Summary: Economics And Financing Of Health Care (Flashcards)

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• 1 M1: Is healthcare really different?

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• 4 reasons why healthcare economics are relevant:

  1. Healthcare is a large and expanding sector
     
  2. Healthcare is no regular economic good;
  1. It's a right, not a privilege
  3. Features of Healthcare easily result in market failure and government failure
  4. Economic organization has impact on the efficiency and equity of healthcare allocation

• 2 reasons why the USA is an outlier in healthcare expenditure as % of GDP:

  1. High administration costs:
     
  1. 8% compared to 3%
  2. Rapid adoption of technology:
  1. Expensive machines and developing new drugs

• Reasons for the expansion of the healthcare sector (7x):

  1. Advancing medical science and technology
     
  2. Ageing of the population
  3. Shift towards chronic diseases
  4. Increasing welfare
  5. Expanding health insurance coverage (moral hazard)
  6. Baumol's cost disease
  7. Perverse (financial) incentives

• Three dimensions of universal coverage + explanation:

  1. Financial protection:
     
  1. What do people have to pay out-of-pocket
  2. Population:
  1. Who is covered?
  3. Services:
  1. Which services are covered?

• Why is healthcare different from other goods? (8x)

  1. Presence and extent of uncertainty
     
  2. Information problems / information asymmetry
  3. Presence of insurance / risk-bear third parties
  4. Large role of non-profit firms
  5. Restrictions on competition
  6. Importance of equity and solidarity
  7. Government subsidies and public provision
  8. Ethical concerns

• 4 sources of market failure:

  1. Uncertainty
     
  2. Risk-bearing third parties 
  1. Moral hazard
  3. Asymmetric information
  1. Agency problems
  4. Externalities
  1. Smoking, vaccination

• 4 sources of government failure:

  1. Information problems
     
  2. Coordination problems
  3. Motivation problems
  4. Special interest groups

• The role of the market and the government in healthcare?

  Market: efficiency
  Government: universal access (cross-subsidies)

• Definition of health economics by Folland, Goodman & Stano.

  “Health economics studies the allocation of resources to and within the health sector. Because this sector has become the largest sector of many countries’ economies and its share of GDP is expected to continue to grow, we should not be surprised that health economics has emerged as a distinct specialty within economics.”

• What is Baumol’s cost disease? And why is this happening in the healthcare sector?

  The rise of salaries in jobs that have experienced no increase of labour productivity, in response to rising salaries in other jobs that have experienced the labour productivity growth.
  
  In the healthcare sector, the productivity of workers did not increase at the same pace because it harder automatized in the HC sector than in other sectors.