Economics and Health Care - Research Paper Example

? Health Care Economics Corey Sutton Dr. AM The Economics of Health and Health Care Economics and Health Care How Economics Applies to Health Care Economics is fundamentally a social science that seeks to explain how society allocates its scarce resources to satisfy the demand for various goods in society. Many scholars have debated whether the concepts and principles developed in economics can be used to explain how decisions are made in health care. There are a number of ways in which health care may be regarded as an economic good. Yet, in some ways, health care is quite different from conventional goods and services as understood in economics. For instance, many people desire health care, not perhaps as an end but as a necessary means to a desired ends (Parkin, 2009). In this way, there is a demand for better health, which leads to an indirect demand for health care. The resources required for delivering health care, e.g. doctors, hospitals, equipment, etc. are limited (Parkin, 2009). Thus, the concept of allocating scarce resources for providing a service finds resonance in health care too. However, one major difference identified by Scott, Solomon and McGowan (2001) is that in health care, there is an absence of a “market price” that is determined by the interaction of demand and supply forces. This is because many health care services are covered by social support programs such as Medicaid in the United States. In other countries, insurance companies play an important role in covering health care expenses for their clients. This model makes it difficult to determine the exact value of health care to consumers. Parkin (2009) identifies several ways in which economic principles are applied in health care. For instance, economic principles can be used to ensure that equal use of health care services is provided to people with equal health care needs. Similarly, economic principles can help the health care system provide equal health outcomes based on equal merit or need. Kumar, Williams and Sandy (2006) explain how measures such as cost-minimization analysis, cost effectiveness, cost-utility analysis and cost-benefit analysis can be used to maintain high levels of efficiency in the health care system. Cost-minimization techniques, for example, can be used to select the method that uses the minimum resources to produce a certain health outcome. In addition, cost-utility analysis helps hospital management and doctors to evaluate treatments on the basis of “utility-based outcome units.” Implications of Poor Health Care System As economics mainly deals with market economy concerns, applying those principles to health care while ignoring the differences between health care and traditional consumer goods can lead to certain economic and social problems. Friedman (2013) has identified some of the weaknesses of the American health care system which can help to illustrate the impact of economics on health care systems as well as the costs of a poorly functioning health care system on society. The Medicaid system is an integral part of the American health care system. Since 1960, it has provided affordable health care to many Americans who could not afford it. Insurance companies have also contributed much by reducing the costs of health care significantly for consumers. However, Friedman (2013) states that the American health care system is not as efficient as many claim it to be. Some of the so-called reforms to the health care system reflect misunderstanding of economic forces by policymakers. Friedman (2013) argues that current reforms are transferring a greater proportion of the health care costs from the insurance companies to those who need health care, with the effect that the consumer will become increasingly price-sensitive and quality health care will become beyond the reach of many Americans. This move is founded on the misplaced notion that insurance coverage encourages people to consume more health care services than they really need. At the same time, the American government is doing little to make administrative processes more efficient and prevent pharmaceutical companies from charging excessively high prices. On the other hand, the Obamacare reforms have become controversial mainly because of the increased costs of providing federally subsidized insurance plans to consumers (Cleave, 2013). This, particularly during a period when America is trying to emerge from a period of economic decline, reflects the divisive effects of economics on health care and the importance of an efficient and cost-effective health care system. A Statistical Tool for Measuring Health Economics Hospital administrations in collaboration with insurers and other stakeholders have developed a host of statistical tools to monitor and evaluate the efficient of health care processes. Hussey et al. (2009) describe a number of such tools in their study on health care efficiency measures. Among these is a statistical tool that compares whether individual physician treatments are more efficient compared to physician teams administering treatments. Using this tool, health care researchers can weigh the costs of inputs including labour hours for doctors and nurses, medical tests, ultrasound, X-rays, etc. to determine the most efficient one for the patient. This tool is used to determine, for instance, whether solo physician treatment compared to group physician treatment may be more effective at reducing the number of patient visits to the physician (Husset et al, 2009). This statistical tool has also been modified to enable additional variables to be accommodated. Hence, variables such as the experience level of the physician and the number of hospitals in the locality can also be factored into the equation to obtain more accurate results. The tool is based on the stochastic frontier analysis (SFA) methodology which is a completely parameterized model of efficiency analysis. This particular kind of efficiency analysis helps to make comparisons between various combinations of health care inputs to achieve certain outcomes. The model for this tool can be designed similar to a linear regression model. This model helps to determine the efficiency of health care practices by measuring deviation from benchmark levels in the form of one-sided error. By including all the applicable variables in the model, this tool could help physicians and health care administrators to determine the best mix of health care resources to obtain the most efficient results. References Cleave, K. V. (2013). Obamacare: What is Obamacare costing you? Retrieved from http://www.wjla.com/articles/2013/10/obamacare-what-is-obamacare-costing-you--95714.html Friedman, G. F. (2013). The Unhappy Marriage of Economics and Health Care. Retrieved from http://pnhp.org/blog/2013/05/06/gerald-friedman-the-unhappy-marriage-of-economics-and-health-care/ Hussey, P. S., de Vries, H., Romley, J., Wang, M. C., Chen, S. S., Shekelle, P. G., & McGlynn, E. A. (2009). A systematic review of health care efficiency measures. Health Services Research, 44(3), 784-805. Retrieved from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2699907/ Kumar, S., Williams, A. C., & Sandy, J. R. (2006). How do we calculate the economics of health care? European Journal of Orthodontics, 28(6), 513-519. Retrieved from http://ejo.oxfordjournals.org/content/28/6/513.full Parkin, D. (2009). Principles of health economics (including the notions of scarcity, supply and demand, marginal analysis, distinctions between need and demand, opportunity cost, margins, efficiency and equity). Retrieved from http://www.healthknowledge.org.uk/public-health-textbook/medical-sociology-policy-economics/4d-health-economics/principles-he. Scott, R. D., Solomon, S. L., & McGowan, J. E. (2001). Applying Economic Principles to Health Care. Emerging Infectious Diseases Journal, 7(2). Retrieved from http://wwwnc.cdc.gov/eid/article/7/2/70-0282_article.htm#suggestedcitation Read More