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Samenvatting - Economics And Financing of Health Care Systems (GW4568M)
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ECONOMICS AND FINANCINGPlenary meeting 1.
Introductievideo’s:
Health economics analyses the allocation of resources to and within the
health sector. Because this sector has become the largest sector of many
countries’ economies and its share of GDP is expected to continue to
grow, we should not be surprised that health economics has emerged as a
distinct specialty within economics.
Health economics provides tools to understand difficult tradeoffs involved
in organizing the allocation of healthcare resource, which may help to
improve health policy and health system design
The relevance of health economics:
The economic organization of healthcare systems had a significant
impact on the efficiency and equity of healthcare allocation
Health care is a large and expanding sector of national economics
o Health care growth has outgrown the economies
Health care is not a regular commodity. It is widely considered a
right, not a privilege.
o Privilege: special entitlement to immunity provided to a
restricted group, on a conditional basis after birth.
o Right: inherited invocable entitlement, by all citizens, all
human beings, from the moment of birth.
o WHO: health care is a right. fundamental human
right.
ensuring that all people can use services they need, of sufficient quality
to be effective, while ensuring that the use does not expose the user to
financial hardship.
(Affordable Care Act)
Specific features of health care can easily result in market failure
well as in government failure.
o Health care is not a regular economic good!
Health care had many distinctive features, but is not unique in any of
them. What is unique is the combination of features and even the sheer
number of them
- Features:
o Presence and extent of uncertainty (market failure is likely)
o Problem of information (conflicting interests)
o Presence of insurance
o Large role of nonprofit firms
o Restrictions on competition: not allowed
o Importance of equity and solidarity (anderen betalen voor
jouw zorg, gebeurt niet in een andere sector)
o Government subsidies and public provision
, o Ethical concerns
Market failure: individual’s pursuit of self-interest leads to outcomes that
can be improved upon from societal point-of-view.
- Caused by uncertainty, risk-bearing third parties and asymmetric
information, externalities.
The government can try to correct market failure by public provision,
regulation but the fact that in can intervene in the healthcare system does
not always mean that it will succeed in doing so.
- Caused by information, coordination, and motivation problems.
Universal access and efficiency how to avoid market and government
failure.
Reasons for expansion:
- Ageing of populations
- Advancing medical science and technology
- Shift towards chronic diseases
- Increasing welfare: meer geld, meer naar zorg.
- Expanding health insurance coverage: reduced prices for individuals
- Flawed incentives
Baumol’s cause disease
Health care is becoming more expensive than agriculture. The reason: the
productivity like persons in health care and education is higher: cannot be
automized. Productivity cannot really increase. Demand of healthcare is
unlikely to decline, despite the increasing cost price.
Is health spending growth sustainable? No.
It can harm the economy.
Taxes are higher = more labor costs = less competitiveness.
Other public services can be crowded out by increasing public health
spending.
How to pay for spending growth?
Ensuring value for money.
Midterm: topics 1-9. MC. 10% 16 SEPT
PLENARY MEETING 2
Demanding health care is not for fun, it only generates utility if it improves
health or quality of life.
The demand for health care is derived for demand for health.
Health production function: health care, nutrition, schooling, prevention.
What makes health care different?
o It has no utility in itself, but only if it can improve health.
, o Demand for health care is often not well defined: people are
uncertain about what and how much care they need.
o Health is also an investment good
o The price plays a limited role. People are well insured.
People typically pay only part of the price and do not
even know the true price.
o Health care demand is not independent from health care
supply
Doctors can shift the demand curve for health care:
supplier-induced demand
How to explain the demand for health care?
Three basic models:
1. The medico-technical model: the doctor is in the lead professional
model
Consumer demand is determined by medical experts.
o Health care providers act as perfect agents on behalf of their
patients
o Patients have uniform preferences and fully comply with the
decisions made by their providers (no uncertainty)
o Providers know with certainty the results of their decisions
One determent: NEED. It’s clear what the patient needs,
how much it needs. The price is inelastic. You get the
amount of care prescribed by the doctor.
Critique: the model are violated. Doctors are
not perfect agents, there is no certainty,
consumers do not have uniform preferences,
consumers do not fully comply, and consumers
are not insensitive to prices.
2. The neo-classical model: the patient or consumer is in the
lead economical model
Consumer demand is determined by consumers themselves to
maximize utility subject to a budget constraint, having
perfect information.
o Consumers are sovereign and rational
o Consumers have predetermined and ordered
preferences
o Consumers know with certainty the results of their
consumption decisions.
Critique: in health care assumptions about consumer
behavior are violated:
o Consumers are not sovereign and are dependent on
the physicians judgement. Consumers do not have
predetermined and well-ordered preferences with regard to
, medical care. Consumers do not know the certainty. It does
not reflect the value.
The medico-technical and the neo-classical model aren’t valuable to
health care.
3. The imperfect agency model: demand is determined by doctors
as well as patients. Information is part of the transaction health
care model.
Information is part of the transaction between doctor and patient.
Demand is partly consumer initiated and partly provider initiated.
Providers act as an imperfect agent: own interests (income, status,
may conflict)
This results in:
Patients demand curve may not reflect how they really value health
service.
Overprovision (supplier-induced demand) or under provision of care
may occur.
Utility theory: determinants of health care demand according to the
utility theory.
- Consumer demand is determined by consumers who maximize
utility subject to a budget constraint.
- Assumptions:
o Consumers prefer more above less,
marginal utility of consumption>0
Marginal utility: the additional
satisfaction or benefit that a
consumer derives from buying an
additional unit of a service.
o Consumers have predetermined and
ordered preferences
o Consumers know with certainty
the results of their consumption
decisions
Key determinants:
- Needs: positions of indifference curve
- Wants: slope of indifference curve
- Budget: position of budget restriction
o Budget=price * quantity of HC +
price* quantity of OG.
o B=Phc* HC + Pog * OG
o HC= (Pog/Phc)*OG + B/Phc.
- Prices of health care and other good
Are consumers sensitive to health care prices?
Consumers typically pay only part of the price, because of health insurers.
Prices are not unimported though. Changing the price consumers must
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