An Overview of Health Economics
Economics has generally been defined a social science of scarcity, and its application in health is a reflection of the need to achieve maximum value from resources used through improving cost and clinical effectiveness. Economic principles are applied in numerous disciplines and health is among the disciplines where the principles are applied. Health economics involves an application of economic theories and principles such as consumer and producer theories, as well as understanding of the social choices. It aims at understanding the behaviors portrayed by health care providers, individuals, public and private institutions. It has been imperative in the improvement of care, in the sector as it has adopted theories such as production efficiency, regulation and disparities, for the purpose providing information to the public and service providers of the most cost effective methods.
Basic Terms in Health Economics
There are numerous terms used in health care economics in explaining different concepts. The majority of these terms involve different economic principles and theories used in explaining health care concepts. For example, the concept of demand in health economics is a central economic concept where the demand for health care is derived from demand for health. Health care demand is different from the common demand for other commodity goods. This is based on the aspect that individuals allocate resources to consume and produce health. Therefore, individuals are perceived as both producers and consumers of health. It is perceived as a capital good whereby, it can diminish over time if individuals do not make proper investments. The concept of efficiency has been considered highly important in health care economics. Technical and allocative efficiency and inefficiency have been mostly used in the study of efficiency, in health economics. Technical efficiency is used in reference to the physical relationship between resources and health care outcomes. Therefore, efficiency is achieved when the maximum possible outcome is achieved from a certain set of resources. Allocative efficiency used in assessing the viability of competing programs and ensures an allocation is made in a way that any change in spending priority would not improve the welfare of one individual without reducing the welfare of another. Consumer behavior has also been an essential concept used in health economics in the description of how people behave in making decisions regarding health acquisition.
History of Health Economics
Over the past four decades health has increasingly become a dominant and common social, political and economic issue with numerous countries experiencing a rapid increase in health care expenditures. The sector has evolved from a single generation system involving the physicians and individual client to a highly interconnected system with numerous stakeholders. The diverse arrangement and gathering under managed care has been the reason behind apotheosis of the experienced change. The period has also experienced intensive expansions, organization and rationalization to handle the emerging issues in health care. There has been numerous explanations in regard to the causes of evolution in the sector, but some researchers have attributed to the evolution to increased uncertainty and adoption of analytical approach towards understanding economic rationality of health. For example, the US health system has undergone numerous changes characterized by an increase in managed care, driven by competition, rationality and self interest.
The Timeline of Health Care Funding
The numerous changes and developments in the health care sector have dominantly been attributed to changing demand and supply of health. The demand and supply of any commodity determine the price, and this has changed over time as the population has exponentially grown over time. Globally the people in need of health care services have increased, leading to an increase in prices and the cost of health care. The early 1900s experienced the emergence of organized health as Railroads established an extensive medical program in the US. As compared to other developed countries in Europe, America was lagging behind in the development of insurance programs to cater for the cost of sickness. The period experienced numerous developments as health insurance started to gain support.
References
Culyer, A. J., & Newhouse, J. ( 2000). Handbook of Health Economics, Volume 1, Part 1. New York: Elsevier.
Murray, J. E. (2007). Origins of American Health Insurance: A History of Industrial Sickness Funds. Toledo: Yale University Press.
Penner, S. J. (2004). Introduction to Health Care Economics & Financial Management: Fundamental Concepts with Practical Applications. Oakland: Lippincott Williams & Wilkins.
