Welcome to you all in these health economics
course, today we will start with a basic introduction
about health economics this course, as its
it intends to address the students who are
from economics who are also not from economics
as the name suggests health economics is basically
a marriage between Health Sciences and its
economic implications.
When I was doing my doctoral research, people
asked me that what is my research area.
So and broadly, I used to say this is health
economics and they were asking me that health
economics what is that?
I would like to take you through a 20 hour
session where you will learn the nitty gritties
about health economics in a broad way and
I will like to mention that this course intends
to benefit the students of economics of healthcare
or allied subjects which connects the health
and economics together.
Now, coming to the health economics, I will
first talk about what is health according
to the definition by World Health Organization.
Health is a status of complete physical, mental
and social well-being.
Now, when I say complete physical, mental
and social well-being everything connects
to health and to be very specific their health
status you ask me, how are you?
I will say I am good, I am not so good, I
am having fever or I was having fever.
So, whatever I am specifying about my health
is basically health status, when I talk about
health status then somebody asks me okay,
if you are not well did you consult a doctor
or have you taken a medicine, this health
status now I linked it to healthcare service
or my demand that way that I intend to go
to a doctor or I casually leave it.
When I talk about my caffeine problem they
may ask, do you smoke cigarettes that is my
behavioural problem, my demand.
Again, so the health status; health connects
to the health status, health status connects
to the service and demand for health or health
care, so health economics is basically connected
to healthcare economics.
Many often we come across the health economics
as synonymous as economics of health care
or healthcare economics therefore, now after
giving a broad definition about health or
health economics, I will go back to this economics
little bit.
And try to introduce the economics for which
whom those who are not coming from economics
background.
Why do we study economics, I asked my students
those who are not from economics background,
they say it is the study of money, finance,
these, that.
Let me say economics is not actually accountancy.
Economics we study primarily when we have
1; limited resources and 2; unlimited demand,
I mean we have enormous demand in our life
but we have limited resources, I want to live
150 years but I have limited resources, I
want to be healthy every day but I have limited
resources in terms of be it pollution, be
it availability of doctors, be it the medical
facilities otherwise be it my food habit,
so everything has a limitation also finally,
comes to my budget constraint.
So, even if I have an unlimited demand, I
also have limited resources to meet that demand
because it is not only me, there are millions
and billions of people who have enormous demand
and that particular resources which is limited
in nature are you know you are serving those
infinity amount of demand therefore, we need
to have choices that given those limited resources
or scarcity how best I can maximize my demand
or maximize my satisfaction based on my demand.
I have to choose between different resources,
which are possible given my constraints, my
budget constraints, my time constraint, my
cost constraints, my production constraints,
we will talk about more about these constraints
when we go along and we also have to choose
in a way that makes my choices efficient,
which makes my choices efficient, so that
I can say that I have gained the most given
the scarcity or the current limited circumstances.
Therefore, when I talked about these 3 aspects
that limited resources and unlimited demand
given and I will like to maximize my efficiency
given the choices, so in economics would;
we would like to bring them down in 4 basic
aspects.
So, the first one is costs; every activity
we do it has some cost, it can be monetary
cost, it can be non-monetary cost and the
cost is in terms of here we say in broad,
resource use.
Every resource we use it has some costs associated
with this, we pay monetarily or we do not
pay monetarily, there can be like say an example
of non-monetary cost can be time cost, for
an example I go to a doctor and I pay the
fees to the doctor that is my monetary cost.
My non-monetary cost is because I am going
to the doctor I am not going to work maybe
for that day, right or I am spending some
time, even if I am paid for taking leave,
so it does not, you know culminate to my;
does not have an implication to my monetary
cost or monetary loss but at the same time,
I am losing my time which could be utilized
in some you know, some other way which could
be productive.
I am being assisted by my family members,
they could; could not work or they could not
do anything else which could be productive
otherwise, if I am not going to visit a doctor
eventually, in a country like India or any
lesser developing; developed countries, we
see that there is a high cost associated for
the poor underprivileged villagers who stay
in remote areas have to come to our urban
cities to; to visit a hospital or our health
care provider.
They are not mostly, they are daily wage earners
or their income comes from their daily activities,
so they are losing their income, their family
members are losing their income and their
time cost, they are travel cost even if they
do not pay or they pay, so the cost is in
terms of resource use, it can be monetary
as well as non-monetary, when we study about
health economics, it also discusses about
the payment mechanisms.
And who pays for that in several countries,
I will take an example of say UK, where the
health financing is basically, done by the
Government through taxes, we can talk about
USA where the health financing is mostly private
in nature, the health care providers are private,
the people who are visiting a doctor or a
health care, they are paying either from their
insurance or from their pocket so because,
they are private.
Next and let us take an example of Canada,
in Canada, some part is provided through taxes
by the Government in some cases, the doctors
or the healthcare providers are paid by insurance
companies.
In India, it is very mixed in nature in India,
as the health care providers are very mixed
or diverse in nature, we have quacks who give,
who you know put some powder even if there
is a snakebite, there are quacks.
There is Government doctors, there is private
doctors who serves village peoples, there
are private doctors who charges high solving
this or consulting in tertiary care super
speciality hospital, so the nature of our
health care system in India is very diverse
and very sparsely distributed therefore, our
health care or our health care behaviour is
highly determined by the doctors or the health
care providers, hospitals, private or public
where they are located, what kind of problem,
I have whether, I am paying from my pocket
which is mostly the case in India.
Or in any lesser developed countries as well
as whether I am paying from my insurance or
my insurance pays for me or I am being paid
through some schemes you know because I am
a central Government employee or I am associated
with some Government scheme being a below
poverty level cardholder; BPL card holder.
So, my health care; health seeking behaviour
is determined based on who pays for my health
care and what is the payment mechanism.
And the costs associated because I am meeting
that cost based on this healthcare payment
mechanism is all directly connected with that.
The next is the benefits what I get.
I estimate the benefits against the costs
I mean, what I am gaining visiting a doctor,
what I am gaining by my health care behaviour
or healthy behaviour, I smoke a cigarette
what I am gaining or what I am losing and
after I have some lung infection, I go to
a doctor, what I am gaining and what I am
losing.
Because I pay for the cigarette here and later
I pay for the doctor in which way I want to
seek my; you know satisfaction or which way
I find more benefits against my payments be
it in cigarette, be it on towards the doctor
or my you know, my treatment processes.
The next is the choices I make.
Now, here as I said that based on the cost,
it comes, I look at the benefit that whether
I pay for this or a pay for that and what
kind of benefits I am getting best you know
in comparison to the costs and pay I am incurred;
incurring in different aspects.
So, I am; I have choices, right, I have different
choices and I have to choose the best one
and when I talk about the efficiency, I will
choose the one which gives me the highest
efficiency and efficiency is very relative,
I can gain satisfaction by smoking a cigarette,
you can say that sir smoke causes cancer,
do not smoke and you gain benefit by not smoking
cigarette, so it is very individual level.
Therefore, again when I go back to the choices,
I make my choices based on how much payment
I am making for a particular decision be it
healthy or unhealthy, be or what kind of choices
I make that I want to go to a homeopathic
doctor or an allopathic doctor, maybe the
homeopathy will take me longer time or an
allopathy doctor maybe it takes a longer time
but I do not have to go for a surgery for
allopathy, maybe I am paying more, I am going
for a surgery causes me pain.
But at the same time, my treatment is faster,
so you have got several choices and you have
to see which is the most efficient for you
maybe a surgery is not recommended for an
elderly person, so they can choose for a allopathic
or homeopathic treatment, they can, I am not
saying that is the best or that is the worst.
At the same time for me, I need to join a
Hospital, I mean join my job, I cannot stay
at home, if I have you know twisted my leg.
And then, I cannot choose a health care process,
which takes longer time now, so again I am
deciding about which is my choice and what
is the implication in terms of my benefits
and the benefits are very again subjective
in nature, my benefit may not be similar to
your benefit therefore, my choices may not
be similar or are not similar to your choices.
Therefore, when I see a half bottle, half-filled
bottle and then I say, if I am an pessimist,
I will say that this is this bottle is half-empty.
If I am an optimist, I will say that this
bottle is half-full, if I am an economist,
I will say this an inefficient choice because
you cannot afford to keep this bottle half-empty,
you are not making the best of your choices.
Now, I will introduce 2 concept; micro and
macroeconomics; micro and macroeconomics.
What is the difference between micro and macroeconomics?
Microeconomics, as the name says it is small,
micro means small, is not it, so when I talk
about microeconomics, it talks about individuals,
any human being individual, a singular sense,
2; households or the families you know, we
generally, in research terms in social sciences,
we call households mostly.
I do not say, I am saying that family is the
wrong term or non-scientific term but generally,
it is known as households, so households again
is a unit as a you know, is a unit which takes
economic decision which takes the healthcare
decision and then they can relate it at the
household level as a small unit and third;
if it is a community, you know community as
a unit, a small communities or small unit,
where there is a homogeneity in terms of the
health seeking behaviour or healthcare provision
or put the supply and demand side effect together
or separately.
On the other hand, when I talk about macroeconomics;
macro is a large concept, so you can say it
as a state or district; is a state or district,
it can be a country or it can be an international
perspective across countries yeah, so that
means whenever some economic decisions, the
economic; the relationships between economic
variables, economic theories are encompassing
different countries, state at the larger context,
then it is macroeconomics.
When it talks about the small; smaller context
at an individual level at a household level
or a small community level, it talks about
microeconomics and that expanse of these microeconomics
and macroeconomics are very different you
know, so whenever we are talking about a policy,
a Government’s decision about how much to
pay in a Health budget or an international
NGO, you know spending say a World Bank or
Asian Development Bank or some international
NGOs right, BMG, how much they are paying
for a particular health cause, for a particular
country their investment.
It is all are the macroeconomic variables
or macroeconomic decisions and in terms of
my health, my expenditure towards my treatment
seeking say, how much I paid during a particular
year for myself or for my family or household
or what is the; you know health insurance
mechanism at a community level or a community
financing mechanism, we can talk these under
micro economic theories.
Now, when I talk about efficiency; efficiency
is when I talk about efficiency; efficiency
is basically, an optimization concept.
When I talk about optimization, here in these
healthcare economics, we talk basically about
maximizing benefit; maximizing benefit given
resource constraints; maximizing benefit given
resource constraints therefore, when I talk
about this maximizing benefit given my resource
constraint, we can deliver to this topic 2
ways.
One is technical efficiency, another one is
allocative efficiency; technical efficiency
and allocative efficiency.
Now, what is technical efficiency, it is like
meeting a given objective that you have an
objective, you want to achieve that objective
given cost or cost constraints or certain
budget, you know to attain say, let us take
a production or the level of immunization
that I want to complete immunization for children
< 5 years of age; all 5 years of age children
should be; should have complete immunization
against certain listed diseases.
To attain that objective, if I can utilize
my resources in the best possible manner,
so that I can limit or keep my cost lowest
or least, then I achieve my technical efficiency,
so my resources; it can be capital, it can
be labour, I mean, it can be human resources,
it can be non-human resources and this cost
implications, so if I can deliver the best
in terms of healthcare, health status, health
achievement given my budget constraint; cost
constraints, then I am achieving our technical
efficiency.
Whereas, in terms of allocative efficiency,
we look at the dynamics where supply = demand
that is, when I as a service or as a Government
or a policymaker can ensure that the supply
of healthcare providers, the number of primary
health centres, the number of doctors per
1000 population, the number of nurses per
1000 population, the number of births per
1000 population, I am meeting that demand
based on the you know, with my supply yeah.
So and that can vary, maybe in Calcutta, where
Dengue is very high nowadays, whether I am;
I am achieving the level of supply of doctors
or the you know, the requirements based needed
to these Dengue treatment, I am meeting that
requirement or not given the higher prevalence
rate, higher percentage of Dengue cases or
incidence rate of that is the new cases in
a particular year of Dengue in a particular
locality in or a city or a state, whether
I am achieving that.
So, then I am meeting a supply = demand, may
be Dengue is not the case in Gujarat, there
is a higher proportion of diabetes at the
same time, I will look at whether in Gujarat,
the requirement for the diabetes treatment
is being delivered based on this you know,
the requirement of this of the general population
based on the prevalence rate or the percentage
of diabetic population in that particular
state during a particular time period.
Now, health economics basically, talk about
I come back again to health economics, you
know it also encompasses pharmaco economics;
pharmaco economics, they are not very different
than health economics, pharmaco is the pharmaceuticals
yes, so this is the economics which talks
about the drug therapies of the; you know
the consumption of a particular medicine for
a particular disease, its effectiveness, the
cost of that particular medicine.
And how best it is reducing that particular
disease prevalence know, how effective is
that therefore, when I am talking about this
effectiveness, this pharmaco economics and
healthcare economics mostly, talk about or
largely talk about economic evaluation.
We will talk about this economic evaluation
for a couple of hours later during our course
and this economic evaluation is the most sought
for concepts from the health economists.
So, what is evaluation?
I want to evaluate something right, what do
I evaluate, I evaluate a particular implementation,
it can be when evaluation is; we know that
when I write an exam after say 1 year of a
course or 2 years of a course when I write
an exam, my teachers are evaluating me right,
not me basically, my learning.
Similarly, so learning is my outcome here
which my teachers have delivered to me.
And I am trying to understand what has been
the effectiveness of that learning process
on me, I do better or I do bad that is subjective
that is again, you know varies from person
to person, their efforts and many other things.
In healthcare, the evaluation we do generally,
of a particular treatment or a treatment mechanism
of a medicine of or of some implementation
I give some vaccinations, I give some immunization
technique, I deliver some awareness campaigns.
And its evaluation on the health status of
that individual, of the household or of that
community as a whole therefore, in economics;
economic evaluation in health care we basically,
try to understand that how effective a particular
treatment process, a particular medicine has
been for a particular target population.
In a nutshell, in health economics, when I
talk about descriptive health economics as
economics by large has remained a quantitative
on numerical subject as a descriptive health
economics, I keep it quantification of a particular
phenomena, quantification of my health seeking
behaviour that how many times I go to a doctor
depending my affordability, quantification
of a particular disease, quantification of
a particular medicines, effectiveness on that
particular disease, quantification of how
much I pay or how much I lose, how much I
pay for the treatment, how much I lose because
I have the disease.
I; with respect to I take the treatment or
I do not take the treatment, at the same time
how do I pay whether I have an health insurance
then, what is the premium if I; my Government
is paying for me through taxes, then how much
they are paying, what is the percentage of
GDP they are paying, so these are the basic
health economic variables, which I try to
quantify and give them a number to describe
the scenario of a particular population.
When I talk about predictive that means, I
am predicting something, I am predicting something
that what happens yeah, so when I am predicting
something, I am actually identifying the impact
of a change or implementation 
that means, how much change or how much impact
a particular change in decision or a particular
change in treatment process, a particular
change in medicine, a particular change in
health financing mechanism has brought in.
So, the impact of change or an a particular
implementation, so this implementation is
my determining variable, my independent variable
and the impact is the dependent variable,
so if you have a knowledge about regression,
so here we are trying to understand the impact
on the dependent variable based on some changes
in the independent variable and how much that
impact is or how much the impact can be in
different circumstances.
And finally, evaluative; here, comes the evaluation
again so, when we are talking about evaluative,
we are doing an economic evaluation of several
healthcare processes that means, what is the
effectiveness of process A, what is the effectiveness
of process B, what is the effectiveness of
process C along many others, I am; I have
some cost implications for process A, B, C
and others.
And I have varied gains from A, B, C and others
now, it is my choice based on my preferences,
based on my affordability, on my conditions
that which would be my best choice; A, B,
C or D therefore, evaluative says the relative
preferences at least, they help us to make
a relative preference.
So, when we try to map a demand for health
based on Grossman, I will have an extended
session on Grossman's model of healthcare
demand.
We basically, try to understand here the healthcare
as the healthy days or a health stock, how
much, how many days I stay healthy that is
my health stock, right.
If I am staying longer time period as healthy,
then my health stock is you know, strong,
larger that accumulates further that I will
be staying healthier; healthy for a longer
duration of time for the later period of my
life.
Therefore, this health stock is basically
determined by several health factors, it can
be health care, how best healthcare I am enjoying
or I have enjoyed probably, since my mother's
pregnancy with me from their our health cure
during her pregnancy my child; my birth and
my; you know my health as a child because
that has a strong impact on my health as an
adult.
And my health seeking behaviour or my healthy
behaviour starting from diet, the exercise,
the environment, the income, the awareness,
these all the; are very prominent determining
factors which affect your health stock based
on some production process.
This is basically the Grossman's model; I
am just giving you the name here, Grossman's
model, thank you.
