HIM002/APT2: ANALYSE
THE ECONOMIC CONTEXT
OF HEALTH(CARE)
INNOVATION
All learning team meetings, trainings & lectures
,Introduction to health and economics thinking
Analyse of the economic context of health(care) innovation, 13-09-
2024
Economic = the science of scarcity.
- How are choices structured and prioritized to maximize welfare within constrained
resources?
- Focused on maximum value for money
Life expectancy vs. health expenditure
Health economics
Health economics include economic evaluation (is more
than economic evaluation), optimal hospital funding,
incentives for providers, competition in health care, co-
payments, incentives for healthy behavior .
Healthcare challenges
- Efficiency = equity
o Doing the right things in the right way = fairness in payments and access
Definition of efficiency
- Rooted in economics theory
- How are choices made by individuals and society?
- Doing the right thins in the right way
- The relation between:
o Resource inputs (costs in terms of labour, capital, equipment, etc.)
o Intermediate outputs (number of persons treated, waiting times, etc.) or final
health outcomes (lives saved, life-years gained, etc.)
,Efficiency in healthcare
- Technical efficiency
o Maximum possible is obtained from a set of resource inputs
o Outputs cannot be produced with fewer resources
o Opportunity: reduce wase
- Productive efficiency
o Maximization of health outcome for a given cost, or minimization of cost for a
given outcome
o Outputs cannot be produced at lower costs
o Opportunity: save money
- Allocative efficiency
o Resources are allocated according to needs/preferences to maximize welfare
o No person can be made better off without making someone else worse off
o Opportunity: maximize social value
Examples
A. Excessive length of scale = technical à not questioning inputs
B. Cardiac defibrillator for low-risk patients = allocative
C. Excessive costs for health service = productive
D. Unused medical equipment = technical
E. Wrong scale and scope of hospitals = allocative
F. PET scan instead of standard imaging = productive
Equity in healthcare
- Rooted in social justice
- What is accepted to be fair?
à hard to define, possible in many ways:
- Equal ‘chance’ of treatment
- Equal treatment for equal need
- Equal resources per capita
- Equal waiting time per ‘condition’
- Most widely defined as: “Receiving according to the health needs, and paying
according to the ability to pay”
Dimensions of equity in health care
- Vertical equity = unequal
individuals are treated unequally
with respect to the inequality
- Horizontal equity = equal
individuals being treated equally
- Equity in financing = paying
according to ability to pay
- Equity in access = receiving
according to health needs
Examples
A. Sophie earns the same as Talib, but has private health insurance that covers all
expenses, while Talib relies on public health insurance with high co-payments = equity
in financing, vertical equity
B. Maram earns more than James but both pay 10% of their income for healthcare =
finance, vertical
, C. Carlos lives in a large city with multiple hospitals, while Ana, who lives in a rural area,
must travel over 100 miles to see a specialized hospital treatment = equity in access,
horizontal equity
D. Amal, single mother on low income, has a health insurance plan with co-payments,
while Michael, an executive with a higher income, has immediate access without any
payments = equity in finance & access, vertical
Equity is more than equality
- Equity is concerned with ‘fairness’ and ‘justice’
- It may not necessarily entail equality e.g. minimum standards of care, positive
discrimination, etc.
Health economics field
Healthcare peculiarities
- Uncertainty
o Person buys health insurance, without knowing if they’ll need medical treatment
o Patient agrees to have the surgery but is not sure if that will improve his health
- Information asymmetry
o Patient doesn’t understand the side effects of a medication, and the physician
explains
o Physician recommends surgery, but the patient doesn’t fully understand what
the risks are
- Externalities
o Patient getting a flu vaccine helps prevent the spread of illness to others
- Dual providers’ role
o Physician prescribes medicines, which patients buy in the pharmacy owned by
the physician
- Licensing
o Dentist is required to pass government-approved exams to practice legally
THE ECONOMIC CONTEXT
OF HEALTH(CARE)
INNOVATION
All learning team meetings, trainings & lectures
,Introduction to health and economics thinking
Analyse of the economic context of health(care) innovation, 13-09-
2024
Economic = the science of scarcity.
- How are choices structured and prioritized to maximize welfare within constrained
resources?
- Focused on maximum value for money
Life expectancy vs. health expenditure
Health economics
Health economics include economic evaluation (is more
than economic evaluation), optimal hospital funding,
incentives for providers, competition in health care, co-
payments, incentives for healthy behavior .
Healthcare challenges
- Efficiency = equity
o Doing the right things in the right way = fairness in payments and access
Definition of efficiency
- Rooted in economics theory
- How are choices made by individuals and society?
- Doing the right thins in the right way
- The relation between:
o Resource inputs (costs in terms of labour, capital, equipment, etc.)
o Intermediate outputs (number of persons treated, waiting times, etc.) or final
health outcomes (lives saved, life-years gained, etc.)
,Efficiency in healthcare
- Technical efficiency
o Maximum possible is obtained from a set of resource inputs
o Outputs cannot be produced with fewer resources
o Opportunity: reduce wase
- Productive efficiency
o Maximization of health outcome for a given cost, or minimization of cost for a
given outcome
o Outputs cannot be produced at lower costs
o Opportunity: save money
- Allocative efficiency
o Resources are allocated according to needs/preferences to maximize welfare
o No person can be made better off without making someone else worse off
o Opportunity: maximize social value
Examples
A. Excessive length of scale = technical à not questioning inputs
B. Cardiac defibrillator for low-risk patients = allocative
C. Excessive costs for health service = productive
D. Unused medical equipment = technical
E. Wrong scale and scope of hospitals = allocative
F. PET scan instead of standard imaging = productive
Equity in healthcare
- Rooted in social justice
- What is accepted to be fair?
à hard to define, possible in many ways:
- Equal ‘chance’ of treatment
- Equal treatment for equal need
- Equal resources per capita
- Equal waiting time per ‘condition’
- Most widely defined as: “Receiving according to the health needs, and paying
according to the ability to pay”
Dimensions of equity in health care
- Vertical equity = unequal
individuals are treated unequally
with respect to the inequality
- Horizontal equity = equal
individuals being treated equally
- Equity in financing = paying
according to ability to pay
- Equity in access = receiving
according to health needs
Examples
A. Sophie earns the same as Talib, but has private health insurance that covers all
expenses, while Talib relies on public health insurance with high co-payments = equity
in financing, vertical equity
B. Maram earns more than James but both pay 10% of their income for healthcare =
finance, vertical
, C. Carlos lives in a large city with multiple hospitals, while Ana, who lives in a rural area,
must travel over 100 miles to see a specialized hospital treatment = equity in access,
horizontal equity
D. Amal, single mother on low income, has a health insurance plan with co-payments,
while Michael, an executive with a higher income, has immediate access without any
payments = equity in finance & access, vertical
Equity is more than equality
- Equity is concerned with ‘fairness’ and ‘justice’
- It may not necessarily entail equality e.g. minimum standards of care, positive
discrimination, etc.
Health economics field
Healthcare peculiarities
- Uncertainty
o Person buys health insurance, without knowing if they’ll need medical treatment
o Patient agrees to have the surgery but is not sure if that will improve his health
- Information asymmetry
o Patient doesn’t understand the side effects of a medication, and the physician
explains
o Physician recommends surgery, but the patient doesn’t fully understand what
the risks are
- Externalities
o Patient getting a flu vaccine helps prevent the spread of illness to others
- Dual providers’ role
o Physician prescribes medicines, which patients buy in the pharmacy owned by
the physician
- Licensing
o Dentist is required to pass government-approved exams to practice legally
