Health Economics- Lecture Ch01

8/3/2019 Health Economics- Lecture Ch01

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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

Documents

Health Economics- Lecture Ch01