Summary Economics and Financing of Health Care Systems (GW4567M)
By Merel Buiter
October 2023
Includes preparatory videos, lectures, lecture notes, highlights of the mandatory literature,
kahoot/menti questions and discussions.
,Week 1
,Meeting 1 Course overview & Is health care really different?
Explain the relevance of health economics.
Analyze the causes and consequences of the expansion of the healthcare sector.
Explain what makes health care different and infer the implications thereof.
Video lecture 1a health economics and expansion of the healthcare sector
“Health economics studies the allocation of resources to and within the health sector” -
(Folland, Goodman & Stano, 2017).
Provides concepts and tools to understand difficult trade-offs involved in organizing
the allocation of healthcare resources, which may help to improve health policy and
health system designs.
Economics applies to health care, but this was questioned – e.g. demand response for
mental care: curves are similar to economic curves with downward sloping: those facing
higher prices, demand less care (might not be applicable in e.g. emergency situations).
Healthcare resources are scarce and are produced and distributed.
Relevance of health economics – economic organization of healthcare systems has a
significant impact on the efficiency and equity of healthcare allocation (e.g. introduction of
regulated competition is based primarily on publications of healthcare economics), health
care is large and expanding sector of national economies, health care is not a regular
commodity; it is widely considered a right, not a privilege, specific features of health care
can easily result in market failure as well as in government failure.
Healthcare spending is growing faster than our economies.
In 2008 and 2009 there was a decrease in spending – when economy doesn’t go well,
they spend less on healthcare.
Reasons for expansion of health care expenditures:
- Ageing of populations
- Advancing medical science and technology
- Shift towards chronic diseases
- Increasing welfare (more money available a larger share goes to medical care)
- Expanding health insurance coverage (moral hazard)
- Flawed incentives
- Baumol’s cost disease*
*Labor intensive services like health care are becoming more expensive compared to
products of other industries, this is because productivity of workers in service provision
cannot increase at the same pace as compared to that of workers in other industries,
increase in wages cannot be earned back by increase in productivity, demand for healthcare
is unlikely to decline despite the increase in cost price government interference.
Increasing health spending may significantly harm the economy, higher taxes and premiums,
means higher labor costs, means less competitiveness. Increasing public health spending
may crowd out other public services. But how do we pay for spending growth?
, Video lecture 1b healthcare: right or privilege
Health care is not a regular economic commodity; it is widely considered a right, not a
privilege.
Privilege: special entitlement to immunity
granted to a specific group.
Right: inherent, irrevocable entitlement
by all citizens from the moment of birth.
WHO definition of universal health
coverage speaks of “all people”
fundamental human right, also embodied
in national constitutions.
Three dimensions of universal coverage:
entire population, care based on need
and quality, not composed to financial
hardship.
Video lecture 1c health care’s distinctive features
“Specific features of health care result in market failure leading to government
Health care is not a regular economic good – it has 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” (Folland, Goodman and Stano).
- Presence and extent of uncertainty
- Problems of information
- Presence of insurance
- Large role of nonprofit firms
- Restrictions on competition
- Importance of equity and solidarity
- Government subsidies and public provision
- Ethical concerns
Weakened price effects because of premiums, moral hazard. Information allocation
not divided equally. High amount of uncertainty since you’re not guaranteed of a
good outcome.
Market failure vs government failure – the government can try to correct market failures by
public provision, redistribution, and regulation but the fact that it can intervene in the
healthcare system does not always mean that it will actually succeed in doing so
Fear of government failure – Obamacare, more government in the system
Universal access and efficiency – how to realize solidarity and how to organize an efficient
provision and financing of health services and systems.
Lecture did not discuss any new subjects, and is therefore not included.
Meeting 2 Demand for health care
