paid to providing care to individuals.
The third set of characteristics includes outcomes, such as the accuracy of the diagnoses and the
techniques in treating the person and its impact on health status.
This includes facility mortality and morbidity rates, and rates of adverse events such as
infections or other complication rates due to a particular episode of care received. All of these
aspects are considered aspects of quality.
The challenge, then, is in choosing the particular aspect of quality to measure. For this
reason,“visits” should only be cautiously used as a measure of physician care.
Despite this challenge, physician visits are used as a measure of medical care and hospital
admissions are used as a measure of output of hospital services—mostly due to their being
readily available.
Outputs
Output measurements are usually conducted to make comparisons, either against other output
measures or against some standard measure.
There are two types of output comparisons: time series and cross-sectional comparisons.
A time series comparison measures the output of the same commodity at different times, and
cross-sectional comparisons measure many different outputs (e.g., health care provided by
different providers or in different sociodemographic groups) during the same time period.
Health care output can be measured at three sources:
1. The providers can determine the amount of health care that they produce.
2. The payers can determine the amount of healthcare expenditures.
3. The consumers can determine the amount of health care consumed and the quality of the
care consumed. With perfect measurement, data from all three sources would be consistent.
However, due to different data sources and difficulty in measuring health care, substantial
variation among the sources arises.
An alternative way to measuring physician output is to focus on procedures or services.
Procedures, such as tonsillectomies, can be measured in a number of ways.
The Economy and Health
1. Health plays a major role in the socio-economic development of a people. Health can no
longer be seen as bye-product of develop but rather a pre-condition for economic
development. The health sector is just one of the components of the economic system;
every sector of the economy has a bearing with the health sector and can not be
underestimated for socio-economic development.
2. Economic development requires a healthy workforce. Try and imagine a workforce where
about a third of them are ill at the same time, you know that in that situation productivity
will be low. Improvement in health status of a country represents both gains in welfare and
an investment on the countries future growth.
3. Healthy people are more productive, perform better in learning and can work to make
income. Unhealthy people may not be able to work to have income and if they work will be
less productive. You know that a nation with large number of unhealthy people will be
required to spend much money on health care and have little for other activities. Poor health
therefore lowers prospects of development for a nation.
4. Also, economic development is usually followed by changes in production which have positive
impact on the health of the population, although economic development does have negative
impact on health too. Certain diseases like cardiovascular diseases and cancers are commoner in
well developed countries than in the less developed countries mainly because of change in
lifestyle resulting from economic development. For example consumption pattern changes with
economic development. Obesity is usually a significant public health problem of developed
countries whereas malnutrition is a problem of underdeveloped countries. Generally economic
development has more positive than negative effect on the health of people. Economic
development makes more money available to the health sector for provision of services.
5. Health is higher on the international agenda than ever before. Concern for the health of poor
people is a central development issue. In addition to its intrinsic value on individuals, investment
in health is an important and previously underestimated means of economic development.
Substantially improved health outcomes are a pre-requisite if developing countries are to break
out of the cycle of poverty.
Thank you

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DIPLOMA OF HEALTHCARE

Intellectual Property Rights

The inputs include provider services, medical equipment, and pharmaceuticals.

Quality is a broad term and is elusive in its meaning (Donabedian, 1988).

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