HEALTH ECONOMICS
HEALTH ECONOMICS
Sponsored by a Grant TÁMOP-4.1.2-08/2/A/KMR-2009-0041 Course Material Developed by Department of Economics,
Faculty of Social Sciences, Eötvös Loránd University Budapest (ELTE) Department of Economics, Eötvös Loránd University Budapest
Institute of Economics, Hungarian Academy of Sciences Balassi Kiadó, Budapest
HEALTH ECONOMICS
Authors: Éva Orosz, Zoltán Kaló and Balázs Nagy Supervised by Éva Orosz
June 2011
ELTE Faculty of Social Sciences, Department of Economics
Part I
Economic analysis of the health system
Week 1–7
Author: Éva Orosz
Supervised by Éva Orosz
HEALTH ECONOMICS
Contents
• Week 1: Analysis of the health system: basic concepts.
Introduction to health economics
• Week 2: Markets and market failure in health care and health insurance
• Week 3: Role of the state in health care
• Week 4: Health care financing
• Week 5: Resource allocation in health systems
• Week 6: Analysis of health expenditure
• Week 7: Health policies for sustainable financing and improving efficiency
Week 1
Analysis of the health system:
basic concepts
Introduction to health economics
Author: Éva Orosz
Supervised by Éva Orosz
HEALTH ECONOMICS
Overview
• Health economics as a discipline
• Relationships of health, health care and economy
• Health care as an economic good
• Need, demand and supply
• Components and functions of the health system
• Assessment of health system
performance: criteria, methods and
indicators
Health system is an important branch of national economies
• Spending on health services and goods
amounts to 7-15% of GDP in OECD countries
• Manpower employed in health and social
services amounts to 6–16% of the employed in OECD countries
• At micro-level: a hospital may serve as one of the most important economic organization in the given area (in terms of employment,
demand for goods produced by other economic branches, etc.)
• A driving force of innovation
Health economics as a discipline
• Analysis of health care and health
system – from the perspective of the allocation of scarce resources
– Application of methods of economics for the analysis of the health care
sector
– A multidisciplinary approach to the
allocation of health sector’s scarce
resources
Centre for Health Economics, University of York
Limitations of health economics
“A larger challenge for macroeconomic policymakers is the enormous gap that exists between the recognition of the need to achieve more effectiveness in the use of resources to achieve quality health outcomes and the knowledge base available to implement good policies to achieve these outcome ..”
(
Hsiao and Heller, 2007)
Health status, health care (spending) and the economy
Basic issues to explain and measure:
• Contribution of improvement in health to economic growth
• Contribution of economic growth to improvement in health status
• Contribution of health care to improvement in health status
• How can the performance of health system be
improved? Would higher health spending result in a higher performance?
• How does public spending on health influence
health status and economic growth?
Grossman model of inputs to and outputs from health
Healthy time Health care
Education Housing Income
Employment status Nutrition
Individual’s stock of health
INPUTS OUTPUTS
Source: (Donaldson and Gerard, 2005)
Determinants of health and health inequalities
Source: COM(2009) 567
Impact of health status on the economy – at individual level
Positive impact of improving health status / or increasing life expectancy on:
• productivity
• willingness to save
• (childhood health status on) learning capacity
and creativity
Channels through which health may influence macro and microeconomic variables
Source: IMF WP 07/13
Worsening economic conditions Decreasing health
status
Improving health status Improving economic
conditions
Productivity, supply of labour;
Education; Savings Consumption of healthy goods;
Health care; Knowledge;
Democracy
Decreasing productivity, labour supply and savings, weakening incentives for human capital
development
Scarcity; Lack of security Consumption of goods
jeopardizing health;
Environmental pollution; Risky work conditions, stress
Lower environmental pollution
Source: (Kollányi, 2011)
Manifold relationships between health status and the
economy
The impact of health systems – new research findings
• “ Health services themselves do make a difference. The evidence of this is complex but consistent, showing that around a half of life expectancy increases in recent decades stem from improved health care. ”
– Figueras, J. et al: Health systems, health and wealth: Assessing the case for investing in health systems. WHO, 2008, p.
viii.)
Demand for formal care
Demand for lay care
Felt need but unexpressed
Unfelt need
Healthy
The ”clinical iceberg” (based on Last,1963)
Source: (Black and Gruen, 2005)
Population
Felt need Demand
Felt need
Professionally defined need
Unmet need Met need Screening
Rationing
Need, demand and supply
Source: (Black and Gruen, 2005)
Excludability
Rivalry
Deniability
The nature of the goods
Public Mixed Private
– – –
+ – + – + –
+ + +
Consumer protection Policy-making
Regulation
Setting standards Quality-control
Consumer goods / providers Clinics
Hospitals
Health service providers Pharmaceuticals
Health care as economic goods
Source: (Preker and Harding, 2005)
Types of health care as economic goods
• Public goods
• Low-cost private goods
• High cost private goods (can be paid from savings)
• Catastrophically costly private goods (that may result in loss of property, grave indebtedness or even impoverishment of the families affected)
• In economic terms, most health services and goods are quasi-private or private goods.
– Externalities: private markets produce more (e.g., antibiotic resistance) or less (e.g., vaccination) than optimal for society’s welfare.
Health system and health system goals
Source: (WHO, 2006)
Stewardship
Health financing system Revenue collection
Pooling Purchasing Resource generation
Service delivery
Quality
Equity in utilization and resource distribution
Efficiency
Transparency and accountability
Health gain Equity in
health Financial protection
Equity in finance
Responsiveness
Health system functions Intermediate objectives of health
finance policy
Health system goals
Basic questions of health system analysis
• How to provide a description of a health system?
• When can a health system be considered well-functioning?
• How to assess/measure health system performance?
• How to influence the performance of a
health system?
Description of a health system: basic issues
• Who are covered by compulsory social insurance/
government programmes?
• What services are goods are included in the
service-basket of the publicly financed system in a county?
• How resources to finance health services and goods are raised?
• What payment-methods are applied to pay for services /to provides?
• What characteristics does the service provision have?
• What components of and how the health system are regulated?
• How (and whether) adequate human and material conditions of operation of the health system are ensured?
Measuring health system performance
• Performance: the extent of achievement of the basic health system goals
• Conceptual framework
– The concept of performance (and its dimensions)
– Clarifying cause-consequence relationships – Developing adequate indicators
• Information system
• Analysis, interpretation of results
• Utilisation of performance indicators in practice
• Analysis of the system of performance
measurement and its operation in practice
Criteria applied in measuring health system performance
• Improvement in health status (health-gain due to health interventions)
• Financial protection
• Responsiveness (patients’ satisfaction)
– Responsiveness can be categorised as a component of quality of care.
• Reducing inequalities (equity in health, in finance, in access to care)
• Efficiency
• Quality of care
• Saving human life (can be categorised as a component of health gain)
• Respect of human dignity (can be categorised as a component of responsiveness)
• Individual freedom (can be categorised as a component of responsiveness)
• Sustainability of financing
• Transparency and accountability of health policy / decision-making
Components of health care quality
• Structure (human resources, technology)
• Process
– Adequate and effective therapy
• provided in time and in a continuous, coordinated way
• provided in a way acceptable for the patient (ethical, acceptable waiting time, etc.)
– Patient’s safety
• Outcome (health-gain)
The definition of efficiency in health care
• Technical efficiency
– To minimize costs of producing a given output (the same outputs)
• Cost-effectiveness
– To produce a unit of health-gain (e.g. QUALY) at the lowest cost, considering the available alternative
technologies for treating a given health condition
• Allocative efficiency
– To achieve an allocation of resources where it is not possible to change the utilisation of society’s health resources in a way that to make any individual
better off without making some other individuals worse off (in terms of health-gain)
OECD conceptual framework for health care quality indicators
Source: (OECD, 2006)
Conceptual framework for evaluating technical efficiency and cost-effectiveness measures
Outcomes
Increase in the quality and length of life, etc.
Equity in access, etc.
Outputs
Number of patients treated, day beds,
in-patient admissions, etc.
Inputs
Measured in physical terms (No. Of physicians, hospital beds, etc.)
Measured in financial
terms
Cost-effectiveness
Technical efficiency
Source: (OECD, 2008)
Indicator systems: international organizations
• EU: European Community Health
• Indicators (ECHI)
• EU: Sustainable development Indicators
• OECD: Health at a Glance
• OECD Health Care Quality Indicators Project
• WHO: Monitoring and evaluation of
health systems strengthening framework
Indicator systems: country examples
• DUTCH HEALTH CARE PERFORMANCE REPORT 2008
• USA: Commonwealth Fund. ”Why Not the Best?
Results from the National Scorecard on U.S.
Health System Performance”, 2008
• United Kingdom: NHS Performance Framework
76 81 88 84 89 89
99 97
88 97
109 106
116 115 113
130 134 128
115
65 71 71 74 74 77 80 82 82 84 84 90 93 96 101 103 103 104 110
0 50 100 150
France Japan
Australia Spain
Italy Canada
Norway Netherlands
Sweden Greece
Austria Germany
Finland New
Zealand Denmark
United Kingdom Ireland
Portugal United States 1997/98 2002/03
Deaths per 100,000 population*
* Countries’ age-standardized death rates before age 75; including ischemic heart disease, diabetes, stroke, and bacterial infections.
See report Appendix B for list of all conditions considered amenable to health care in the analysis.
Data: E. Nolte and C. M. McKee, London School of Hygiene and Tropical Medicine analysis of World Health Organization mortality files (Nolte and McKee 2008).
A key indicator of health system performance:
Mortality Amenable to Health Care
Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2008
Diagnosis: causes of good/poor performance
• Context of the health system: socio- economic and political factors
• Actors of the health system
• Structural characteristics and
mechanisms of the health system
Factors amenable to health policy interventions (reforms)
• Revenue-raising
• Payment-methods of providers
• Institutional/organisational structure of service provision
• Regulation
• Changing behaviour patterns/habits/attitudes
(patients, medical personnel, etc.)
Health systems: tools, instrumental and basic goals
Source: (Hsiao-Heller, 2007)
References
• Black, N. and Gruen, R. (2005), Understanding Health Services, Open University Press
• COM(2009) 567: Commission Communication Solidarity in health: Reducing health inequalities in the EU
• Figueras,J. et al. (2008), Health systems, health and wealth: Assessing the case for investing in health systems. WHO, Copenhagen
• Folland, S. et al. (2008), The Economics of Health and Health Care (Fourth Edition), Pearson Education
• Hsiao, W. and Heller, P. (2007), What Should Macroeconomists Know About Health Policy? IMF Working Paper. WP/07613. International Monetary Fund
• Kelley, E. and J. Hurst (2006), Health Care Quality Indicators Project:
Conceptual Framework Paper, OECD Health Working Papers, No. 23
• Murray, C. – Frenk, J. (2000), A framework for assessing the performance of health systems. Bulletin of the World Health Organisation, 2000, 78(6)
• Häkkinen, U. and Joumard,I. (2007), Cross-country analysis of efficiency in OECD health care sectors: Options for research, Economics Department Working Papers, No. 554
• Smith, P.C. (ed.) (2009), Performance measurement for health system
improvement: experiences, challenges and prospects, Cambridge University Press, 2009