The Burgeoning Health Sector

An Introduction
arnab@iimb.ac.in

Wednesday, June 23, 2021 Arnab Mukherji HE:TPFM 1

 “Greatest wealth is health”… Virgil

• Health care needs arise

At beginning and end of life
During life as well

• Economic well being ↔ Health

• We explore
Why are there differences in levels of health?
Role of health systems in managing this link
How to think about Markets in “Health”
Analytic/Economic tools for Analysis
“Congruence of Complexity”

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 A number of open questions …

• How do we finance healthcare for the poor?

• How should the sector adapt to changing lifestyles and demographic

profiles?

• How should we expand health infrastructure? Doctors? Nurses?

Pharmacists? Labs?

• Integrating informal healthcare providers?

• Controlling counterfeiting of drugs and securing its distribution?

• Pricing of pharma drugs to ensure access and encourage innovation?

• Managing quality & access across the sector (public, private, and informal)

The list of open question is pretty endless …

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 In this course …

• We are going focus on

Health systems in India

Discuss this from a Comparative perspective

Develop Revisit relevant concepts from Economics for modeling and

evaluating

• Thus we develop
Institutional and Policy Knowledge

Economic Tools

• Goal: understand incentives and dynamics in the Health Sector

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 Health-Wealth “Caribbean Pirates Style”
• The earliest form of health protection was accident protection
for pirates that precisely defined how health losses were valued
and compensated:
Loss of right arm = 600 pieces of eight

Loss of left arm = 500 pieces of eight (note bias)

Loss of right leg = 500 pieces of eight

Loss of left leg = 400 pieces of eight

Loss of eye or finger = 100 pieces of eight

Loss of both legs or arms = 800 pieces of eight & a slave

Source: Cordingly (1997)

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 Raises a financing question …

• Who pays these pieces of eight?

• More generally (outside of the Pirate Code):
Preventive question:
• How does one think of maintaining health? Can we buy care (goods and
services) to prevent ill health?

Curative question:
• How does one think of curing illness? Can we buys care to return to good
health?

Institutional question:
• What kind of a marketplace allows for efficient and equitable access to
goods and services for health/health care

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 Cross-Country Health Narrative

• Gapminder Session:

Plot 1: PCY vs Total Health Spending (HE)

Plot 2: PCY vs Government Share of HE

Plot 3: PCY vs Out-of-Pocket Share in HE

Plot 4: HE vs Life Expectancy (next slide)

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 Poor Performance even among peers

Life Expectancy Vs Current health

expenditure per capita 2018

Log (Life Expectancy at birth (Years))

MDV
LKA CHN

BGD RUS WLD

BTN
NPL
IND
PAK MMR

AFG ZAF
1.8
1.5 1.75 2 2.25 2.5 2.75 3 3.25
Log (Current health expenditure per capita)

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 Poor Performance even among peers

Life Expectancy Vs Per Capita Life Expectancy Vs Current health

Medical Spending 2016 expenditure per capita 2018

2 2
Log (Life Expectancy at birth (Years))

Log (Life Expectancy at birth (Years))

CHN MDV MDV
LKA BRA LKA CHN
BGD RUS
NPL BTN BGD RUS WLD
IND BTN
PAK NPL
IND
AFG ZAF PAK MMR

AFG ZAF
1.75 1.8
1.5 1.75 2 2.25 2.5 2.75 3 3.25
1.5 1.75 2 2.25 2.5 2.75 3
Log (Current health expenditure per capita)
Log (PC Medical Spending)

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 Thus …

• We not only want to understand the relationship between health and

income, but also need to understand why spending the same level of

income in India leads to lower than predicted outcomes?

• The logically next step is to ask – is this something we can fix? If so,

how … ?

• One trivial way to think about this is in terms of production functions

of health (or is it healthcare)?

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 Markets for Automobiles and Healthcare
Vary significantly on how they operate and compete across countries

Complex
Demand and
sectoral inter-
Uncertainty
linkages

Supply
Externalities
structures

Competitive
Markets and
Welfare
Implications

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