Nowhere in the world is there a health care system that devotes enough resources to health care to meet all of its citizens’ wants. Health can indeed be regarded as a good, in fact a fundamental commodity that is essential to people’s well-being, leading to a demand for improvements in it. And when the nation has good healthcare system, there could be a free rider problem, because it is hard to exclude anyone from consuming health due to ethical reasons. Economists have created some very useful ways of measuring equity, but apart from that economic analysis of equity is less clear than the analysis of efficiency and there is lower consensus amongst economists about it. Economists are specialists in the analysis of efficiency and largely agree about what it means, and about definitions of different types of efficiency. The demand for such goods is lower and their prices are lower. Consider a screening programme which can be carried out with different numbers of sequential tests. Social efficiency is where both of these are achieved. Pareto efficiency is therefore a contentious idea as a way of thinking about how resources should be allocated at a societal level, but does form the basis of definitions of efficiency in economics more narrowly. Inequities could arise because of the financing system itself. Further use of the concept of the margin is discussed in section 6, and a specific application of this in health care is discussed in section 8. %%EOF Section 4 reviews specific economic models and techniques for analyzing some of the health policy issues highlighted in this introduction. It is likely that these equity principles will conflict with each other. Health economics seeks to facilitate decision making by offering an explicit decision making framework based on the principle of efficiency. But the point is that markets do not result in a random allocation of scarce resources, but one that is the result of the incentives provided to economic actors, both consumers and producers, by prices. “The Impact of Consumer Inattention on Insurer Pricing in the Medicare Part D Program.” These two concepts have technical definitions, which are described below. 0 Many individuals discuss the subject without ever even realizing that there is a whole branch of economic theory devoted to this topic. Vertical equity means the unequal treatment of unequals; for example, do people who have worse levels of health have greater access to health care? For example, different socioeconomic and ethnic groups might have different use of health services because they have different levels of ill-health. Such health inequalities, particularly those that demonstrate that health status levels vary systematically and inversely with socioeconomic status, are always important in health policy debates within most countries and are a major concern of governments, depending on their political preferences. A key element of defining equity is specifying what it is that is to be fairly distributed between people, sometimes called the ‘distribuendum’. 3 Examples of How Economics Affects Health and Health Care. Performing one extra operation would require a new theatre to be built, so its marginal cost would be very high. Technical efficiency is only concerned with how many inputs are used in production, while economic efficiency is related to the cost of those inputs. At the beginning of an inpatient stay there are high costs of surgery and perhaps of high dependency care. Health economics examines the costs and consequences of health issues, connecting public health science to real-world applications. Ho, Kate, Joseph Hogan, and Fiona Scott Morton. In analysing these issues, health economics attempts to apply the same analytical methods that would be applied to any good or service that the economy produces. Many important forces shaping health and health care have more to do with economics and social policy than with any particular medical treatment or procedure. One is related to the resource input and goods output model outlined above, looking at how resource use, costs and outputs are related to each other within a firm.

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