HEALTH CARE ECONOMICS

24th June 2010 Mr.Peter Kithuka

Discipline that deals with allocating scarce resources

what is economics?Adam smith,1776:the science that studies the nature and source ofnational wealth

Lionell Robins,1932:the science that studies human behaviour inrelation to ends and means

What is Microeconomics? Study of individual and household behaviour asthey make choices on the use of scarce resources to satisfy theirneeds

Macroeconomics-the study of national aggregates e.ginflation,income,unemployment etc

Health economics- the application of economic principles in health,involves the study of application of resources for care of the sickand promotion of health e.g economic resources: land, labour, capital,time etc

Methods of economic evaluation

cost minimization analysis- use of minimal resources possible

cost benefit analysis- what are the benefits?

Cost effectiveness- will the application of resources make adifference in health?

Cost utility QALY(Quality Adjusted Life Years)-will the quality oflife improve or change?

TerminologiesWant, need, demand, effective demand, supply,effective supply.

Demand- quantity of goods and services the buyer is willing topurchase at a given price

Efective supply- an increase in prices of health care commodities andservices reduce their consumption

Effective demand- quantity of goods and services the buyer is able andwilling to purchase at a given price

Question: HOW do consumers of health care commodities express theirwillingness to purchase goods and services

1.when they forego work to seek healthcare services2.they travel to health facilities3. When they qeue for services4. They will spend resources to get health services

Supply- quantity of goods and services a seller is willing to give tothe marke at a given price

Effective supply- quantity of goods and services a seller is willingand ble to offer to the market at a given price

Markets include: healthcare markets,pharmaceutical market,insurance,physicians and nurses,manpower,physician and nurses services,institutional market

Market- interaction between forces of supply and demand as buyer andsellers exchange goods and services

When forces of demand and supply interact theres a point at which themarket clears, this means demand=supply, this point is called themarket equilibrium

The price at which demand = supply is called the equilibrium price ormarket exchange rate

The law of Demand - The higher the price the lower the quantitydemanded, other factors remaining constant

The law of Supply - The higher the price the higher the quantitysupplied, holding other factors constant

Factors affecting demand - presence of substitute, price, income, preferences

Factors affecting supply - market prices, price of inputs, number ofsuppliers in the market

In order for govt. To regulate the various health care markets thereis need for policy interventions aimed at restricting or encouragingentry and exit from the market