Good example of analyzing health economics: implications of health economic concepts essay

for Health Care
Economics is something that we apply in our lives on a daily basis. According to Haycox (2009), economics is the science that analyses scarcity: Allocation of limited resources to their best possible uses. Resources that we have are naturally scarce compared to our needs which are unlimited (Scott, Solomon, and McGowan, 2001). Economics functions to somehow solve the problem of scarcity by helping us weigh which among our countless needs should be prioritized the most given the limited resources that we have. Economics is basically easy to comprehend when applied to the common things in our daily lives. But when applied to health and healthcare, economics transforms into a whole new level of something harder to understand, something that is much more difficult to deliver.
Economics in relation to health and healthcare is called health economics (Andargie, 2008). Health economics deals with the issues associated with the allocation of scarce resources in order to improve health (Andargie, 2008). Just like the common economics, health economics is mainly concerned with factors such as supply and demand, consumers and suppliers, elasticity, resources, and costs—all integrated with health. In relation to healthcare, consumers are the patients while suppliers are the healthcare providers. Later we will understand the role played by insurance companies or private sectors as third-party healthcare providers. Supply and demand in healthcare greatly differ from that of other things to which economics apply. Since services and goods incurred as part of healthcare provision vary from person-to-person, with reference to medical conditions, they do not have standard market prices thus, making the basis for demand and supply not as clear-cut in health economics as in other forms of economics. Also, elasticity or the degree of responsiveness of an economic variable to a certain change in another variable is also highly different in health economics. Elasticity is much more difficult to measure in terms of health economics as economic variables with regards to health do not have specific outcomes to patients. In general, resources in health market are scarce but must be allocated in such a way that quality of healthcare is still uncompromised (Haycox, 2009). With regards to health measures, many factors determine the success and failure of health within a community but in general, healthcare with high quality is more attainable for more affluent states or communities which have more resources to allocate for healthcare facilities. Cost in healthcare is the amount of money paid to achieve a desired outcome or benefit (Haycox, 2009; Andargie, 2008). In healthcare, costs are relatively higher with reference to the scarcity in resources.
There exists a wide difference between economics not related to health and economics that is related to health. Economics ideally deals with what is called as the perfectly competitive market which includes (1) buyers and sellers who influence the exchange of goods and services without the aid of an economic agent, (2) a homogenous product or product that cannot be substituted or altered to affect and increase the price, (3) firms that can exit or enter the market free from any types of intervention, (4) complete market information that is accessible to all the participants of the market, and (5) fully defined system of property rights that rightfully assigns ownership of products and other productive resources (Scott et al., 2001). This is where health economics differs from the economics that deals not with healthcare. According to Scott et al. (2001), market that deals with healthcare can be considered as an imperfect market because (1) products and services offered in relation to healthcare are considered heterogeneous, meaning they are not standardized therefore, patients or consumers cannot expect a specific outcome, (2) insured patients have economic agents in the forms of their insurance companies which are also considered as third-party payers, and (3) since products and services offered in relation to healthcare are heterogeneous, no market price is ever applicable at any time, therefore, lacking the feedback mechanisms that shall reflect the value of resources in health care (Scott et al., 2001).
Healthcare professionals and decision-makers are the foremost individuals who need to be acquainted with health economics. Health economics helps in establishing choices that must be considered in order to maximize the benefits of scarce resources. With the help of health economics, healthcare decision-makers can analyze better the choices they must prioritize “ among competing interventions through the analysis of their costs and benefits” (Haycox, 2009, p. 2). Since health economics provides a systematic study of choices available to maximize the benefits from costs and utilize the resources to their fullest despite their scarcity, it is helpful that the main authorities that run the healthcare facilities of a community know the basis of the choices they must make. Healthcare professionals and decision-makers who know nothing about health economics are missing a critical aspect that they need in order to fully exercise their duties and obligations.
Understanding the complexities of health and healthcare is necessary when integrating economics to healthcare. Health economics would not serve its purpose if the basis of the factors unto which it is applied is not fully understood. For one example, the reason for the high variability among economic factors (e. g. supply and demand) regarding healthcare provision would not be fully understood if the complexities of services, products, costs, and benefits in healthcare are not taken into consideration and analyzed.
Aside from healthcare professionals and decision-makers, government authorities also need to be familiar with the scope of health economics. Healthcare in many countries, especially in Asia, is still dependent on their government despite the widespread existence and prevalence of third-party insurance companies who act as economic aid of the patients and pay in their behalf—through an accumulation of monthly contributions from wages or personal choice of an individual to insure him/herself—for products and services incurred as part of healthcare (Andargie, 2008; Scott et al., 2001). Government plays a great role in the implementation of healthcare facilities that meet the needs of its state’s population. One fine example of the association of government with the issues of health economics is the presidential race between Hilary Clinton and Barack Obama in 2008 where both of them acknowledged the great culprits created by a deteriorating healthcare system among the US population. Both candidates addressed the impacts of poor healthcare system on the US nation’s economy and health of the population in general in their campaign platforms (Cohen, Neumann, and Weinstein, 2008). This would not be possible if they did not have any intimate knowledge about health economics. This is one of the reasons why health economics is fundamental in promoting the stability of a nation. The involvement of the government officials with the provision of high-quality healthcare necessitates knowledge of health economics—a discipline that determines what needs to be reformed, what strategies need to be formulated, and what are the choices that must be considered to maximize the benefits of scarce resources.
Private sectors that intervene with the healthcare market—usually as third party payers in behalf of consumers—would not be able to perform their jobs and exercise their functions as economic aids of providing interventions to access healthcare if they do not understand the importance of the principles they are working with, thus learning the principles of health economics is a must. Private sectors serve the purpose of being the economic aid of consumers, intervening and acting as third-party in the purchase of goods and services related to healthcare (Scott et al., 2001). Also, the activities of private sectors in connection to healthcare system of a certain country “ inevitably impacts” that country’s public sector (McIntyre, 2010, p. 19). Therefore, private sectors need to learn the overall principles of health economics that apply to the country they are working with in order to help in the success of improving the quality of healthcare being provided.


Andargie, G. (2008, Sept.). Introduction to Health Economics. Ethiopia Public Health Training Initiative, 1-264. Retrieved from http://www. cartercenter. org/resources/pdfs/health/ephti/library/lecture_notes/health_science_students/LN_Intro_to_Health_Economics_final. pdf
Cohen, J. T., Neumann, P. J., and Weinstein, M. C. (2008, 14 Feb.). Does Preventive Care Save Money? Health Economics and the Presidential Candidates. The New England Journal of Medicine, 358(7), 661-663. DOI: 10. 1056/NEJMp0708558
Haycox, A. (2009, Apr.). What is health economics? Retrieved from http://www. medicine. ox. ac. uk/bandolier/painres/download/whatis/what_is_health_econ. pdf
McIntyre, D. (2010, July). Private sector involvement in funding and providing health services in South Africa: Implications for equity and access to health care. Equinet Discussion Paper 84, 1-52. Retrieved from http://equinetafrica. org/bibl/docs/DIS84privfin%20mcintyre. pdf
Scott, R. D. II, Solomon, S. L., and McGowan, J. E. (2001, March-April). Applying Economic Principles to Health Care. Emerging Infectious Diseases (CDC), 7(2), 282-285. Retrieved from http://www. ncbi. nlm. nih. gov/pmc/articles/PMC2631712/