INTRODUCTION

Economics is the social science that analyzes the production, distribution and consumption of goods and services. Health economics involves the application of various microeconomics tools such as demand and cost theory to health issues and problems. The health economics is to promote a better understanding of the economic aspects of health care problems so that corrective health policies can be designed and proposed and health economics is also essential for conducting health economic analyses.

HEALTH

At the time of the creation of the World Health Organization (WHO), in 1948, Health was defined as being “a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity”.

ECONOMICS

The Economist's Dictionary of Economics defines economics as "The study of the production, distribution and consumption of wealth in human society."

“Economics enquires in to the nature and causes of the wealth of nations”. –Adam Smith

Three fundamental elements of economics are:

Scarcity: needs, wants and demands are greater than resources available to meet them

Choosing: analyses and assists decision making

Alternative uses: opportunity costs

CONCEPT OF HEALTH ECONOMICS

Health economics is a branch of economics concerned with issues related to scarcity in the allocation of health and health care. It is the study of how resources are allocated to and within the market for health care. It combines the study of health as it relates to economics and the study of economics as it relates to health.

There are many conditions that may be different for health-related goods and services compared to other products. These include:

Information: Consumers may not be informed about * the nature and quality of health care being purchased.

Uncertainty: Randomness in the cause and timing of ill health. Barriers to competition: Limitations may be placed on health care labor, the use of

hospitals, or other resources.

Externalities: One person’s or firm’s action can affect those of a third party separately from financial effects in the marketplace.

DEFINITION OF HEALTH ECONOMICS

General definition of health care economics is as follows: .The study of how scarce resources are allocated among alternative uses for the care of sickness and the promotion, maintenance and improvement of health, including the study of how healthcare and health-related services, their costs and benefits, and health itself are distributed among individuals and groups in society.

“Health economics studies the supply and demand of health care resources and the impact of health care resources on a population.” [Mosby medical encyclopedia, 1992)

“Health economics is the discipline that determines the price and the quantity of limited financial and nonfinancial resources devoted to the care of the sick and promotion of health”. - Klarman, H.E

Health economics can, broadly, be defined as ‘the application of the theories, concepts and techniques of economics to the health sector’ (Lee and Mills, 1983).

Health economics, which is a branch of economics concerned with issues, related to scarcity in the health markets. The five health markets typically analyzed are:

Healthcare Financing market Physician services market Institutional services market Input factors market Professional education market

Topics related to various aspects of health economics include the meaning and measurement of health status, the production of health and health care, the demand for health and health services, health economic evaluation, health insurance, the analysis of health care markets, health care financing, and hospital economics.

BASICS OF HEALTH ECONOMICS

In every country, health economics plays, or should play, an important role in critical policy and operational decisions,

These decisions include:

The appropriate role of government, markets and the private sector in the health sector. Resource allocation and mobilization functions critical to addressing equity and

efficiency of public spending.

Resource transfer mechanisms to hospitals and health care providers and the incentive systems that underlie them.

Organizational structures at the system level and the linkages between the levels. Organizational structures at the facility level. Mechanisms to change behaviors of the population at large and health system providers

in order to achieve better health.

Health economists can contribute to better decision-making. Long term capacity building efforts, through degree programs in universities, should develop the human capital needed in health economics to address needs.

MAJOR FEATURES OF HEALTH ECONOMICS

• It is a broad sub discipline of economics.

• Overlaps with a number of topics, both within and apart from health and medicine.

• It is concerned with maximizing benefits within available resources.

• Encompasses more than economic evaluation alone.

• It interacts with many other disciplines like finance, insurance, education, law, geography, information technology, business management etc.

• Has significant role in health care decision making at policy and clinical level.

• Has the objective of achieving efficiency and equity in health care services.

• It introduces to the application of economic thinking to the analysis of health policy and health systems

Organization and financing of health care

Priority setting and resource allocation

Economic evaluation of alternative ways of providing health care

2.3 IMPORTANCE OF ECONOMICS IN HEALTH

1. Health Economics lies at the interface of economics and medicine and applies the discipline of economics to the topic of health

2. There is rapid growth in health expenditure:

demographic changes� technological advance� changing expectations�

3. Resources available to health care are scarce and finite. A choice must be made about which resources to use for which activities. With scarcity, what is required is an efficient allocation or decision making system to determine how much of which kinds of health care is provided to different individuals and it is the role of economics.

4. Choices must be made as to what health care should be provided, how it should be provided, in what quantities and how it might be distributed

5. Health economics provides a way of thinking and a set of techniques which assists in decision making in health care sector which promotes efficiency and equity. Economy is producing exactly the quantity and type of health care that the population wants (allocative efficiency) and is producing that health care for the lowest possible cost (Productive efficiency).

6. Health economics is about maximizing social benefits subjected to the constraint imposed by resource availability

7. Most health care related issues have an economic dimension to them. These include medical insurance coverage, the overall demand for health care services, prescription of drug prices etc. The most important aspect is the proper allocation of resources, which is perhaps the cause of all problems in health care.

SCOPE OF HEALTH ECONOMICS

The scope of health economics is encapsulated by Alan William's "plumbing diagram" dividing the discipline into eight distinct topics:

The scope of health economics includes the following:

What influences health? (Other than health care); What is health and what is its value?; The demand for health care; The supply of health care; Microeconomic evaluation at treatment level; Market equilibrium; and price mechanism; Evaluation at whole system level; and Planning, budgeting and monitoring mechanisms

Indicators of Health Status

Birth rate: It means number of live births per 1000 people in a year. In western countries the birth rate is very low. Generally, higher the birth rate higher will be the health problems.

Death rate: It means number of deaths per thousand populations in a year. It is very high in Asian countries. This is due to lack of medical facilities. Death is high also because of low literacy rate.

Infant mortality rate: Number of deaths of children less than 1 year of age per thousand live births is called Infant Mortality Rate. In other words, it refers to number of children die before their first birth day, per thousand populations in a year. This is mainly because of lack of maternal education and unhygienic environment.

Total fertility rate: It means the number of children delivered by a woman.

Life expectancy: It means longevity of life or the number of years a person can live. Due to decline in birth rate, death rate, infant mortality rate and fertility rate, life expectancy has gone up from 37.1 years to 63 years in 2001, in India.

AREAS OF HEALTH ECONOMICS

Major areas or applications of health economics are as under:

l. At family level

At family level, aim of health economics is to help its members in spending their money effectively and efficiently for safe guarding their health and welfare. There are number of ways by which a family can practice health economics.

(a) The family takes advantage of (and even demands) the routine immunization services.

(b) They scrupulously follow healthy life styles by avoiding smoking, drinking, animal fats, excess salt, sugar preparations, and junk foods, and indulge in regular physical activities, meditation and diversional pursuits.

(c) They obtain health insurance for themselves.

(d) When they feel ill, they at once seek consultation from a qualified medical practitioner.

2. Maximum Utilization of the Limited Resources

The financial resources for health care are limited. They should therefore be used in the most profitable way for the control of diseases and promotion of health. Following help in the optimum use of health investment:

• Prioritization: The health administrator studies the magnitude, severity, disability and prevents ability of the prevalent diseases in the community to determine which of them need to be controlled on a priority basis. He then allocates a lion’s share of available budget for tackling them.

• Geographic urgency: The health authorities determine which particular areas within the state or a district need urgent medical and health services. Funds are preferentially allotted for health care in these areas.

• Planning: At the stage of planning for a health program, the planners choose the most effective course of action. For this purpose they carry out the analyses of cost-benefit, cost-effective, cost-utility, etc. Based on the result of these they select the best of the available options.

• Administrative streamlining: For effective use of money, the health care provider should be knowledgeable about the principles of financial management. He must enforce interdepartmental coordination. Also he must ensure that duplication of work does not occur.

• Consumer’s demands and satisfaction: The health administrator should assess people’s felt health needs and demands. He must make budgetary allowance for satisfying these on a priority basis. Health economics focuses on the care provider to spend money in such a way that the needy who receive the services are satisfied with them. People in general should believe that the government is using the taxpayer’s money judiciously.

• Supplier induced demand: Manufacturers of health goods, the condoms, oral rehydration salt packets, iodized salt, rejuvenating potions, Cure-all elixirs, etc., and private providers of health services. The abortion operations, fertility regulation, prenatal sex determinations, etc., often boost the demand for their goods/services through publicity or other means. The health authorities should differentiate between desirable and undesirable goods/services and curb the later through education and/or legislation.

3. Financing in Health care Services

Financing in health care services refer to the amount of money available for health care and related activities the medical education, health research, population control, nutrition promotion, etc.

Some of the other sources of health financing are the following:

(a) External aid/loan: International agencies and banks have, from time to time, provided grants and interest free loans for health

(b) Health insurance: Both private companies and the government run health insurance schemes. Private health insurance is not yet popular in India. The major schemes that the government runs are Employees State Insurance Scheme and the Central Government Health Scheme that benefit industrial workers and government employees respectively.

(c) Health financing by corporate bodies, voluntary agencies and philanthropic individuals. Many industrial establishments provide free health care for their better paid employees. Rotary Club, Lions Club, Family Planning Association of India (FPAI), National Tuberculosis Association (NTA), India Red Cross Society (IRCS), among others, run free clinics, maternity centers and hospitals. Also they conduct periodic diagnostic, blood-donation, cataract and sterilization camps.

(d) Users’ fee: The consumers pay for health care. Many prefer to obtain paid treatment and hospitalization from private dispensaries and nursing homes.

ROLE OF HEALTH IN ECONOMIC DEVELOPMENT

The role of health in economic development is analyzed via two channels:

• The direct labor productivity effect and

• The indirect incentive effect.

The incentive effect is borne of the theoretical literature, and individuals who are healthier and have a greater life expectancy will have the incentive to invest in education as the time horizon over which returns can be earned is extended. Education is the driver of economic growth, and thus health plays an indirect role. Accounting for the simultaneous determination of the key variables: growth, education and fertility, the results show that the indirect effect of health is positive and significant.

Economic development is one of the main contributors of the health status of the people. Health economics combines the economics perspective of production with the social objectives of health sciences. The concepts of this new discipline are common in the academic health field and in the professional literature, thus, health professionals adopt and use regularly these terms.

IMPORTANCE OF HEALTH ECONOMICS IN NURSING

Health economics in nursing is extremely important in patient care. It can explain non-compliance with meds (too expensive), nutrition problems, and many other factors you will encounter when dealing with and assessing your patient.

ASSESSMENT AND EVALUATION OF HEALTH CARE SERVICES

Economic evaluation is “the comparative analysis of alternative courses of action in terms of both their costs and consequences in order to assist policy decisions” (Drummond et al, 1997). Economic evaluation is not choosing the cheapest. Economic evaluation is used to ensure that limited resources are allocated as efficiently as possible. Society may have other goals when allocating resources: equity or ethical issues. There are many methods to evaluate for health care services.

Marginal Analysis Cost minimization Analysis (CMA) Cost-effectiveness Analysis (CEA) Cost-utility Analysis (CUA) Cost-benefit Analysis (CBA)

MARGINAL ANALYSIS

This is one of the simplest methods of micro economic evaluation. In this method there is no need to know the total exact costs or benefits of the various services or treatments. It involves a comparison of the marginal costs and benefits of the alternative services, and it leaves much to the judgements of the decision maker. It provides estimates of the implications of redeploying resources within, to, or from a programme where alternative patterns of care are possible. If there is no budget restraint then a programme should be expanded or contracted to the where marginal benefits equals marginal cost; if there is a budget constraint, then all programmes should operate at a level whereby the ratio of marginal benefit to marginal cost is the same for all programmes

COST- MINIMISATION ANALYSIS (CMA)

The technique identifies the least cost intervention and is based on prior epidemiological findings .e.g. if reduction of disability is achieved to the same degree by two intervention than which is the least cost intervention to achieve reduction of disability

COST EFFECTIVENESS ANALYSIS (CEA)

Cost effectiveness analysis (CEA) measures outcomes in 'natural units', such as mmHg, symptom free days, life years gained. Cost effectiveness analysis is a formal planning and evaluation technique having both economic and technical components. It involves organizing information so that the costs of alternatives and their effectiveness in meeting a given objective can be compared systematically. The main aim of cost- effectiveness analysis is how at least cost to meet a particular objective? and is labeled as “X- efficiency” by economists. Or given a fixed budget to meet a particular objective, how best to deploy this budget? In order to answer these questions one has to define:

The objective 

The possible options The effects and relevant costs of each possible options.

 Example of cost  effectiveness analysis

Cost effectiveness can be expressed in terms of the total cost of each option, or cost per unit of output of the option, or the number of units of output obtainable for this budget for each of the option

  COST-UTILITY ANALYSIS (CUA)

Cost Utility analysis is a type of economic evaluation that compares the degree to which quality of life is improved per unit of money spent. It is a form of cost effectiveness’ analysis but it measures effect of the project or programme in terms of utilities. Like cost effectiveness analysis it can focus either on minimizing cost or maximizing effects. A quality of life index is used to compare the interventions. Results are expressed in terms of Quality Adjusted Life Years or QALY’s per monetary unit. It permits wide range of options. This measures allocates a quality of life value between 1(perfect health) and 0 (death) and combines quantity and quality of life to derive the quality adjusted life years {QALY}. QALY is important in representing the value of a treatment on the health status.

COST-BENEFIT ANALYSIS (CBA)

In cost benefit analysis (CBA) costs and benefits are both valued in cash terms. Cost benefit analysis asks the question “is the treatment valuable” It investigates whether the benefit of a project or programme exceeds costs. It involves identifying measuring and valuing all relevant costs and benefits over an appropriate time period. In cost benefit analysis objectives can be questioned. It values both costs and benefits in monetary terms and is expressed by benefit/cost ratio i.e. benefits divided by costs. If the cost-benefit ratio is more than one, the project/programme is worthwhile. It also helps to answer the question, “how to maximise the benefit from available resources?” which is labelled as “allocative efficiency” by economists.

The most commonly used techniques of economic evaluation are cost benefit and cost effectiveness analysis

PROBLEMS OF ECONOMIC EVALUATION

» Technical problem due to lack of information and the shortcoming of units of effect.

»“Efficient is not always sufficient” as the sole criterion for decision making. Final approach

which is sometimes classed an economic evaluation is a cost of illness study.

COST OF ILLNESS STUDY:

It is not a true economic evaluation as it does not compare the costs and outcomes of alternative

courses of action. Instead, it attempts to measure all the costs associated with a particular disease

or condition. These will include

•Direct costs; (where money actually changes hands, e.g. health service use, patient co-payments

and out of pocket expenses).

•Indirect costs: (the value of lost productivity from time off work due to illness).

•Intangible costs: (the 'disvalue' to an individual of pain and suffering).

HEALTH CARE ENVIORNMENT

INTRODUCTION; Over all development takes place in a healthy environment. Both the health

and illness of the individual is depended upon the environment in which the individual live in.

health care providers play a major role in an individual’s health and illness.

ENVIORNMENT

Environment refers to the sum total of conditions which surround a man at a given point in the

space and time. - CHRIS PARK

Comprehensive health environment encompass four areas of aspect like:

Health promotion

Prevention of disease and injury

Diagnosis and treatment of disease and injury

Rehabilitation.

LEVELS OF HEALTH CARE SERVICES

Health care services are classified into three levels: primary, secondary and tertiary. The trends

towards holistic care i.e. care of the entire person, including physiological, psychological, social,

intellectual and spiritual aspects.

1. Primary care: the major purposes of primary care are to promote and prevent illness or

disability. Promotion of wellness is mainly through regular exercise, reducing fat in the

diet i.e. diet control, reducing pollution etc.

2. Secondary care: services within the realm of secondary care include diagnosis and

treatment which occur after the client exhibit symptoms of illness.

3. Tertiary care: restoring an individual to the state of health that existed before the

development of an illness is the purpose of tertiary care.

AREAS OF HEALTH CARE ENVIORNMENT

Areas of health care environment are the areas through which health care services are provided

and they are

Physician’s office :

Physicians either have their own offices or work with several other physicians in a group

of practices.

Physicians are mainly concerned with the diagnosis and therapy pertaining to the

patient’s immediate illness or injury.

Hospitals :

Hospitals are the institution through which the restoration care to the ill and injured

traditionally has been provided.

They vary with size.

They can be classified based on its ownership.i.e. Governmental and nongovernmental

Hospitals also are classified by the services they provide. A general hospitals admits

patients requiring a variety of facilities including medical, surgical, obstetrics, pediatric

and psychiatry services. Other hospitals offer only specialty services such as psychiatry

or pediatric care.

Hospitals also provide health related research and teaching. Hospital personnel conduct

research and educational programs or they may provide resources for such personnel as

university teachers to carry out research and teaching responsibilities.

Daycare Centre:

Daycare centers are either attached to hospitals or independently to provide health care

services during day care services.

These centers have two advantages: they permit the patients to continue to line at home

while obtaining needed health care, and free costly hospital beds for seriously ill patients.

Nursing homes:

Many nursing homes are owned privately by individuals or group of individuals.

They provide long term care.

Rehabilitation centers:

Rehabilitation centers often exist as departments with hospitals and provide services to

patients admitted to the hospitals and to patients who come to the centers on an

appointment basis. These centers often combine of physical therapist, occupational

therapist, social worker and nursing personnel.

Community health centers:

Community health clinic provides medical, dental, nursing, counseling, legal and other

social services.

The often provide services to minority and low income groups and usually are available

free of charge or for a minimal fee.

Nurses provide services like immunization, screening test and home/ school visits to

provide counseling and health education.

Essential environmental health standards in health care contain guidelines for setting standards of

safety conditions to provide adequate health care.

develop specific national standards that are relevant to various health-care settings in different contexts

support the application of national standards and set specific targets in health-care settings

assess the situation regarding environmental health in existing health-care settings to evaluate the extent to which they may fall short of national plans and local targets

plan and carry out the improvements that are required ensure that the construction of new health-care settings is of acceptable quality prepare and implement comprehensive and realistic action plans so that acceptable

conditions are achieved and maintained.

These guidelines deal specifically with water supply (water quality, quantity and access), excreta disposal, drainage, health-care waste management, cleaning and laundry, food storage and preparation, control of vector-borne disease, building design (including ventilation), construction and management, and hygiene promotion.

Disease risks and preventive measures in health-care settings

Steps in establishing and managing appropriate standards at national, district and local levels

Roles and responsibilities for implementing guidelines and standards for environmental health in health-care settings

Essential temporary measures required to protect health

Provide safe drinking-water from a protected groundwater source (spring, well or borehole), or from a treated supply, and keep it safe until it is drunk or used. Untreated water from unprotected sources can be made safer by simple means such as boiling or filtering and disinfection.

• Provide water for hand washing after going to the toilet and before handling food, before and after performing health care. This may be done using simple and economical equipment, such as a pitcher of water, a basin and soap, or wood ash in some settings.

• Provide basic sanitation facilities that enable patients, staff and carers to go to the toilet without contaminating the health-care setting or resources such as water supplies. This may entail measures as basic as providing simple pit latrines with reasonable privacy.

Note that the risk of transmission of soil-based helminths is increased with the use of defecation fields. The use of shoes or sandals provides protection from hookworm infections.

• Provide safe health-care waste management facilities to safely contain the amount of infectious waste produced. This will require the presence of colour-coded containers in all rooms where wastes are generated.

• Provide cleaning facilities that enable staff to routinely clean surfaces and fittings to ensure that the health-care environment is visibly clean and free from dust and soil. Approximately 90% of microorganisms are present within visible dirt; the purpose of cleaning is to eliminate this dirt.

•Ensure that eating utensils are washed immediately after use. The sooner utensils are cleaned the easier they are to wash. Hot water and detergent, and drying on a stand are required.

• Reduce the population density of disease vectors. Proper waste disposal, food hygiene, wastewater drainage, and a clean environment are key activities for controlling the presence of vectors.

• Provide safe movement of air into buildings to ensure that indoor air is healthy and safe for breathing. This is particularly important if health care is being provided for people with acute respiratory diseases.

• Provide information about, and implement hygiene promotion so that staff, patients and carers are informed about essential behaviours for limiting disease transmission in health-care settings and at home.