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DEFINITION OF HEALTH ECONOMICS: WHAT IS HEALTH ECONOMICS?

Health economics can be defined as an area of applied economics that studies the economic aspects of healthcare production and consumption. In determining the ways to improve the outcome of healthcare and related lifestyle patterns that affect health, health economics assesses the behavior, values, efficiency and effectiveness of both healthcare providers and consumers. It also assesses how healthcare providers, consumers and clinical settings interact with each other and determines the ways to improve the effectiveness of these interactions. In broad terms, the application of health economics allows healthcare experts and economists to systematically and rigorously examine the challenges in effective delivery of healthcare to people (consumers).

The main objective of health economics is to understand the behavior of healthcare providers, consumers, organizations and the government in healthcare decision-making by applying relevant economic theories of production, consumption, competition, efficiency, disparities, regulation and social choice. Application of these theories helps decision-makers in determining the most efficient, equitable and cost-effective course of action. The study of these actors and their economic behavior also helps in the promotion of positive health outcomes and healthy lifestyle which can minimize the instances of diabetes, obesity and smoking related diseases.

Another significant area of health economics is the promotion of public health activities for which it applies economic principals to meet global challenges such as pandemics, vaccine access, injuries, migration and climate change. Research in this area generally involves the study of appropriate pricing, assessment of new healthcare technology, strategic behavior, antitrust policy, and optimum levels of public and private investment.

DISTINCTIVE CHARACTERISTICS OF HEALTH ECONOMICS

The evolution of health economics as a separate discipline is credited to the prominent economist Kenneth Arrow whose path-breaking article in 1963 highlighted the conceptual differences between health and other consumer goods. According to Arrow there are several factors and characteristics such as high government intervention, unmanageable uncertainties in various aspects, skewed information, externality, the inevitable presence of third-party agents, and barriers to entry that distinguish health economics from other fields of economics.

The third-party agent here is the insurer who bears the cost of healthcare consumed by the insured patient. Uncertainty is integral to health both in terms financial and health outcomes. This is because the expenses a health issue demands and whether using a healthcare service will improve the patient’s condition can never accurately be predicted. Skewed or unbalanced information results from the massive gap in knowledge that exists between the consumer and the provider such as a physician which creates significant advantage for the latter.

Externalities which impact third parties are frequent in health economics, more so in dealing with the infectious diseases and the issue of substance. Here, a significant part of the cost is borne and decision-making is handled by the government or its agencies. Lastly, there are three main types of financial data that health economists deal with—prices, charges and expenditures against the common price evaluation which is used in other types of economic studies. It can easily be noticed here that none of these characteristics apply to other applied fields of economics. In all or at least most other areas the major actors are just the producer, consumer and the market dynamics.

PRINCIPLES OF HEALTH ECONOMICS

In the area of public health, health economics is seen as one of the several disciplines that can be used in the analysis of health and healthcare delivery systems because it provides a number of analytical methods for research in this area. In the extensive and broad domain of economics it is seen as one of the many areas in which economic theory, principles and methods can be applied. Thus, describing the principles of health economics simply means describing those principles of economics which are relevant to the economic aspects of health and healthcare. Like any other area of economics, health economics also deals with the basic questions of what to produce, how to produce, and for whom to produce. In answering these questions it is only understandable that it applies the same set of analytical methods and principles that are applied to the analysis of any other commodity produced by the economy. The economic principles applied here include:

PRODUCTION: The concept of production is essential to all economic activities. Economics sees health and healthcare just the way it sees any other manufactured or produced goods and service. Therefore, in line with the general economic principle, health economics also defines production as the process of transforming resources such as raw materials and labor into finished goods.

RESOURCES: Resources are the inputs to the production process and generally include people (labor), raw materials, land, and buildings and equipment (capital). In healthcare the input refers to doctors and other healthcare professionals, healthcare facilities and therapeutics which deliver the output (finished goods) in the form of a desirable quality of health. How these resources are used to deliver the output depends on the production process which in healthcare terms can be the type of organization (public or private) and the type of technology used.

SCARCITY: One of the key principles of economics is that resources are limited or scarce in quantity for any given point of time but the desired quantity of output for the same point of time has no bounds. The scarcity of resources and the unquantifiable demand for goods are the forces that drive all economic activity and pose the questions of what, how and for whom to produce. The fact that inputs (doctors, therapeutics, etc.) are scarce and the demand for health services is significantly higher explains why healthcare can be seen as any other goods.

OPPORTUNITY COST: The economic concept of opportunity is based on the principle of scarcity of resources which makes it necessary to choose from the available options to allocate them and produce goods. As a basic assertion, the opportunity cost, which is the foregone benefit or utility from not choosing the other options, cannot be avoided. This principle is of great importance in health economics because the chosen and foregone goods can have significant impact on health outcome, and thus diligent analysis of all alternatives must be conducted to reduce the opportunity cost as much as possible.

DEMAND & SUPPLY IN HEALTH ECONOMICS

To understand the demand for healthcare it is important to understand first that it has some distinct characteristics that separate it from other goods. A critical distinction is that unlike other goods healthcare is not pleasurable in itself. It does not give the pleasure for instance, like wearing new clothes or eating in a restaurant do. The demand of healthcare is driven rather by the need to improve health and it hardly gets slowed down because of the unpleasant nature of healthcare delivery (drugs, painful injections, hospitalization, etc.). However, healthcare does have some very close similarities with consumer goods; it is wanted by consumers, it can be manufactured, it is scarce, and people are willing to pay a price for it. This means that even though the demand for healthcare can be studied just as for other commodities, its peculiarities restrict the use of common assumptions about the effect of market demand on resource allocation.

The supply of goods is analyzed using two different but interrelated methods. The first method analyzes the relationship among inputs, outputs and costs within a firm. This analysis highlights the issues of production efficiency, economies of scale, productivity, and factor substitution. The second method analyzes the structure of the market in terms of the number of suppliers and their behavior regarding price, output and profit determination. It uses the theoretical models of market structure such as perfect competition and monopoly to analyze the behavior of different types of healthcare organizations and providers. Using these models makes it relatively easy to determine how providers including pharmaceutical manufacturers, dentists, ophthalmologists and profit-making insurers control the supply of healthcare. The supply is also heavily regulated by the government through policies to apply competitive pressure and market forces which can help in enhancing efficiency.

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health economics assignment help online

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APPLIED ECONOMICS ASSIGNMENT HELP:

Applied Economics utilizes core economic theories and econometrics to address existing economic problems. It reduces the abstraction of core economics and provides a more practical approach to understand and solve problems related to the economy. Applied Economies is used to solve issues in a variety of fields. These fields include:

BEHAVIOURAL ECONOMICS ASSIGNMENT HELP:

Behavioral Economics studies the behavior of individuals and organizations and its impact on economic decision making. Behavioral factors include:

Behavioral Economics state that every human being is irrational and incapable of taking the right decision. It studies the reason between such irrational behaviors. For example, an individual might think about career options, saving options, which phone to buy, retirement plans. Behavioral economics tries to explain why an individual favors one option over the others. Companies have started to implement behavioral economics to increase sales of products and goods.

For example: Amazon might sell an iPhone through their online vendors for 800$ but decrease the price to 720$ during Amazon Prime Day Sale. The consumer feels that the offer is a good deal that cannot be missed and ends up falling into the temptation.

Behavioural economics include the following:

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