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Why Americans Pay More for Healthcare
Staff Reporters
According to Diana M. Farrell, Eric S. Jensen, and Bob Kocher, the US spends more on health care than comparable countries do and more than its wealth would suggest. Here’s how—and why.
Link: The McKinsey Quarterly Report
Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com or Bio: www.stpub.com/pubs/authors/MARCINKO.htm
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Filed under: Health Economics | Tagged: Health Economics, healthcare |
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But, What is Functional Health Economics, Anyway?
A seminal article by Kenneth Arrow PhD is often cited as the source of origin of health economics as a discipline to itself. However, the relationship between economic productivity and health of individuals was been mentioned as early as 1776 by Adam Smith.
Health economics is that branch of economics that deals with health and health care. It is the study of the functioning of the health care system and the private and social causes of health-affecting behaviors using the distinctive style of economists. The purpose of health economics is to help the government, health care workers, decision makers and the economy as a whole to in their efforts to provide optimal health facilities. The need to study health economics arises because at present how health services should be made available is an important social as well as political issue. Problems crop up as health services are not free and resources are scarce. Health economics is vital in a world where the population is ageing and there exists great strain on health budgets.
Health economics focuses on different aspects of health. One is the evaluation of individual treatment. This approach tries to judge whether a method of treatment is desirable for a patient from the point of view of costs and after effects. There are several methods of economic evaluation that can be used, such as the following:
• Cost minimization analysis
• Cost benefit analysis
• Cost-effectiveness analysis
• Cost-utility analysis
In 1972 Michael Grossman came up with a model of health production that has influenced this discipline. He treated health as a capital good which requires investments to prevent depreciation and also as a consumption good that yields direct utility to a person. Investment in health is costly because consumers must spend time and other resources against other goals.
For example, an individual might go to a gym for an hour each day to keep fit. These factors are used to determine the optimal level of health that an individual will demand. The optimal level of investment in health occurs where the marginal cost of health capital is equal to the marginal benefit. The model can predict the effects of changes in prices of health care and other goods, labor market outcomes such as employment and wages, and technological changes on the demand for health care.
Finally, using the tools of economics, study is also undertaken of various markets linked with health such as:
• Health care finance market
• Doctors and nurses services market
• Institutional services market
• Input factors market
• Professional education market
Trust this functional definition is helpful.
Wexford
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