Health Economics

INTRO AND CHAPTER 1

 What is economics?

 The study of scarcity and the means by which we deal ‫ما هو االقتصاد؟‬
with this problem ‫دراسة الندرة والوسائل التي نتعامل بها مع هذه املشكلة‬

.‫ يجب اتخاذ خيارات حول كيفية استخدامها )التخصيص( يهتم علم االقتصاد بكيفية قيامنا بهذه االختيارات في سياق الندرة‬، ‫نظرًا ألن املوارد محدودة بشكل أساسي‬

 Because resources are essentially limited, choices need to

be made about how they are to be used (allocation)
 Economics is concerned with how we make these choices
in the context of scarcity.
What does economics have to do with
health and health care?

 Health economics is about the OPTIMIZATION of health

relative to other activities and making choices to employ
resources in a way that improves health status and service
delivery within the limited resources available

 Managers and policy makes rely increasingly on economic

analysis. ‫ما عالقة االقتصاد بالصحة والرعاية الصحية؟‬

‫يتعلق اقتصاديات الصحة بتحسني الصحة مقارنة باألنشطة األخرى واتخاذ الخيارات لتوظيف املوارد بطريقة تحسن الحالة‬
‫الصحية وتقديم الخدمات ضمن املوارد املحدودة املتاحة‬

.‫يعتمد املدراء والسياسة بشكل متزايد على التحليل االقتصادي‬

Section OBJECTIVES

 Explain what economics is and the problems that it seeks

to solve
 Define and apply a number of fundamental economic
concepts
 Explain why economics is applicable to health and
‫أهداف القسم‬
health care ‫اشرح ما هو علم االقتصاد واملشكالت التي يسعى لحلها‬

‫تحديد وتطبيق عدد من املفاهيم االقتصادية األساسية‬

‫اشرح سبب تطبيق علم االقتصاد على الصحة والرعاية الصحي‬

Some questions that HEALTH
ECONOMICS seek to answer
‫كأنه جابه في اختر كلهم‬
 At what level should hospital fees be set? ‫موجودين واكسبت واحد منهم‬
 Are taxes on cigarettes a useful way of promoting health through
reducing the prevalence of smoking?
 Which is the more effective method of increasing the take-up of
health services: price controls or subsidies?
 How should doctors be paid?
 Which treatments are the most cost-effective for people with HIV?
Key Terms

‫مهم جًدا‬
 Efficiency
 used to describe the relationship between inputs and outputs
 Concerned with maximizing benefits with the resources ‫الشروط االساسية‬

available or minimizing costs for a given level of benefit ‫كفاءة‬

‫تستخدم لوصف العالقة بني املدخالت واملخرجات املعنية بمضاعفة الفوائد مع املوارد املتاحة أو تقليل التكاليف ملستوى معني من‬
‫املنافع‬

‫بضائع‬
 Goods ‫مخرجات عملية اإلنتاج التي تتضمن الجمع بني املوارد املختلفة مثل العمالة واملعدات‬

 Outputs of a production process that involves combining

different resources such as labor and equipment
Key Terms

 Health sector
 Organized public and private health services ‫قطاع الصحة‬

‫تنظيم الخدمات الصحية العامة والخاصة‬

‫التحليل الحدي‬

 Marginal analysis "‫فحص املنافع أو التكاليف اإلضافية الناشئة عن وحدة إضافية الستهالك أو إنتاج "سلعة‬

 An examination of the additional benefits or costs arising from an

extra unit of consumption or production of a “good”
Key Terms

 Market
A situation where people have a demand for a good come
together with suppliers and agree on a price at which the
good will be traded ‫سوق‬

‫حالة يكون فيها الناس مطالبني بسلعة ما يجتمعون مع املوردين ويتفقون على السعر الذي سيتم تداول السلعة به‬

‫موارد‬

 Resources ‫ العمالة ورأس املال واألرض التي يتم تقييمها بشكل عام من الناحية النقدية‬:‫املدخالت في عملية إنتاج البضائع مصنفة إلى‬

 Inputs into the process of producing goods

 Classified into: labor, capital and land
 Generally valued in monetary terms
Key Terms

 Utility
 The happiness or satisfaction an individual gains from ‫جدوى‬

consuming a good ‫السعادة أو الرضا الذي يكسبه الفرد من استهالك سلعة‬

‫ زاد استعدادهم إلنفاق دخلهم عليها‬، ‫كلما زادت املنفعة التي يستمدها الفرد من استهالك سلعة ما‬

 The more utility an individual derives from the consumption of a

good, the more they would be willing to spend their income on
it
What is economics?

 The study of scarcity and the means by which we deal

with this problem

 Because resources are essentially limited, choices need to be made about

how they are to be used.

 Economics is concerned with how we make these ‫ما هو االقتصاد؟‬

choices in the context of scarcity. ‫دراسة الندرة والوسائل التي نتعامل بها مع هذه املشكلة‬

.‫ يجب اتخاذ خيارات حول كيفية استخدامها‬، ‫نظرًا ألن املوارد محدودة بشكل أساسي‬

.‫يهتم علم االقتصاد بكيفية قيامنا بهذه االختيارات في سياق الندرة‬

What is economics?

 Key assumptions generally made in economics:

 individuals will make these decisions rationally.

 This means that given good information they will choose to do

things, such as utilize health services that will be in their best
interests, where ‘best interests’ is defined as maximizing their utility
given the resources they have at their disposal. ‫ما هو االقتصاد؟‬

:‫االفتراضات الرئيسية التي يتم إجراؤها بشكل عام في االقتصاد‬

.‫سوف يتخذ األفراد هذه القرارات بعقالنية‬

‫ مثل االستفادة من الخدمات الصحية التي ستكون في‬، ‫ سيختارون القيام بأشياء‬، ‫وهذا يعني أنه بالنظر إلى املعلومات الجيدة‬
.‫ حيث يتم تعريف "املصالح الفضلى" على أنها تعظيم فائدتها نظرًا للموارد املتاحة لديهم‬، ‫مصلحتهم الفضلى‬
 What is economics?

Specific concerns
1. What goods are being produced and in what quantities?
2. How are these goods produced?
3. How is society’s output of goods divided among its
members? ‫ما هو االقتصاد؟‬

‫ ما هي السلع التي يتم إنتاجها وبأي كميات؟‬.1 ‫مخاوف محددة‬

4. How efficient is society’s production and distribution?‫ كيف يتم إنتاج هذه السلع؟‬.2
‫ كيف يتم تقسيم ناتج املجتمع من السلع بني أعضائه؟‬.3

‫ ما مدى كفاءة اإلنتاج والتوزيع في املجتمع؟‬.4

 What is an economy?

 It refers to all the economic activities and institutions within a

defined area.

 Resources are items within the economy that can be used to

produce and distribute goods, classified as:
 Labor – human resources, manual and non manual, skilled and
unskilled
.‫يشير إلى جميع األنشطة االقتصادية واملؤسسات داخل منطقة محددة‬
 Capital – goods that are used to produce other goods (machines,
:‫ مصنفة على أنها‬، ‫املوارد هي عناصر داخل االقتصاد يمكن استخدامها إلنتاج السلع وتوزيعها‬
buildings, tools) - ‫ رأس املال املاهر وغير املاهر‬، ‫ اليدوية وغير اليدوية‬، ‫ املوارد البشرية‬- ‫العمالة‬
( ‫ أدوات‬، ‫ مباني‬، ‫السلع التي تُستخدم إلنتاج سلع أخرى )آالت‬
 Land – refers to all natural resources ‫ تشير إلى جميع املوارد الطبيعية‬- ‫األرض‬
What is an economy?

 Most resources can be used as individuals or can be

combined into something that is useful

 Production is the process of combining resources into

goods ‫يمكن استخدام معظم املوارد كأفراد أو يمكن دمجها في شيء مفيد‬

‫اإلنتاج هو عملية الجمع بني املوارد وتحويلها إلى سلع‬

Goods

 Products that you can hold or touch (e.g. drugs) or a

service than can happen to you (e.g., a consultation) ‫بضائع‬

(‫ استشارة‬، ‫املنتجات التي يمكنك حملها أو ملسها )مثل املخدرات( أو خدمة يمكن أن تحدث لك )على سبيل املثال‬

:‫الخصائص األساسية للبضائع‬

 Essential characteristics of goods: :‫سياق السمات املادية الذي يتم فيه استهالك السلعة‬
-
 Physical attributes ‫الوقت الذي تتوفر فيه السلعة املكان الذي تتوفر فيه السلعة‬

 Context in which the good is consumed:

 Time in which the good is available
 Place where the commodity is available
Goods

 Benefit of goods:
 Immediate ‫مباشر‬

 Investment value ‫قيمة االستثمار‬

 Exchange value ‫قيمة التبادل‬

Market

 A situation where people who demand a good come ‫سوق‬

together with suppliers ‫حالة يجتمع فيها األشخاص الذين يطلبون سلعة مع املوردين‬

.‫مقدار املال الذي يتم تبادله مقابل سلعة هو السعر‬

The amount of money that is exchange for a‫لقبوله‬good is the

:‫يتأثر السعر بما يلي‬
 ‫عدد املوردين واملبلغ املالي الذي هم على استعداد‬
price. (‫عدد املشترين )املستهلكني األفراد أو األسر‬

 The price is influenced by:

 thenumber of suppliers and the amount of money they are prepared to
accept
 The number of buyers (Individual consumers or households)
How does government affect the
market?

 Taxes
 Fixing prices
 Licensing suppliers
 Regulating quality
 Control of demand and prohibit private demand
 Control supply and prohibit private supply
 Laws
HEALTH BUILDING BLOCKS OF ECONOMICS
ECONOMICS
‫‪SCARCITY‬‬

‫االقتصاد موجود ألن املوارد شحيحة وأن رغبات البشر تجعل املوارد‬
‫املتاحة اآلن أو ألي وقت متوقع غير كافية‪ .‬ناجحة لتلبية جميع رغباتنا‬
 SCARCITY

 Affects production and consumption ‫يؤثر على اإلنتاج واالستهالك‬

 Example: ‫يؤدي استخدام املزيد من امليزانية للمستشفيات إلى تقليل عيادات الصحة العامة‬
 More budget used for hospitals leads to less public health clinics
 The production and consumption processes must come
together to ensure that “the right level” of hospitals and
clinics are produced ‫يجب أن تتضافر عمليات اإلنتاج واالستهالك لضمان إنتاج‬
‫»املستوى املناسب« من املستشفيات والعيادات‬

 The quantity supplied must match the quantity

demanded ‫املطلوبةأن تتطابق الكمية املوردة مع الكمية‬
‫يجب‬
CHOICE AND OPPORTUNITY COST

 WE CANNOT HAVE ALL WE WANT SO….choices have to be made

 WHY do we have to make choices at all?
 Income is finite
 Our income is insufficient to finance all the goods we want to consume
 Therefore, one must make choices about how to BEST spend our limited income
 BEST – refers to what will give the most satisfaction or utility or maximize the
population’s gain in social welfare.
 OPPORTUNITY COST
 The satisfaction or benefit forgone in not being able to use the resources involved to
obtain some other good which is also desirable and provides satisfaction
 CHOICE AND OPPORTUNITY COST

 Choices involve trade-offs.

 More hospitals means fewer clinics.
 More holidays means fewer cars or clothes.
 The opportunity cost (also known as the economic cost) of
any good (including service) is the satisfaction or benefit
forgone in not being able to use the resources involved to
obtain some other good which is also desirable and
provides satisfaction.
The margin

 Marginal refers to ‘the next unit’.

 The reason why this is relevant is that, in making decisions, our
interest is essentially on change in costs and benefits rather than
their totals.
 Decisions are rarely made on an ‘all or nothing’ basis; instead they
often tend to be made at the margin:
 If marginal benefit (the change in benefit) is greater than marginal cost (the
change in cost), we go ahead;
 if marginal benefit is less than marginal cost, we do not.
The margin

 the marginal benefits of most goods tend to diminish as

the consumption of those goods increases
 known as diminishing marginal utility

 It is intuitive – the first ice cream will generally be more enjoyable

than the second, which in turn will be more enjoyable than the
third and so forth.
Efficiency and equity
‫مهمه هالساليدهـ‬
 Efficiency is a general term used to describe the relationship
between inputs and outputs; which in turn can be valued
respectively in terms of costs and benefits.
 Efficiency is concerned with maximizing benefits with the resources
available,
 or minimizing costs for a given level of benefit.
 In health care, benefits may be interpreted as health gains,
although health services produce a range of benefits including less
tangible things like information and reassurance.
Types of Efficiency

 Technical efficiency
a given output is produced with the least inputs (i.e.
minimizing wastage).
 Also known as operational efficiency;

 Economic efficiency
 where a given output is produced at least cost.
 Also known as productive efficiency;
Types of Efficiency

 Allocative efficiency
 the pattern of output matches the pattern of demand;

 Pareto efficiency
 the point at which no one can gain without someone else
being made worse off.
Examples of efficiency in health care

 length of stay could be reduced

 staff productivity could be increased
 equipment could be fully utilized and maintained
regularly
 over-prescribing of drugs could be avoided
Examples of efficiency in health care

 drug ordering and storage could be managed properly

to avoid wastage and pilfering
 nurses could replace doctors when appropriate
 low-cost equipment could replace staff when
appropriate
 day surgery could replace inpatient stays
 Equity

 Equity is about the distribution of benefits as opposed to

their maximization (as inefficiency).
 Equity usually has something to do with fairness and justice.
 It is subjective, as it will mean different things to different people and different
communities.

 Equity is different to equality.

 Equity is about fairness but this may or may not mean the equal
sharing of a good or service.
 Equity and efficiency are often conflicting objectives.
 Categories of Economics

‫مهم‬
 Microeconomics and macroeconomics
 Microeconomics is concerned with the decisions taken by
individual consumers, households and firms and with the
way these decisions contribute to the setting of prices and
output in various kinds of market (‘micro’ implies small
scale)
 Categories of Economics

 Microeconomics and macroeconomics

 Macroeconomics is concerned with the interaction of

broad economic aggregates (such as general price
inflation, unemployment of resources in the economy and
the growth of national output).
Categories of Economics

‫مهم‬
 Positive and normative economics
 Positive
economics refers to economic statements
that describe how things are.

 Normativeeconomics refers to economic

statements that prescribe how things should be.
Why does the need for health services
exceed supply?

 an ageing population in which the elderly potentially

require more health services than younger adults;

 new health technologies which mean more conditions

have become treatable;

 increased expectations from people.