Review of Lecture 1

What is health economics?

health economy ..the entire configuration of actors and

behaviour (action & interaction) mechanisms that produce health

Consumers: self-manage (produce) their health & purchase

healthcare services from providers Providers: Provide healthcare services to consumers and are either paid directly by them or by someone else Financiers: Provide insurance to consumers (if private in return for premiums) and pay providers for healthcare services Government: Often pays for healthcare services, at times provides it directly, and always regulates the behaviour of consumers, providers, and financiers

On with rest of Topic 1

Relevance of health economics?

Importance of health (individually & in aggregate) living longer is increasingly dependent on timely and appropriate use of healthcare services ..which require resources Size of health economy and growth trends Health expenditures

as share of GDP as share of government expenditures as share of personal expenditures increase over time

Employment & capital

Economics of health care use & delivery

Price, access, quality Choice of treatment
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New Zealand: General Government Expenditure (2006)

Social protection, 26%

General public services, 13% Defence, 3%

Education, 19% Economic affairs, 10%

Public order and safety, 5%

Recreation, culture and religion, 3%

Health, 17%

Environmental protection, 3%

Housing and community amenities, 2%

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Household spending in NZ
Average weekly household expenditure on health Table 1(3) HES
$20.00 $15.00 $10.00

$5.00
$0.00 2006/07 2009/10 Medical products, appliances, and equipment Out-patient services Hospital services
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Average weekly household expenditures Table 2 HES

Other Miscellaneous expenditure, goods and $97 services, $92

Education, $17
Recreation and culture, $99

Alcoholic beverages, tobacco, and illicit drugs, $29 Housing and Clothing and footwear, $31 household utilities, $253

Communicatio n, $36

Transport, $131

Household contents and services, $45 Health, $24

Share of health in GDP (%)

17 15 13 11 9 7 5 3 Australia New Zealand United Kingdom Canada Norway United States Denmark Spain Germany Sweden

Health system indicators

(per 1,000 population) - 2009
18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

Physicians
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Nurses

Hospital beds

A Guide to FGS Chapter 1

What is health economics
The relevance of health economics Economic methods and examples of analyses Does economics apply to health & healthcare

Is healthcare different? TOPIC 2 (next)

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2: Characteristics of health & healthcare

ECON 350 ST

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Health economics health & healthcare

Health economics is primarily about the economics of

healthcare services, i.e.

the demand for it, its production and supply, insurance, the market, and

government role in the market

BUT.the scope of health economics is expanding with

increasing focus on the economics of the underlying rationale for healthcare - health production Why the wider lens?
Life style diseases (cancer, heart attacks, diabetes, stroke)

due to health behaviours smoking, substance use, eating and physical activity disorders
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New Zealand Health Strategy (2000)

The 13 population health objectives are to:
reduce smoking
improve nutrition reduce obesity increase the level of physical activity reduce the rate of suicides and suicide attempts

minimise harm caused by alcohol and illicit and other drug use to both

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individuals and the community reduce the incidence and impact of cancer reduce the incidence and impact of cardiovascular disease reduce the incidence and impact of diabetes improve oral health reduce violence in interpersonal relationships, families, schools and communities improve the health status of people with severe mental illness ensure access to appropriate child health care services including well child and family health care and immunisation.

The theory of the epidemiologic transition

1.

The Age of Pestilence and Famine - when mortality is

high and fluctuating, thus precluding sustained population growth. In this stage the average life expectancy at birth is low and variable, vacillating between 20 and 40 years.

2.

The Age of Receding Pandemics - when mortality

declines progressively; and the rate of decline accelerates as epidemic peaks become less frequent or disappear. The average life expectancy at birth increases steadily from about 30 to about 50 years. Population growth is sustained and begins to describe an exponential curve.

3.

The Age of Degenerative and Man-Made Diseases - when mortality continues to decline and eventually
approaches stability at a relatively low level. The average life expectancy at birth rises gradually until it exceeds 50 years. It is during this stage that fertility becomes the crucial factor in population growth.

134.

The Age of Delayed Degenerative Diseases when

there is delay in the ages at which degenerative diseases kill

What is health?
Survival (avoiding mortality) disease & injury free

(avoiding morbidity) healthy life (having vitality, energy) IN THAT ORDER

World Health Organization (1948 constitution) defines good

health as: A state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity
Health = physical health + psychological (mental) health Survey measurement (HrQoL health-related quality of life)
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self-assessment of different physical, psychological, social domains

EQ5D: mobility, self-care, usual activities, pain/discomfort,

EuroQol EQ-5D
Please tell me which answer best describes your own health state today: Circle/check mark your response Mobility 1. I have no problems in walking about 2. I have some problems in walking about 3. I am confined to bed

Self-Care 1. I have no problems with self-care 2. I have some problems washing or dressing myself 15 3. I am unable to wash or dress myself

EuroQol EQ-5D
Usual Activities (e.g. work, study, housework, family or leisure activities) 1. I have no problems with performing my usual activities 2. I have some problems with performing my usual activities 3. I am unable to perform my usual activities

Pain/Discomfort 1. I have no pain or discomfort 2. I have moderate pain or discomfort 3. I have extreme pain or discomfort
Anxiety/Depression 1. I am not anxious or depressed 2. I am moderately anxious or depressed 16 3. I am extremely anxious or depressed

EQ-VAS thermometer
I'd like you to try to picture in your mind a scale that looks a bit like a thermometer. The best health state you can imagine is marked 100 (one hundred) at the top of the scale and the worst state you can imagine is marked 0 (zero) at the bottom.
1. I would now like you to tell me the point on this scale where you would put your own health state today. (Note respondents can respond with ANY number between 0 and 100) Score:

2. Now I would now like you to tell me the point on this scale where you would put your own health state over the last 4 weeks. (Note respondents can respond with ANY number between 0 and 100)
Score:
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What is physical health (PH)?

The human body
Cells (adults ~ a trillion cells) & tissues (epithelial, connective, muscle, nerve) Organ systems (skeletal, muscular, circulatory, nervous, respiratory,
digestive, excretory, endocrine, reproductive, lymphatic/immune)

http://www.innerbody.com/htm/body.html

An economist perspective: human body is a stock that

produces a flow of services

Complexity of Information
Each element is (potentially) measurable Each is a piece in a larger puzzle (organ system & body) The condition of the body reflects interaction of its parts with

competitive, collaborative, and compensatory aspects

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What is mental health?

Mental health is described by WHO as:

... a state of well-being in which the individual realizes his or her own abilities, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to his or her community (WHO 2001a, p.1).
DSM (Diagnostic and Statistical Manual of Mental Disorders) orientation
Comprehensive approach based on subjective well-being Hedonic (feelings of happiness, satisfaction, and interest in life) Eudaimonic (effective functioning as an individual and in society) psychological well-being (self-acceptance, personal growth,

purpose in life, positive relations with others, autonomy, and environmental mastery) social well-being (social integration, social contribution, social coherence, social actualization, and social acceptance) 19 Perhaps simpler set = happiness, satisfaction, resilience (stability) self-

Characteristics of physical health

Complex, changing, susceptible & adaptable, imperfectly observed
Complexity Changing
Predictably - growth, aging, eventual death Unpredictably - illness, injury

Susceptibility & Adaptability

Organic and in an organic environment therefore susceptible But evolution has crafted biology to be adaptable to changes

internal & external

Imperfect observability of true health status (biological)
Observe only markers - of outward appearance, symptoms,

and functioning.
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Economics of health
Health production = f(biology, normal health

inputs, healthcare inputs)

3 factors with economic significance
Limited observability of health, and health

production Uncertainty primarily regarding disruptions in normal health but also individual-specific timing of predictable pattern of aging Involvement of others primarily in healthcare, but also in normal health production (in very early years and in old age)
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