Understanding Health Economics Edina Sinanovic Health Economics Unit University of Cape Town May...

Copyright: Dr Edina Sinanovic

Understanding Health Economics

Edina SinanovicHealth Economics Unit

University of Cape TownMay 2011


Outline

The scope of health economics Health Economics Unit, UCT

– research– teaching

Economic evaluation studies


Definition of economics Economics is the study of how people and

society end up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses, to produce various commodities and distribute them for consumption, now or in the future, among various persons and groups in society. It analyses the costs and benefits of improving patterns of resource allocation (Samuelson 1947)


Definition of health economics Health economics can be defined

broadly as the application of the theories, concepts and techniques of economics to the health sector (Williams 1987)


Nature of the market for health care What is a market? Theory of perfect competition Many of the conditions for perfect

competition are not met in the market for health care, i.e. there are “market imperfections” (or areas where market fails to operate efficiently in allocating health care resources)


Imperfections in the health care market Externalities Public goods Consumer rationality and merit

goods Barriers to entry and exit Economies of scale and

monopolies Imperfect information Risk and uncertainty


Concerns of health economics The allocation of resources between

various health-promoting activities The quantity of resources used in

health delivery The organisation and funding of health

institutions The efficiency with which resources are

allocated and used for health purposes The effects of preventive, curative and

rehabilitative health services on individuals and society


Basic notions of health economics (1-4)

1. Human wants are unlimited but resources are scarce

2. Economics is as much about benefits as it is about costs

3. The costs of health care are not restricted to the health sector (community care, cost of patient time)

4. Choices in health care (i.e. health planning and treatment) inescapably involve value judgments



5. Many of the simple rules of market operation do not apply in the case of health care – market imperfections

6. Consideration of costs is not necessarily unethical

7. Most choices in health care relate to changes in the level or extent of a given activity – the relevant evaluations concerns these marginal changes, not the total activity



8. The provision of health care is only one of the ways of improving the health of population – intersectoral linkages (e.g. education)

9. Community’s preference to postpone costs and bring forward benefits

10. Equity is health care may be desirable, but reducing inequalities comes at a high price –issues of concern are income class, social class, geographic location, needs, etc.


Economic organisation of health services A framework for analysing the

nature of the health system in a particular country includes:

– Sources of finance (public & private)

– Resources allocation/reimbursement (services & individual providers)

– Service provision (public & private)


Sources of finance

PUBLIC: general tax revenue, budget deficits, dedicated tax, foreign aid/donors

QUASI-PUBLIC: social/national insurance, lotteries

PRIVATE: private health insurance, private sector employers, direct household expenditure, community financing, charitable donations


Health care policy objectives Cost containment (macro-

economic cost control) Efficiency (micro-economic cost

control) Equity (distributional objectives)


Service provision

PUBLIC: hospitals, primary care (clinics, community health centres, environmental services, school health services, etc), other health services

PRIVATE: private hospitals, industry-specific services, independent practitioners, managed care groups, retail pharmacies, NGOs, church related facilities, traditional healers


Public/private mix debate Public/private mix in health care

financing and provision (a conceptual framework)

Two key reasons for public/private mix:– The general trend in economic policies

towards increasing the role of the private sector (international organizations’ influence in developing countries)

– Economic difficulties in many countries with limited resources available to government for financing and providing health services


Regulation vs. incentives Regulation of

price Regulation of

quantity and distribution

Regulation of quality of health services

Free or subsidised continuing education

Free provision of supplies such as vaccines, condoms…

Access to drugs at state tender prices

Capitation vs. FFS

Contracting out


Public/private interactions (some examples) Private sector providers operating out

of spare facilities in the public sector Medical schemes contracting with

public providers at special fee for service rates

Provincial administrations contracting with private providers for the delivery of specific services to the public sector patients

Contracts for sessional work Public-private partnerships with NGOs

in the provision of TB treatment


Summary (1)

Health economics is a sub discipline of economics applied in health sector

It is not only important to consider sources of finance for health care but also how services are provided and the methods of financial allocation and reimbursement

Choice of payment has implications for equity, efficiency and cost containment, and incentives for providers


Summary (2)

Private sector regarded as a resource for meeting the health needs of the population

Important to determine the extent and role of the existing private sector

Appropriate regulation and incentive mechanisms (the international trend is to pursue incentives rather than regulation)


Health Economics Unit, UCT Established in 1990 Key research focuses on three

themes:– Health systems and health equity

research– Health financing– Economic evaluation of disease-

priority areas Teaching


Post-graduate programmes in health economics

PhD MPH specialising in Health

Economics Masters in Health Economics Post-graduate Diploma in Health

Economics Post-graduate Diploma in Health

Management


MPH in Health Economics Coursework

– Core modules Health policy and planning Theory and application of economic evaluation in health

care Quantitative methods in health economics Microeconomics for the health sector Macroeconomics, health and health care financing Research methods

– Electives (examples) Critical issues in the study of HIV/AIDS and society Introduction to epidemiology Public policy Development economics

Mini thesis


Masters in Health Economics (1) Structure for the 18-month programme

(students who have an acceptable 4-year degree in economics)

Masters level 1st semester Advanced microeconomics Advanced macroeconomics Quantitative methods for health economics Health policy and planning 2nd semester Theory and application of economic evaluation in

health care Macroeconomics, health and health care financing Microeconomics for the health sector 3rd semester Half dissertation


Masters in Health Economics (2) Structure for the 30-month programme

(students who do not have an acceptable 4-year degree in economics)

Honours level Masters level Advanced microeconomics Advanced macroeconomics Quantitative methods for health economics Health policy and planning Theory and application of economic evaluation in

health care One course to be taken from the list of optional

courses for the Masters Programme in Economics Half dissertation


PGD in Health Economics Online, over 24 months on a part-time basis 1 week contact time per year Courses

– Introduction to microeconomics– Introduction to health economics and health policy

(health economics I)– Economic evaluation– Priority setting, resource allocation and equity– Health economics II– Economics of health systems– Health economics III– Current developments in health economics


PGD in Health Management

18 months Four 8-9 day residential blocks in

the first 12 months and additional 6 months to complete the project

Courses Managing Health Policy Implementation Public health Management Practice Managing Health Systems Development Public Health Technical Report


Economic Evaluation studies Disease priority areas Operational research Most recent and current studies

– The potential cost-effectiveness of adding an HPV vaccine to the cervical cancer screening programme

– Cost-effectiveness of GeneXpert MTB/RIF

Understanding Health Economics Edina Sinanovic Health Economics Unit University of Cape Town May...

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