HEALTH ECONOMIC

BY: MS. ESTER JOHANNES

 INTRODUCTION
MANY COUNTRIES ESPECIALLY THE DEVELOPING ONES, ARE CONCERNED ABOUT THE
RESOURCES OF HEALTH SECTOR. SUCH CONCERNS BROADLY RELATES TO:
A.) THE SOURCES OF FINANCE FOR HEALTH SERVICES;
B) THE ABILITY TO MAINTAIN AT LEAST THE PAST FUNDING LEVELS;
C)RESOURCES ALLOCATION PATTERN AND
D) ECONOMIC EFFICIENCY WITH EQUITY OF HEALTH SERVICES DELIVERY ETC.
• THE TERM ECONOMICS IS TAKEN FROM GREEK WORDS “OIKOS” AND “NOMOS”. ‘OIKIOS’
MEANS HOUSEHOLD AND ‘NOMOS’ MEANS MANAGEMENT. SO, ECONOMICS MEANS
HOUSEHOLD USING THE LIMITED FUNDS AVAILABLE IN THE MOST ECONOMICAL MANNER
POSSIBLE. IN OTHER WORDS, IT MEANS MANAGING THE DESIRES AND ASPIRATIONS OF
FAMILY THROUGH WISE ALLOCATION OF RESOURCES IN ORDER TO ACHIEVE MAXIMUM
SATISFACTION IN LIFE.
 DEFINITIONS OF ECONOMICS

IT HAS BEEN VARIOUSLY DESCRIBED AS THE STUDY OF WELFARE AND STUDY OF WEALTH, STUDY OF WELFARE
AND STUDY OF SCARCITY. THE DEFINITIONS ARE GIVEN BELOW:
• STUDY OF HEALTH
• ADAM SMITH THE FATHER OF ECONOMICS DEFINED ECONOMICS AS A SCIENCE WHICH STUDIES THE
NATURE AND CAUSES OF NATIONAL WEALTH.
• STUDY OF WELFARE
• MARSHLL DEFINED ECONOMICS AS A STUDY OF MANKIND IN THE ORDINARY BUSINESS OF LIFE; IT
EXAMINES THAT PART OF THE INDIVIDUAL AND SOCIAL ACTIONS WHICH IS MOST CLOSELY CONNECTED
WITH THE ATTAINMENT AND USE OF THE MATERIAL REQUISITES OF WELLBEING.
 DEFINITIONS OF ECONOMICS

• STUDY OF SCARCITY
• ROBBINS, WHO PROPOUNDED ECONOMICS AT THE STUDY OF SCARCITY, DEFINES IT AS THE SCIENCE
WHICH STUDIES HUMAN BEHAVIOR AS A RELATIONSHIP BETWEEN THE ENDS AND SCARE MEANS WHICH
HAVE ALTERNATIVE USES.
• GROWTH DEFINITION OF ECONOMICS
• ACCORDING TO PAUL A SAMUELSON, ECONOMIC IS THE STUDY OF HOW MEN AND SOCIETY CHOOSE
WITH OR WITHOUT THE USE OF MONEY, TO EMPLOY SCARCE PRODUCTIVE RESOURCES WHICH COULD
HAVE ALTERNATIVE USES, TO PRODUCE VARIOUS COMMODITIES OVER TIME AND DISTRIBUTE THEM FOR
CONSUMPTION NOW AND IN FUTURE AMONG VARIOUS PEOPLE AND GROUPS OF SOCIETY.
 WHAT IS ECONOMICS?

The economics is the science that deals with the consequences of

resources scarcity.
Economics as a social science studies how people perform economic
activities and how they try to satisfy unlimited wants by the proper use of
limited resources.
 The discipline of economics deals with use of scarce resources to satisfy
human wants and needs how best to use the resources available.
 ECONOMICS:
• ECONOMICS IS A BRANCH OF SOCIAL SCIENCE THAT DEALS WITH HOW TO USE SCARCE
RESOURCES TO PRODUCE OPTIMAL OUTPUT AND HOW TO DISTRIBUTE THEM AMONG
ECONOMIC AGENTS TO MAXIMIZE SOCIAL WELFARE.
• ECONOMICS HAS THREE FUNDAMENTAL QUARRIES:
I. WHAT TO PRODUCE?
II. HOW TO PRODUCE?
III. FOR WHOM TO PRODUCE?
 TWO MAIN APPROACHES OF ECONOMICS:

Positive science : explains what it is ? it explains what is

• Good and bad. It is concerned with describing and explaining
how such choices are actually made.
• Normative science : explains " what ought to be " ?. it wont
explains what is good and bad.
• It is concerned with which choices should be made.
 WHAT IS HEALTH ?
Health economics is a study of all financial aspects and their
distribution of healthcare system.
It is a branch of economics concerned with issues related to
effectiveness, efficiency, value and behaviour in the production
and consumption of health and healthcare.
 Health
Health evaluation is a kind of measure for health status
According to world health organization ( WHO ) health is " a state of complete physical ,
mental and social well being and not merely absence of disease or disability”.
Heath care can be defined as the prevention, treatment, and management of illness and
the preservation of mental and physical well-being through the services offered by the
medical and allied health professions.

Importantly, health care can be traded on the market but

health cannot.
 HEALTH ECONOMICS

SUPPLY
Health Care Dilemma

Demographic
Increasing EFFCTIVE DON’T
DEMAND Increasing
Expectation KNOW INEFFECTIVE

Technological advancement
 HEALTH ECONOMICS

Health care is the maintenance of health through the prevention ,

diagnosis , treatment, recovery, illness, injury, and other physical and
mental impairments of the people.
It is the branch of economics concerned with application of economic
theory and the problems related with health and healthcare.
It shows the allocation of resources within the health system and
functioning of healthcare market in the economy.
 CONTINUE ...

Health economics is a study of how scarce resources are allocated with

alternative uses for sickness and to maintain their health with the help of
health related services.
Health economics deals with the purpose and plans how much budget is
required in the health care delivery system.
The demand for healthcare comes from the desire of the consumers to
gain good health.
 CONTINUE ...

Health economics concerns :

Minimum resources used in health service delivery over a period of time .
Efficiency of resources allocated and used for health purposes.
Health economics concerns about the various effects of health services
upon health and for the welfare of the population.
HEALTH ECONOMICS IS CONCERNED WITH THE HEALTH CARE MARKET NOT WITH HEALTH OR
HEALTH STATUS.
• IT IS A THEORETICAL FRAMEWORK TO HELP HEALTHCARE PROFESSIONALS, DECISION-MAKERS
OR GOVERNMENTS TO MAKE CHOICESON HOW TO MAXIMIZE THE HEALTH OF POPULATION
GIVEN CONSTRAINED RESOURCES.

• HEALTH ECONOMISTS TEND TO VIEW ECONOMICS AS THE SCIENCE OF [Link] USES

MARKET ECONOMICS COMBINED WITH THE MICROECONOMIC CONCEPTS OF
OPPORTUNITY COST AND THE MARGIN TO FACILITATE PRIORITY SETTING.

• MARKET ECONOMICS BECOME THE 'FIRST PORT OF CALL‘ IN HEALTH ECONOMICS AND
PROVIDE THE PRINCIPLES THAT DETERMINE THE RATIONAL APPROACH TO PRIORITY
SETTING
 CRUX OF HAVING HEALTH ECONOMICS AS
SEPARATE DISCIPLINE
• WHAT MAKES HEALTH CARE MARKET DIFFERENT FROM OTHER MARKETS AND HOW OUR
ANALYSIS MAY NEED TO ADJUST?
1) HOW HEALTH CARE IS DIFFERENT FROM OTHER PRODUCTS AND SERVICES TRADED IN
MARKETS?
2) HOW BUYERS AND SUPPLIER RELATION IS DIFFERENT IN HEALTH CARE MARKET FROM
OTHER MARKET?
3) WHAT ARE THOSE PECULIARITIES IN HEALTH CARE MARKET THAT MAKE IT DIFFERENT
FROM OTHER MARKET?
 CONCEPTS IN HEALTH ECONOMICS

• Macro economies studies of total economic process rather than single parts . it covers production ,
consumption and distribution of goods and services for economy as a whole.
• TAKES A BROADER VIEW BY ANALYSING THE ECONOMIC ACTIVITY OF AN ENTIRE COUNTRY (NATIONAL OR
INTERNATIONAL LEVEL).
• Micro economics studies individual behaviour in decision making units . it covers consumption ,
production and distribution by an individual.
• FOCUSES ON THE ACTIONS OF INDIVIDUALS AND INDUSTRIES, LIKE THE INTERACTION BETWEEN BUYERS AND
SELLERS, BORROWERS AND LENDERS.
 Health under microeconomics is concerned with how individuals choose minimize cost or maximize
profits within a given healthcare with given rules and prices.
 FEATURES OF HEALTH ECONOMICS

Health and medical care is considered as economic goods.

Health is a private or public good.
Measurement of health is also considered in economics.
It is a stock of health.
It covers investment aspects of health.
 CONTINUE ....

Minimizing the loss due to ill health.

Resource cost of various different diseases effects of health and medical
care provision.
Planning of health and medical care.
Choice of technology in health care system.
Provision of equity in health outcomes and health care.
 ECONOMIC GOODS IN HEALTH CARE

Health and medical care.

Measurement of health.
 Health as a private or a public good.
Burden of diseases.
Investment aspects of healthcare industry.
Choice of technology in healthcare system.
Effect of healthcare provision.
 NEED FOR MEDICAL CARE

Medical
advances

public due to
increase in
awarenes life
s expectancy

NEED FOR
HEALTH
ECONOMICS
higher changes
expectati in family
on among structure
people and
norms
advances
in health
research
 FACTORS INFLUENCING HEALTH ECONOMICS

Extensive government intervention.

Intractable uncertainty in several dimensions.
Information about lop sides.
Externalities and the presence of third party agents.
Barriers to entry.
 RELEVANCE OF HEALTH ECONOMICS

Relevance of health economic analysis will help both directly and indirectly:
Directly:
It clarify the choices for health policy.
Choosing among different health services.
It decide what to buy and how to pay for it.
It evaluate the end results out of consumption.
Indirectly:
It take decision between the out of pocket payment or insurance.
It covers population health and welfare.
 IMPORTANCE OF HEALTH ECONOMICS

To formulate various health services needed for the people.

To establish the true costs of delivering health care for the public welfare.
To evaluate the relative costs and benefits of particular policy options.
To estimate the effects of few economic variables on the utilization of
health services.
 HEALTH ECONOMICS AND DEVELOPMENT

• GOOD HEALTH PLAYS A SUBSTANTIAL ROLE IN ECONOMIC GROWTH.

• FOR EXAMPLE,
• IT REDUCES PRODUCTION LOSSES DUE TO WORKER ILLNESS,
• IT LOWERS ABSENTEEISM RATES AND IMPROVES LEARNING AMONG SCHOOL CHILDREN.
• IT PERMITS THE DIFFERENT USE OF FINANCIAL RESOURCES THAT MIGHT NORMALLY BE
DESTINED FOR THE TREATMENT OF ILL HEALTH.
 HEALTH ECONOMICS AND
DEVELOPMENT…………CNTD.
HEALTH AFFECTS ECONOMIC GROWTH DIRECTLY THROUGH LABOR PRODUCTIVITY AND THE
ECONOMIC BURDEN OF ILLNESSES, FOR EXAMPLE.
• HEALTH ALSO INDIRECTLY IMPACTS ECONOMIC GROWTH SINCE ASPECTS SUCH AS CHILD
HEALTH AFFECT THE FUTURE INCOME OF PEOPLE THROUGH THE IMPACT, HEALTH HAS ON
EDUCATION.
• ROBERT W. FOGELFINDS THAT BETWEEN ONE THIRD AND ONE HALF OF ENGLAND’S
ECONOMIC GROWTH IN THE PAST 200 YEARS IS DUE TO IMPROVEMENTS IN THE
POPULATION’S FOOD CONSUMPTION.
 INTRODUCTION TO HEALTH ECONOMICS

• HEALTH ECONOMICS IS A BRANCH OF ECONOMICS CONCERNED WITH ISSUES RELATED TO

SCARCITY IN THE ALLOCATION OF HEALTH AND HEALTH CARE. BROADLY HEALTH ECONOMISTS
STUDY THE FUNCTIONING OF HEALTH CARE SYSTEM AND PRIVATE AND SOCIAL CAUSES OF HEALTH
AFFECTING BEHAVIORS SUCH AS SMOKING, DRINKING ALCOHOL ETC.
• HEALTH ECONOMICS IS THE DISCIPLINE THAT DETERMINES THE PRICE AND QUANTITY OF LIMITED
FINANCIAL AND NON FINANCIAL RESOURCES DEVOTED TO THE CARE OF THE SICK AND
PROMOTION OF HEALTH. IT COVERS THE MEDICAL INDUSTRY AS A WHOLE AND EXTENDS TO SUCH
FIELDS AS ECONOMIC ANALYSIS OF HEALTH PROGRAMS AND RETURNS FROM INVESTMENT IN
MEDICAL EDUCATION, TRAINING AND RESEARCH.
 AIM

TO QUANTIFY OVERTIME THE RESOURCES USED IN HEALTH CARE SERVICES DELIVERY AND TO
ORGANIZE ALLOCATE AND MANAGE THEM IN SUCH A WAY THAT THEY ARE USED FOR HEALTH
PURPOSES WITH MAXIMUM EFFICIENCY IN PREVENTIVE, CURATIVE AND REHABILITATIVE HEALTH
SERVICES, SO AS TO ACHIEVE MAXIMUM INDIVIDUAL AND NATIONAL PRODUCTIVITY.
 SCOPE OF HEALTH ECONOMICS

• THE SCOPE OF HEALTH ECONOMICS INCLUDE THE FOLLOWING:

• ▪ WHAT INFLUENCES HEALTH? (OTHER THAN HEALTH CARE).
• ▪ WHAT IS HEALTH AND WHAT IS ITS VALUE?
• ▪ THE DEMAND FOR HEALTH CARE:
• ▪ THE SUPPLY OF HEALTH CARE;
• ▪ MICRO ECONOMIC EVALUATION AT TREATMENT LEVEL
• ▪ MARKET EQUILIBRIUM; AND PRICE MECHANISM
• ▪ EVALUATION AT WHOLE SYSTEM LEVEL; AND
• ▪ PLANNING, BUDGETING AND MONITORING MECHANISM.
 FOCUS OF HEALTH ECONOMICS

• THE HEALTH ECONOMICS MAINLY CONCENTRATES ON HOW TO EXTRACT MAXIMUM BENEFITS

FROM HEALTH INDUSTRY WITH LEAST COST COMBINATION. HERE THE BENEFITS ARE NOT JUST
IN TERMS OF MONETARY TERMS BUT ALSO IN TERMS OF HUMAN WELFARE.
• HEALTH ECONOMICS EXPLAINS THE HEALTH INFRASTRUCTURE AS MEANS OF HEALTH CARE
INDUSTRY. IT APPLIES THEORIES TECHNIQUES, MODELS AND OTHER RELEVANT TOOLS TO THE
HEALTH SERVICES BOTH MATERIAL AND NON MATERIAL THINGS USED IN HEALTH CARE
INDUSTRY.
 AREAS OF HEALTH ECONOMICS
THE STUDY OF HEALTH ECONOMICS INCLUDES THE FOLLOWING AREAS.
• 1. COST OF HEALTH CARE
• COST REFERS TO EXPENSES INCURRED TO PRODUCE OR CREATE ANYTHING WHICH SATISFIES HUMAN WANTS. HEALTH
ECONOMICS EXPLAINS THE APPLICATION OF VARIOUS COST CONCEPTS IN HEALTH CARE INDUSTRY. AS THE HEALTH CARE
INDUSTRY NON PROFITABLE SECTOR, COST IS TAKEN AS SECONDARY FOR DEVELOPMENT OF HEALTH EDUCATION AND HYGIENE
ENVIRONMENT. IT INCLUDES OPPORTUNITY COST, VARIABLE COST, FIXED COST, MARGINAL COST ETC.
• 2. HEALTH PROBLEMS:
• THE STUDY OF HEALTH ECONOMICS ALSO CONCENTRATES ON HEALTH AS AN IMPORTANT OF ECONOMIC INDICATOR OF
ECONOMIC DEVELOPMENT, HOW HEALTH PROBLEMS POSE A MAJOR THREAT FOR ECONOMIC PROGRESS AND NATIONAL
DEFENSE OF A COUNTRY. IT ALSO EXPLAINS THE VARIOUS CAUSES FOR HEALTH PROBLEMS AND CO RELATION BETWEEN HEALTH
INDUSTRY AND ECONOMIC DEVELOPMENT.
• 3. DEMAND FOR HEALTH CARE:
• DEMAND REFERS TO DESIRE ACCOMPANIED BY ABILITY TO PAY AND WILLINGNESS TO PAY FOR A PRODUCT OR SERVICE IN A
MARKET. THE DEMAND MAY BE ELASTIC OR INELASTIC. BASED ON THE NATURE OF ELASTICITY OF DEMAND IN RESPECT OF PRICE,
THE MARKET SUPPLY IS DETERMINED. HENCE THE DEMAND ANALYSIS COMES WITHIN THE SCOPE OF HEALTH ECONOMICS. FOR E.G.
DEMAND FOR MEDICINE HAS INELASTIC DEMAND AS IT IS NECESSARY PRODUCT WHICH SAVES LIFE.
• 4. SUPPLY ANALYSIS IN HEALTH CARE:
• SUPPLY REFERS TO ANY THING MATERIAL OR NON MATERIAL WHICH IS OFFERED FOR SCALE AT A PARTICULAR
LEVEL OF PRICE AND AT A GIVEN PERIOD OF TIME. SUPPLY DEPENDS ON MANY INFLUENCING FACTORS LIKE
PRICE, COST OF PRODUCTION, GOVT. POLICY, DEMAND ETC. THE HEALTH CARE SERVICES LIKE HOSPITALS,
DISPENSARIES ETC ARE ALL INCLUDED IN THE BOUNDARY OF THE STUDY OF HEALTH ECONOMICS.
• 5. HEALTH CARE SERVICE MARKET:
• MARKET IS AN ECONOMIC ENVIRONMENT WHERE BUYERS AND SELLERS OF GOODS AND SERVICES INTERACT
FOR PURCHASE AND SALE FOR MUTUAL BENEFIT. IT EXPLAINS HOW THE MARKET FOR HEALTH SERVICES WORK.
• 6. FINANCING FOR HEALTH CARE INDUSTRY:
• FINANCE HERE REFERS TO MONEY INVESTED IN HEALTH CARE SERVICES. FINANCING MEANS CREATION AND INVESTMENT OF FUNDS IN
CREATING VARIOUS HEALTH CARE AMENITIES. IT STUDIES VARIOUS SOURCE OF FINANCE AVAILABLE FOR HEALTH CARE INDUSTRY. IT
DISCUSSES BOTH MONEY AND CAPITAL MARKET WHERE SHORT AND LONG TERM FUNDS ARE PRODUCED. IT MAKES AWARE ABOUT THE
EXISTENCE OF PUBLIC AND PRIVATE SECTOR BANKS AS SUPPLIERS OF LOANS AND ADVANCES TO HEALTH CARE INDUSTRY. IT COVERS GOVT.
GENERATE FUNDS, HEALTH INSURANCE, VOLUNTARY AGENCIES PROVIDING SERVICES AT FREE OF COST ETC.
• 7. HEALTH PLANS AND OUTLAYS:
• ONE OF THE PRIMARY MOTIVES OF EVERY COUNTRY IS TO GIVE PRIMARY IMPORTANCE TO HEALTH SERVICE TO MAKE CITIZENS HEALTHY
BOTH PHYSICALLY AND MENTALLY. FOR THAT EACH COUNTRY PREPARES ITS OWN PLAN ABOUT THE POSSIBLE HEALTH CARE PROGRAMS FOR
HUMAN WELLBEING. E.G .5 YR PLANS.
• 8. OPTIMUM UTILIZATION OF RESOURCES:
• THE OPTIMUM ALLOCATION OF RESOURCES IS AN IMPORTANT ELEMENT OF HEALTH ECONOMICS. AS EVERY INVESTOR OR FACILITATOR
EXPERTS MAXIMUM BENEFIT WITH MINIMUM COST, THE RESOURCES PLAY A MAJOR ROLE IN DECIDING THE PATH OF PROGRESS. THE
RESOURCES IN HEALTH CARE ECONOMICS INCLUDE ALL THOSE MEN AND MATERIALS USED TO PROMOTE HUMAN HEALTH.
 CAUSES OF HEALTH PROBLEMS
HEALTH HAS BECOME A COMMON FACTOR IN INDIA WHICH IN TURN PUT NEGATIVE EFFECT ON ECONOMICAL GROWTH AND
DEVELOPMENT. THE MAIN CAUSES FOR HEALTH RELATED PROBLEMS IN INDIA ARE AS FOLLOWS:
• LACK OF EDUCATION.
• POVERTY
• POOR GOVERNMENT SUPPORT.
• ENVIRONMENTAL DEGRADATION.
• POPULATION EXPLOSION.
• SLUMS AND OPEN SANITATION.
• SOCIO RELIGIOUS CAUSES.
• IGNORANCE AND LETHARGIC ATTITUDE OF PEOPLE.
• OTHER CAUSES LIKE
• BIRTH RELATED PROBLEMS DUE TO MARRIAGE AMONG CLOSE RELATIVES.
• SCARCITY OF SAFE DRINKING WATER.
• INADEQUATE HEALTH EDUCATION
• POOR INFRASTRUCTURE FACILITIES.
• SCARCITY OF QUALIFIED PERSONNEL’S.
 COST OF HEALTH CARE
• COST CAN BE CLASSIFIED IN MANY WAYS. IN GENERAL COSTS REFERS TO THE SOURCES WHICH ARE SPENT
IN CARRYING OUT HEALTH ACTIVITIES SO FAR AS THE HEALTH CARE SECTOR IS CONCERNED. IT IS TO BE
UNDERSTOOD THAT “UNREALIZED” OR “NON REALIZED” BENEFITS ALSO COUNT TOWARDS COSTS. AN E.G.
COULD BE THE LOSS OF PRODUCTIVITY DUE TO MORBIDITY, DISABILITY OR MORTALITY.
• IN GENERAL COST CAN BE CLASSIFIED INTO TWO BROAD GROUPS: CAPITAL COST AND OPERATING COST.
• CAPITAL COST: THESE COSTS ARE BORNE IRRESPECTIVE OF THE WORK LOAD OF ANY HEALTH CENTRE AND
FIXED. THEY MAY INCLUDE:
• BUILDING I.E HEALTH CENTRE, HOSPITAL ETC.
• MAJOR ITEMS OF EQUIPMENT.
• IN ORDER TO COMPUTE THE YEARLY COST OF SUCH ITEMS AS BUILDING REFRIGERATOR ETC.
• CAPITAL COSTS ARE ALSO TERMED AS CAPITAL EXPENDITURE, CAPITAL GOODS REPRESENT CAPITAL
INVESTMENT.
• OPERATING COSTS: THESE COSTS ARE RELATED TO THE LEVEL OR TYPE OF ACTIVITY IN A HEALTH INSTITUTION. SOME OPERATING
COSTS WILL CHANGE DAILY AND SOME FROM YEAR TO YEAR. THE OPERATING COSTS INCLUDE:
• ▪ SALARIES, WAGES AND ALLOWANCE OF HEALTH STAFF AT DIFFERENT LEVELS.
• ▪ MEDICAL SUPPLIES, DRUGS ETC.
• ▪ TRANSPORT OPERATING COSTS.
• ▪ MAINTENANCE AND REPAIR.
• ▪ TRAINING.
• ▪ POWER
• ▪ OTHER MISCELLANEOUS ITEMS.

• OPERATING COSTS MAY ALSO BE SEEN AS INDIRECT OR OVERHEAD COSTS RELATED TO THE EXPENSES ASSOCIATED WITH UTILITIES,
ADMINISTRATION AND SUPERVISION.
 OTHER CONCEPTS RELATED TO COSTS
• MARGINAL COSTS:
• THIS REFERS TO THE AMOUNT, AT ANY GIVEN VOLUME OF OUTPUTS, BY WHICH AGGREGATE COSTS ARE CHANGED IF THE VOLUME OF OUTPUT IS INCREASED
OR DECREASED BY ONE UNIT. THESE COSTS OCCURS WHEN ONE OR MORE UNIT IS ADDED.
• SOCIAL COST:
• IT IS THE COST OF HEALTH ACTIVITY TO THE SOCIETY AND NOT MERELY OR SOLELY TO THE AGENCY INSTITUTION OF SECTOR CARRYING OUT THE ACTIVITY.
• UNIT COST:
• IT IS ALSO KNOWN AVERAGE COSTS. IT IS THE TOTAL NUMBER OF UNITS OF AN ACTIVITY DIVIDED BY THE NUMBER OF UNITS OF OUTPUT PRODUCED.
• OPPORTUNITY COST:
• THIS ECONOMIC CONCEPTS IS QUITE IMPORTANT AND USUALLY FORGOTTEN IN COSTING. THE ECONOMISTS NOTION ABOUT OPPORTUNITY COSTS IMPLIES
THAT THE COST OF PROVIDING ONE FORM OF HEALTH CARE SHOULD ALWAYS BE BALANCED AGAINST THE BENEFITS WHICH HAVE TO BE SCARIFIED.
• COST ACCOUNTING:
• COST ACCOUNTING CAN BE DEFINED AS A PROCESS OF MANIPULATING OR REARRANGING THE DATA OR INFORMATION IN THE EXISTING ACCOUNTS IN
ORDER TO OBTAIN THE COST OF SERVICES RENDERED BY AN ORGANIZATION. COST ANALYSIS PROVIDES A TOOL OF MEASURING SUCCESS IN MONETARY
TERMS AND THUS HELPS TO CONTROL AND MONITOR THE COST.
• COST ACCOUNTING ASSIST HEALTH ADMINISTRATION IN CONTROLLING THE COSTS AND MONITORING THE PROGRESS OF VARIOUS RESOURCES. THEREBY IT
CAN LEAD TO RATIONAL ALLOCATION OF SCARE HEALTH RESOURCES.
 NATIONAL INCOME

• NATIONAL INCOME REFERS TO THE MONEY VALUE OF ALL THE FINAL GOODS AND SERVICES PRODUCED
IN AN ECONOMY WITH IN AN ACCOUNTING YEAR. IN SIMPLE WORDS IT IS THE AGGREGATE INCOME
EARNED BY ALL THE PEOPLE FROM ALL THE SOURCES IN ONE YEAR TIME.
• CONCEPTS OF NATIONAL INCOME
• GROSS DOMESTIC PRODUCT
• GDP IS THE AGGREGATE OF FINAL GOODS AND SERVICES PRODUCED IN THE DOMESTIC TERRITORY OF A
COUNTRY DURING AN ACCOUNTING YEAR. IT CAN BE CALCULATED BOTH IN FACTOR COST AND MARKET
PRICES. GDP CAN BE OBTAINED AS FOLLOWS:
• GDP= GNP-(X-M) WHERE GNP IS GROSS NATIONAL PRODUCT, X IS EXPORTS AND M IS IMPORTS.
• GROSS NATIONAL PRODUCT
• IT IS THE NATIONAL INCOME OF A COUNTRY. GNP IS DEFINED AS THE TOTAL MARKET VALUE OF ALL FINAL
GOODS AND SERVICES PRODUCED IN A COUNTRY IN A YEAR TIME.
• WHILE CALCULATING GNP THE MONEY VALUE OF ONLY THE GOODS AND SERVICES WHICH ARE FINALLY
CONSUMED BY THE PEOPLE ARE TO BE TAKEN INTO ACCOUNT. HENCE THE VALUE OF ALL INTERMEDIARY
GOODS AND INPUTS ARE TO BE EXCLUDED.
• GNP= GDP+X-M
• X INCOME EARNED BY EXPORTS.
• M MONEY SPENT ON IMPORTS.
• GNP INCLUDES:
• THE TOTAL VALUE OF ALL CONSUMPTION GOODS WHICH ARE CURRENTLY PRODUCED.
• THE VALUE OF ALL CAPITAL GOODS.
• TOTAL GOVERNMENT EXPENDITURE ON BUYING VARIOUS GOODS AND SERVICES.
• NET EXPORT VALUE.
• NET NATIONAL PRODUCT;
• NNP IS THE MARKET VALUE OF THE NET OUTPUT OF FINAL GOODS AND SERVICES PRODUCED BY
THE COUNTRY DURING THE RELEVANT INCOME PERIOD.
• NNP= GNP-DEPRECIATION.
• PERSONAL INCOME
• THE CONCEPT OF PERSONAL INCOME IS THE SUM OF ALL THE INCOMES ACTUALLY RECEIVED BY
THE INDIVIDUALS AND HOUSEHOLD IN A COUNTRY DURING ONE YEAR.
• PERSONAL INCOME HELPS US TO KNOW THE POTENTIAL PURCHASING POWER OF PEOPLE. IT
REPRESENTS PER CAPITA INCOME OF A NATION AND MEASURES STANDARD OF LIVING.
 DISPOSABLE PERSONAL INCOME

• IT IS A PART OF PERSONAL INCOME WHICH IS AVAILABLE FOR CONSUMPTION OA GOODS AND SERVICES BY
INDIVIDUALS.
• PRACTICAL IMPORTANCE OF THE STUDY OF THE NI ESTIMATES
• THE USES OF NI ESTIMATION ARE GIVEN BELOW;
• IT HELPS TO KNOW THE PRODUCTION PERFORMANCE AND ECONOMIC PROGRESS OF THE COUNTRY.
• IT INDICATES ECONOMIC WELFARE AND STANDARD OF LIVING.
• IT MAKES US TO UNDERSTAND WHETHER A COMPANY IS GROWING, STAGNANT OR DECLINING.
• IT DEPICTS THE CONTRIBUTION MADE BY DIFFERENT SECTOR OF THE ECONOMY.
• IT HELPS TO KNOW THE PURCHASING POWER OF MONEY.
• IT NARRATES THE RELATIVE ROLE PLAYED BY THE PUBLIC SECTOR AND PRIVATE SECTOR.
• IT HELPS TO KNOW THE PURCHASING POWER OF MONEY.
• IT HELPS TO FORMULATE VARIOUS ECONOMIC POLICIES FOR ECONOMIC AND SOCIAL DEVELOPMENT.
• USEFUL STUDY TO KNOW THE POSITION OF AN ECONOMY AT INTERNATIONAL LEVEL.
 DEMAND

• DEMAND MEANS DESIRE TO BUY OR CONSUME SOMETHING. IN ECONOMICS DEMAND REFERS NOT ONLY
TO DESIRE BUT ALSO ABILITY AND WILLINGNESS TO BUY GOODS OR SERVICES. IT MEANS A CONSUMER
SHOULD HAVE DESIRES, ABILITY TO PAY FOR A PRODUCT OR SERVICE AND WILLINGNESS TO PAY FOR IT.
• HOWEVER THE DEMAND FOR HEALTH AND MEDICAL CARE IN STRICT ECONOMIC SENSE IS A FUNCTION OF:
• CONSUMER INCOME
• THE PRICE OF MEDICAL CARE RELATIVE TO THE PRICES OF GOODS
• TASTES AND PREFERENCES OF CONSUMERS INCLUDING THEIR PERCEPTIONS ABOUT HEALTH AND HEALTH
CARE.
 SUPPLY

THE TERM SUPPLY IS NOTHING BUT ANYTHING BUT ANYTHING WHICH IS OFFERED FOR SALE. IN ECONOMICS, SUPPLY OF A PRODUCT DURING A GIVEN
PERIOD OF TIME MEANS THE QUANTITIES OF GOODS WHICH ARE OFFERED FOR A SALE AT PARTICULAR PRICES.
• SUPPLY IS ALWAYS REFERRED TO IN RELATION TO PRICE AND TIME. A STATEMENT OF SUPPLY WITHOUT REFERENCE TO PRICE AND TIME CONVEYS NO
ECONOMIC SENSE.
• DETERMINANTS OF SUPPLY
• THE SUPPLY OF COMMODITY DEPENDS NOT ONLY ON THE PRICE OF THE COMMODITY BUT ALSO ON MANY OTHER FACTORS. THEY ARE AS FOLLOWS:
• 1. COST OF PRODUCTION: COST MEANS EXPENSES INCURRED BY THE PRODUCER ON VARIOUS FACTORS OF PRODUCTION LIKE RENT, WAGES AND
CAPITAL. THE COST OF PRODUCTION DETERMINES THE SUPPLY. IF THERE IS CHANGE IN COST OF PRODUCTION WE CAN ALSO EXPECT VARIATION IN THE
SUPPLY.
• 2. THE LEVEL OF TECHNOLOGY: THE SUPPLY OF A PRODUCT DEPENDS UPON THE TECHNOLOGY USED IN THE PRODUCTION. ADVANCEMENT IN SCIENCE
AND TECHNOLOGY INFLUENCES THE PRODUCTION PROCESS OF THE FIRM.
• 3. NON GOVERNMENT FACTORS: THE ECONOMIC FACTORS LIKE WEATHER CONDITIONS, FLOODS AND DROUGHTS, EPIDEMICS, WARS ALSO CAUSE
FLUCTUATIONS IN THE SUPPLY OF GOODS.
• 4. GOVERNMENT POLICIES: GOVERNMENT POLICY IN RESPECT OF A PARTICULAR PRODUCT OR A SERVICE ALSO DETERMINES THE QUANTITY OF SUPPLY.
 MICRO ECONOMIC ANALYSIS IN HEALTH
• THERE ARE FOUR MAIN TYPES OF ECONOMIC ANALYSIS IN HEALTH:
• COST MINIMIZATION: HERE ONLY INPUTS ARE COMPARED AND OUTPUTS ARE CONSIDERED TO BE EQUAL,
WHICH IS RARELY SO.
• COST BENEFIT: IN THIS TYPE OF ANALYSIS ALL OUTPUTS ARE MEASURED IN MONETARY TERMS.
• COST EFFECTIVENESS: HERE A CLINICAL OUTPUT SUCH AS MORBIDITY, MORTALITY, REDUCTION IN BLOOD
PRESSURE OR QUALITY OF LIFE ETC IS MEASURED AS A MEASURE OF EFFECTIVENESS. COST EFFECTIVE ANALYSIS
HAS GENERALLY SUPERSEDED COST BENEFIT ANALYSIS BECAUSE OF THE PROBLEMS OF ALLOCATING MONETARY
VALUES TO ALL OUTPUTS.
• COST UTILITY: THIS MEASURES ALLOCATES A QUALITY OF LIFE VALUE AND COMBINES QUANTITY AND QUALITY
OF LIFE TO DERIVE THE QUALITY ADJUSTED LIFE YEARS. ALTHOUGH THE COST UTILITY METHOD HAS THE
ADVANTAGE THAT DIFFERENT INTERVENTIONS CAN BE COMPARED ACROSS A BROAD RANGE OF CHOICES IN
RESOURCES ALLOCATION, A NUMBER OF METHODOLOGICAL PROBLEMS REMAIN.
 HEALTH CARE ECONOMIC TERMS
• THE FOLLOWING ARE HEALTH CARE ECONOMIC TERMS WITH WHICH THE NURSE SHOULD BECOME FAMILIAR.
• CAPITATION: CAPITATION IS A DOLLAR AMOUNT ESTABLISHED TO COVER THE COST OF HEALTH CARE SERVICES
DELIVERED TO A PERSON FOR A SPECIFIC LENGTH OF TIME, USUALLY ONE YEAR. THE TERM USUALLY REFERS TO
A NEGOTIATED PER CAPITA RATE TO BE PAID PERIODICALLY BY A MANAGED CARE ORGANIZATION TO A HEALTH
CARE PROVIDER. THE PROVIDER IS THEN RESPONSIBLE FOR DELIVERING OR ARRANGING FOR THE DELIVERY OF
ALL HEALTH SERVICES REQUIRED BY THE COVERED PERSON UNDER THE CONDITIONS OF THE PROVIDER
CONTRACT.
• CO PAYMENT: IT IS A COST SHARING ARRANGEMENT WHEREBY THE PERSON WHO IS INSURED PAYS A
SPECIFIED CHARGE. THE PERSON IS USUALLY RESPONSIBLE FOR PAYMENT AT THE TIME THAT THE SERVICE IS
RENDERED.
• DIAGNOSIS RELATED GROUPS: DIAGNOSIS RELATED GROUPS IS A PROSPECTIVE COST REIMBURSEMENT
CLASSIFICATION SYSTEM FOR INPATIENT SERVICE BASED
• ON DIAGNOSIS AGE, SEX AND PRESENCE OF COMPLICATIONS. IT IS USED AS A MEANS OF BOTH IDENTIFYING
COSTS FOR PROVIDING SERVICES ASSOCIATED WITH GIVEN DIAGNOSIS AND REIMBURSING HOSPITALS AND
SELECT OTHER PROVIDERS FOR SERVICES RENDERED. THE AMOUNT OF PAYMENT IS PREDETERMINED.
• FEE FOR SERVICE: FEE FOR SERVICE IS A PAYMENT SYSTEM WHERE BY NURSES, PHYSICIANS, HOSPITALS AND
OTHER PROVIDERS ARE PAID A SPECIFIC AMOUNT FOR EACH SERVICE PERFORMED AS IT IS RENDERED AND
IDENTIFIED BY A CLAIM FOR PAYMENT.
• MANAGED CARE: IT IS AN EXTERNAL MONITORING AND CO MANAGING OF AN ONGOING PROVIDER CLIENT
RELATIONSHIP TO ENSURE THAT THE PROVIDER DELIVERS ONLY APPROPRIATE CARE. MANAGED CARE AS A
MEANS TO CONTROL COST WHILE ALSO MAINTAINING QUALITY AND ACCESS TO APPROPRIATE CARE. IT IS
ALSO A MECHANISM FOR INTRODUCING COMPETITION INTO THE HEALTH CARE MARKET AND THERE BY FOR
MAKING THE HEALTH CARE MARKET RESPOND IN THE EXPECTED FASHION TO THE SUPPLY AND DEMAND CYCLE.
• MANAGED CARE ORGANIZATION: A MANAGED CARE ORGANIZATION IS AN ENTITY THAT INTEGRATES
FINANCING AND MANAGEMENT AND THE DELIVERY OF HEALTH CARE SERVICES TO AN ENROLLED
POPULATION. MANAGED CARE ORGANIZATIONS PROVIDE, OFFER OR ARRANGED FOR COVERAGE OF
DESIGNATED HEALTH SERVICES NEEDED BY MEMBERS FOR A FIXED PREPAID AMOUNT.
• MANAGED COMPETITION: MANAGED COMPETITION AS A PURCHASING STRATEGY TO OBTAIN MAXIMUM
VALUE FOR EMPLOYERS AND CONSUMERS.
• OUT OF POCKET EXPENSES: THESE EXPENSES ARE NOT COVERED BY A HEALTH CARE PLAN AND THUS BORNE
BY THE INDIVIDUAL.
• PREFERRED PROVIDER ORGANIZATION: A PPO IS A HEALTH CARE DELIVERY SYSTEM THAT CONTRACTS WITH
PROVIDERS OF MEDICAL CARE TO PROVIDERS OF MEDICAL CARE TO PROVIDE SERVICES AT DISCOUNTED FEES
TO MEMBERS.
• PROSPECTIVE COST REIMBURSEMENT: IT IS A METHOD OF PAYING ALL HEALTH CARE PROVIDERS IN WHICH
RATES ARE ESTABLISHED IN ADVANCE. PROVIDERS ARE PAID THESE RATES REGARDLESS OF THE COSTS THEY
ACTUALLY INCUR.
• COST PLUS AND RETROSPECTIVE REIMBURSEMENT: IT IS REIMBURSEMENT BASED ON WHAT A SERVICE COSTS, PLUS
THE ADDITION OF SOME PERCENTAGE OF PROFIT. THE COSTS OF THE SERVICE AND THE PROFIT ARE PREDETERMINED
AND AGREED UPON BY THE PROVIDER AND PURCHASER.
• THIRD PARTY PAYER; IT REFERS TO AN ENTITY OTHER THAN THE PROVIDER OR THE CONSUMER THAT IS RESPONSIBLE
FOR THE TOTAL OR PARTIAL PAYMENT OF HEALTH CARE COSTS. WHETHER THE THIRD PARTY PAYS ALL OR A PORTION
DEPENDS ON THE TYPE OF COVERAGE. IF THE CONSUMER IS REQUIRED TO MAKE PARTIAL PAYMENT, THAT PAYMENT IS
COMMONLY REFERRED TO AS A CO PAY. FOR ELDERLY PERSON THE THIRD PARTY PAYER IS THE MEDICARE; FOR THE
POOR IT IS MEDICAID; AND FOR THE INSURED IT IS THE INSURANCE COMPANY.
• MEDICARE: MEDICARE PART A OR THE HOSPITAL INSURANCE PROGRAM, HELPS PAY FOR HOSPITAL, HOME HEALTH,
SKILLED NURSING FACILITY AND HOSPICE CARE FOR THE AGED AND DISABLED. PART A IS FINANCED PRIMARILY BY
PAYROLL TAXES PAID BY WORKERS AND EMPLOYERS.
• MEDICARE PART B OR THE SUPPLEMENTARY MEDICARE INSURANCE PROGRAM, PAYS FOR PHYSICIAN, OUT PATENT ,
HOSPITAL AND OTHER SERVICES FOR THE AGED AND THE DISABLED.
• MEDICAID: IT IS A PROGRAM FUNDED BY FEDERAL AND STATE TAXES AND ADMINISTERED BY THE STATES. MEDICAID
PLAYS FOR THE HEALTH CARE OF LOW INCOME PERSONS. SERVICES AND ELIGIBILITY DIFFER FROM STATE TO STATE
• HEALTH MAINTENANCE ORGANIZATIONS (HMO): HMO ARE A TYPE OF INSURANCE WHO CONTRACTS WITH AND
ENROLLS INDIVIDUALS AND GROUPS TO PROVIDE COMPREHENSIVE HEALTH CARE SERVICES ON A PREPAID BASIS.
THEY EMPHASIZE ON PREVENTIVE HEALTH SERVICES AND MOST OF THEM PROVIDE INPATIENT AND OUT PATIENT
SERVICES.
 FACTORS CAUSING UPWARD CLIMB OF HEALTH
CARE COST
• COST PER VOLUME OF SERVICES
• PER CAPITAL INCREASE IN VOLUME OF SERVICES.
• GROWTH IN SPECIFIC POPULATION GROUP’S
• ADVANCED TECHNOLOGY
• RISING ADMINISTRATIVE COSTS.
• CLIENT’S COMPLEXITY.
• HEALTH CARE FRAUD.
• EXCESS CAPACITY.
• UNCOMPENSATED CARE.
 MARKET EQUILIBRIUM

• MARKET EQUILIBRIUM INCLUDES TWO MAIN FORCES I.E. DEMAND AND SUPPLY.
• THERE ARE 5 HEALTH MARKETS.
• HEALTH CARE FINANCING MARKET.
• PHYSICIANS AND NURSES MARKET.
• INSTITUTIONAL SERVICE MARKET
• INPUT FACTORS MARKET
• PROFESSIONAL EDUCATION MARKET.
 STRUCTURE OR HEALTH CARE INDUSTRY

• AN INDUSTRY IS A GROUP OF FIRMS. INDUSTRY CONSISTS OF ALL THOSE INDIVIDUAL UNITS OF PRODUCTION WHICH ARE PRODUCING DIFFERENTIABLE GOODS THOUGH
THEY BELONG TO SAME PRODUCT LINE.
• INDUSTRY CAN BE CLASSIFIED AS MANUFACTURING INDUSTRY AND SERVICE INDUSTRY. HEALTH CARE IS A SERVICE INDUSTRY.
• HEALTH CARE INDUSTRY
• PUBLIC SECTOR ▪ GOVT. HOSPITAL
• ▪ GOVT. MEDICAL COLLEGES
• ▪ BLOOD BANK
• ▪ AMBULANCE SERVICES
• PRIVATE SECTOR
• MEDICAL COLLEGES AND HOSPITAL
• LABORATORIES
• PHARMACEUTICAL COMPANIES
• AMBULANCE SERVICES
• NURSING HOMES
 CHARACTERISTICS OF HEALTH SERVICE MARKET:

FOLLOWING ARE THE FEATURES OF HEALTH CARE MARKET:

• THE HEALTH CARE MARKET HAS THE INELASTIC DEMAND- MEANS IT DOES NOT CHANGE ACCORDING TO CHANGES IN PRICES OF SERVICES.
THE PRICES MAY FALL OR RISE, BUT THE DEMAND REMAINS SAME.
• SUPPLY OF HEALTH CARE SERVICES IS INDEPENDENT OF DEMAND I.E. IT DOES NOT CHANGE ACCORDING TO THE CHANGES IN DEMAND.
• IMPERFECT COMPETITION: THAT MEANS THE COMPETITION IN THE MARKET IS EITHER MONOPOLISTIC OR OLIGOPOLY OR DUOPOLY.
• NEGLIGIBLE SELLING COST: THE SELLING COSTS ARE THE EXPENSES INCURRED BY THE PRODUCER ON THE PROMOTION OF THE SALE.
• DEMAND IS MORE THAN SUPPLY: THE DEMAND FOR THE HEALTH CARE SERVICES IS MORE THAN ITS SUPPLY PARTICULARLY IN PUBLIC SECTOR
HEALTH CARE MARKET.
• NO PERFECT KNOWLEDGE: THERE IS ANY PERFECT KNOWLEDGE ABOUT THE HEALTH CARE SERVICES MARKET AMONG THE SERVICE
PROVIDERS AND BENEFICIARIES.
• INTERVENTION OF GOVT.: THE MARKET IS CONTROLLED BY THE GOVT.
• PROFIT: IS THE SECONDARY HEALTH CARE MANAGEMENT.
 EVOLUTION OF HEALTH CARE DELIVERY MARKET
PHASE 1 PHASE 2 PHASE 3
▪CHARITABLE TRUST ▪LARGE STAND ALONE HOSPITAL ▪EMERGENCE OF CORPORATE
▪ GOVT. OWNED HOSPITAL ▪SETTING UP OF SUPER SPECIALITY CHAINS
▪ SMALL NURSING HOME HOSPITAL ▪ INCREASED USAGE OF
▪ SCANT TECHNOLOGY, LOW ▪NEW PROJECT FUNDING BY TECHNOLOGIES AND EMPHASIS ON
EMPHASIS ON SUPPORT SERVICES FINANCIAL INSTITUTION OPERATIONAL EFFICIENCIES
PRE & EARLY 1980’S ▪SUPER SPECIALITY CENTRES ▪ GROWTH OF HEALTH INSURANCE
LATE 1980’S-1990 AS A DRIVER BEHIND PHENOMENAL
GROWTH
▪ PROFIT MOTIVE IN HEALTH CARE IS
NO LONGER SCORNED LEADING TO
EVOLUTION OF INNOVATIVE
BUISNESS MODELS
EARLY 2000 & BEYOND
 HEALTH FINANCING

• IT REFERS TO RISING OF RESOURCES TO PAY FOR GOODS AND SERVICES RELATED TO HEALTH. THESE
RESOURCES MAY BE IN THE FORM OF CASH OR KIND. FINANCING OF HEALTH CARE IS VIEWED WITHIN THE
FRAMEWORK OF SCARCITY OF RESOURCES; THEIR SUSTAINABILITY AND THEIR EFFICIENCY. A BROAD
CATEGORIZATION OF THE SOURCES OF HEALTH CARE FINANCING IS AS FOLLOWS:
• PUBLIC SOURCES
• PRIVATE SOURCES
• EXTERNAL COOPERATION
• INDIVIDUAL OR HOUSEHOLD
• MIXED SOURCES
• PUBLIC SECTOR:
• UNDER THIS WE HAVE NATIONALIZED BANKS. EG:- STATE BANK OF INDIA, SYNDICATE BANK.
• PRIVATE BANK:
• PRIVATE BANKS ARE THOSE BANKS WHICH ARE DOING THE BUSINESS OF BANKING AND ARE NOT NATIONALIZED SO FAR.
• PRIVATE FOREIGN BANKS
• FOREIGN BANKS ARE THOSE BANKS BASED IN FOREIGN COUNTRIES AND ARE OPERATING IN INDIA ALSO KNOWN AS FOREIGN
EXCHANGE BANKS. THEY ARE INCORPORATED IN FOREIGN COUNTRIES AND HAVE ITS BRANCHES IN INDIA.
• CORPORATIVE SECTOR
• IT IS ONE OF THE FORM OF ORGANIZATION WHERE PERSONS JOIN VOLUNTARILY ON THE BASIS OF EQUALITY AND TO PROMOTE
ECONOMIC INTEREST OF ALL PERSONS. IN THIS FORM PEOPLE JOIN ARE COME TOGETHER IN A SYSTEMATIC MANNER TO PROTECT
THEMSELVES FROM EXPLOITATIONS FROM ECONOMICALLY RICH CLASS AND TO PROTECT MUTUAL INTEREST.
 TYPES:

•
• 1. AGRICULTURAL COOPERATIVE SOCIETIES
• 2. NON AGRICULTURAL COOPERATIVE SOCIETIES
• ▪ URBAN COOPERATIVE BANKS
• ▪ EMPLOYEES COOPERATIVE BANKS.
 TRENDS IN HEALTH CARE FINANCING

EQUITY DEBT STRATEGIC

▪PRIVATE EQUITY PARTNERSHIP
▪IPO ▪MANAGEMENT CONTRACT
▪JOINT VENTURE
 HEALTH ECONOMICS IN PUBLIC HEALTH DELIVERY
THE AVAILABILITY AND UTILIZATION OF HEALTH SERVICES IN INDIA IS RATHER POOR WITH GOVT. SECTOR MEETING THE
DEMAND OF ON 18% OUT PATIENT, 40% IN PATIENT CAR. THOUGH THE SPENDING OF HEALTH CARE IS 6% OF GDP, THE
STATE EXPENDITURE IS 0.9% OF TOTAL SPENDING. MOREOVER, THE AVAILABILITY OF HEALTH RESOURCES NOT USED
EFFICIENTLY
• PRINCLPLES OF HEALTH CARE IN PUBLIC HEALTH CARE DELIVERY
• EFFICIENCY: MEASURES OF HOW WELL RESOURCES ARE UTILIZED TO ACHIEVE A GIVEN EFFECTIVENESS WHICH
REFERS TO THE EXTENT TO WHICH THE UNDERLYING PROBLEM IS ALLELEVATED OR REDUCED.
THE EFFICIENCY IS ENHANCED BY
• MAPPING OF HEALTH CARE SERVICES AND UTILIZATION.
• PREPARATION OF CITIZENS CHARTER.
• PUBLIC PRIVATE PARTNERSHIP
• DECENTRALIZATION OF HEALTH SERVICES
• LOCAL GOVT. CONTROL OF RESOURCES
• PROMOTION OF COMMUNITY BASED HEALTH INSURANCE
• IMPOSING USER FEES.
• EQUITY: IT IS NEEDED TO MAKE A FAIR DISTRIBUTION OF THE VARIOUS RESOURCES. TO ENSURE THE BEST
HEALTH OUTCOME, A RE ALLOCATION OF SOURCES WITH IN THE HEALTH SECTOR OR IN RELATED SECTORS.
THIS WOULD OVERCOMES A BIG SKEW IN DISTRIBUTION OF HEALTH CARE SERVICES BETWEEN THE RURAL
AND URBAN AREAS.

• COST EFFECTIVENESS: TECHNIQUE OF HEALTH ECONOMIC WHICH CAN BE USED TO COMPARE THE RELATIVE
VALUE OF VARYING CLINICAL STRATEGIES. IT MAY ALSO ACT AN EVALUATION TOOL TO MEASURE THE EXTENT
TO WHICH HEALTH CARE GENERATES CHANGES WHICH PEOPLE VALUES, BE THEY PATIENTS, PLANNERS,
DOCTORS OR POLITICIANS AND TO COMPARE THESE CHANGES WITH RESEARCH NEEDED TO ACHIEVE THEM.
THEREFORE THIS SERVES AS AN AID TO DECISION MAKING.
• E.G.:- DISCOVERY OF COST EFFECTIVENESS OF DOMICILIARY CARE IN TB RESULTED IN EMERGENCE OF DOTS
WHICH WAS FOUND TO PRODUCE DIRECT TANGIBLE ECONOMIC BENEFIT BY REDUCING THE PREVALENCE OF
DEATHS AND AVERTING HOSPITALIZATION OF TB PATIENTS.
• 4. COST CONTAINMENT: AIMS AT REDUCING THE COST OF HEALTH SERVICES WITHOUT COMPROMISING THE
RESULT BY ADOPTING CONTAINMENT MEASURES SUCH AS
• MINIMIZING PURCHASER OF STOCK.
• PREVENT WASTAGE BY INTERNAL AUDITING AND EFFECTIVE SUPERVISION.
• REDUCTION OF COST OF MEDICINE; PURCHASE OF GENERIC DRUGS.
A PHYSICIAN COULD PLAN AN IMPORTANT ROLE IN COST CONTAINMENT BY;
• REDUCING NUMBER OF INVESTIGATIONS.
• PRESCRIBING EQUALLY EFFECTIVE CHEAPER ALTERNATIVES
• REDUCE THE NUMBER OF DRUGS PRESCRIBED.
• REDUCE THE AVERAGE LENGTH OF STAY IN HOSPITAL.
• AVOIDING OVERSTAFFING.
• DEVELOP CHEAPER AND INNOVATIVE TECHNOLOGY.
• TEACHING AND TRAINING IN HEALTH ECONOMIC FOR MBBS AND OTHER DEGREES IN PUBLIC HEALTH..
 TYPES OF MARKETS

• 1. CONSUMER MARKET:

• THIS REFERS TO INDIVIDUALS LIKE YOU AND ME WHO BUY HEALTH-RELATED PRODUCTS OR SERVICES FOR OUR PERSONAL USE. THINK OF BUYING VITAMINS,
JOINING A GYM, OR VISITING A DOCTOR.

• WHEN COMPANIES MARKET TO CONSUMERS, THEY CONSIDER THINGS LIKE OUR AGE, LIFESTYLE, WHAT WE BELIEVE ABOUT HEALTH, AND WHAT WE LIKE OR DISLIKE.

• [Link] MARKET:

• THESE ARE THE PLACES OR PEOPLE WHERE WE GET HEALTHCARE SERVICES, LIKE HOSPITALS, CLINICS, OR EVEN INDIVIDUAL DOCTORS.

• WHEN CHOOSING A PROVIDER, WE THINK ABOUT THINGS LIKE HOW GOOD THEY ARE AT WHAT THEY DO, HOW EASY IT IS TO GET TO THEM, AND WHETHER THEY
HAVE A GOOD REPUTATION.

• 3. PAYER MARKET:

• THIS MARKET INVOLVES ENTITIES THAT PAY FOR OUR HEALTHCARE, LIKE INSURANCE COMPANIES OR GOVERNMENT PROGRAMS.

• THEY DECIDE WHAT THEY WILL PAY FOR, HOW MUCH THEY'LL PAY, AND WHAT RULES WE HAVE TO FOLLOW TO GET OUR HEALTHCARE COSTS COVERED.
• 4. REGULATOR MARKET:
• REGULATORS ARE LIKE THE REFEREES OF HEALTHCARE. THEY MAKE SURE THAT HEALTHCARE PROVIDERS
AND PRODUCTS MEET CERTAIN STANDARDS AND RULES.
• THEY SET RULES TO KEEP US SAFE, LIKE MAKING SURE MEDICINES ARE EFFECTIVE AND THAT HOSPITALS
ARE CLEAN AND SAFE.
• 5. SUPPLIER MARKET:
• THESE ARE THE COMPANIES OR PEOPLE WHO PROVIDE THINGS THAT HEALTHCARE PROVIDERS NEED, LIKE
MEDICAL EQUIPMENT, MEDICINES, OR EVEN OFFICE SUPPLIES.
• HEALTHCARE PROVIDERS RELY ON SUPPLIERS TO GIVE THEM GOOD QUALITY STUFF AT A FAIR PRICE SO
THEY CAN TAKE CARE OF US PROPERLY.
 A MARKET FAILURE

• A MARKET FAILURE REFERS TO THE INEFFICIENT DISTRIBUTION OF RESOURCES THAT OCCURS

WHEN THE INDIVIDUALS IN A GROUP END UP WORSE OFF THAN IF THEY HAD NOT ACTED IN
RATIONAL SELF-INTEREST. IN THE CASE OF A MARKET FAILURE, THE OVERALL GROUP INCURS
TOO MANY COSTS OR RECEIVES TOO FEW BENEFITS.
 WHAT CAUSES MARKET FAILURE

1. INFORMATION ASYMMETRY:
• SOMETIMES, WE DON’T HAVE ALL THE INFORMATION WE NEED TO MAKE GOOD CHOICES ABOUT OUR HEALTH. THIS CAN HAPPEN
WHEN COMPANIES DON’T TELL US EVERYTHING ABOUT THEIR PRODUCTS, MAKING IT HARD FOR US TO KNOW IF THEY’RE GOOD OR
NOT.
2. EXTERNALITIES:
• SOMETIMES, THINGS THAT HAPPEN IN HEALTHCARE AFFECT OTHER PEOPLE TOO. FOR EXAMPLE, POLLUTION FROM HOSPITALS OR
PHARMACIES MIGHT MAKE THE AIR DIRTY FOR PEOPLE NEARBY.
3. PUBLIC GOODS:
• SOME THINGS IN HEALTHCARE, LIKE CLEAN AIR OR RESEARCH ON NEW DISEASES, ARE GOOD FOR EVERYONE BUT ARE HARD FOR
COMPANIES TO MAKE MONEY FROM. SO, THEY MIGHT NOT INVEST IN THEM ENOUGH.
4. MONOPOLY POWER:
• IF ONE COMPANY BECOMES TOO POWERFUL IN HEALTHCARE, THEY MIGHT BE ABLE TO CHARGE REALLY HIGH PRICES OR NOT OFFER
GOOD SERVICES BECAUSE PEOPLE DON’T HAVE OTHER CHOICES.
 GOVERNMENT INTERVENTION
1. REGULATION:
• THE GOVERNMENT SETS RULES TO MAKE SURE COMPANIES SELL SAFE PRODUCTS, LIKE CHECKING THAT
MEDICINES WORK AND DON’T HARM US.
2. SUBSIDIES:
• SOMETIMES, THE GOVERNMENT GIVES MONEY TO HELP PEOPLE PAY FOR HEALTHCARE, ESPECIALLY IF
THEY CAN’T AFFORD IT ON THEIR OWN.
3. TAXATION:
• THE GOVERNMENT MIGHT PUT TAXES ON THINGS THAT ARE BAD FOR OUR HEALTH, LIKE CIGARETTES,
TO TRY TO MAKE PEOPLE BUY LESS OF THEM AND USE THAT MONEY TO HELP WITH HEALTHCARE.
4. PUBLIC PROVISION:
• SOMETIMES, THE GOVERNMENT DIRECTLY PROVIDES HEALTHCARE SERVICES, LIKE RUNNING HOSPITALS
OR CLINICS, ESPECIALLY FOR PEOPLE WHO CAN’T AFFORD PRIVATE HEALTHCARE.
5. EDUCATION CAMPAIGNS:
• GOVERNMENTS ALSO TEACH PEOPLE ABOUT HEALTH RISKS AND HOW TO STAY HEALTHY, LIKE NOT
SMOKING OR EATING HEALTHY FOODS.
 IMPACT OF GOVERNMENT INTERVENTION
1. IMPROVED ACCESS:
• WHEN THE GOVERNMENT GETS INVOLVED, MORE PEOPLE CAN AFFORD HEALTHCARE OR HAVE BETTER OPTIONS
FOR GETTING TREATMENT.
2. QUALITY ASSURANCE:
• GOVERNMENT RULES MAKE SURE THAT THE THINGS WE BUY OR THE PLACES WE GO FOR HEALTHCARE ARE SAFE
AND GOOD QUALITY.
3. REDUCED MARKET FAILURES:
• BY SETTING RULES AND HELPING PEOPLE WHEN MARKETS DON’T WORK WELL, THE GOVERNMENT MAKES SURE
THAT HEALTHCARE IS FAIRER AND BETTER FOR EVERYONE.
4. BUDGETARY CONSTRAINTS:
• SOMETIMES, PAYING FOR ALL THESE THINGS CAN BE EXPENSIVE FOR THE GOVERNMENT, AND THEY HAVE TO
FIND WAYS TO MANAGE THEIR MONEY CAREFULLY.
5. POLITICAL CONTROVERSY:
• PEOPLE MIGHT ARGUE ABOUT WHETHER THE GOVERNMENT SHOULD BE INVOLVED IN HEALTHCARE AND HOW
MUCH THEY SHOULD DO. IT’S A BIG TOPIC IN POLITICS BECAUSE IT AFFECTS EVERYONE.
 Conclusion

Both physical and mental health have strong connections . mental health is
equally important along with physical health to maintain full active lifestyle .
Mental health refers to a person's emotional , social , and psychological
well - being . A person who have good physical health should keep their
body functions fit . the best way to maintain health is to preserve it through
a healthful lifestyle rather than waiting until sickness to address health
problems. People generally use the name wellness to describe this
continuous state of improved well - being.
• In a country with scare resources and over growing population with diverse health care
needs, health economics play a pivotal role in determining the delivery of equitable and
cost effective health services. Concentrated efforts from policy makers, programme
managers education experts, curriculum planners and medical faculty is needed to
promote and utilize this concepts in improving public health practices.
 ACTIVITY

1. What is the definition of health economics, and how does it differ from other branches of economics?
2. Differentiate between positive and normative science in the context of health economics. Provide
examples to illustrate each.
3. Define the concepts of "health" and "economics" and explain how they are interconnected in the field of
health economics.
4. What are the distinctive features of health economics that set it apart from other areas of economics?
5. In the context of health care, discuss the notion of "economic goods" and their significance in health
economics.
 ACTIVITY CONTINUES…

6. What factors influence the demand and supply of medical care? How do these factors shape the health
economics landscape?
7. Discuss the concept of "need for medical care" and its role in understanding resource allocation and
priority setting in healthcare systems.
8. Analyze the different factors that can significantly influence the economics of health, such as
demographics, technology, and government policies.
9. Why is health economics relevant in today's society? Discuss its role in addressing healthcare
challenges and making informed policy decisions.
10. Highlight the importance of health economics in achieving efficient and equitable healthcare outcomes
for individuals and populations.