Health Economics

Health Economics
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QUESTION: Should we leave consumption of health care to the market? Why? (provide references as necessary)
MAKING DECISION IN PUBLIC HEALTH
WORKSHOP LECTURE DAY1
ECONOMIC EVALUATION&INCENTIVES
OUTLINE
Quick recap on key concepts
Efficiency
Equity
Economic evaluation
Incentives
2
DEFINITION OF ECONOMIC
The study of how men and society end up choosing with and
without the use of money to employ scarce productive
resources that could have alternative uses to produce
various commodities and distribute them for consumption
now or in the future among various people and groups in
society.
It analyses the costs and benefits of improving patterns of
resource allocation.I
Efficiency: allocating resources in such a way that maximises
the (health) benefits to society and minimise costs.
Value for money
Allocative efficiency:
Is something worth doing (benefits exceeds costs)
Right mix of health care services
Technical or Operational efficiency:
if something is worthwhile doing (allocative efficiency) what is the best
way of providing it (at lowest cost)?
maximum output for a given level of resources / minimum cost for a
given level of outputncen
EQUITY
How benefits are distributed and who receives them
Notion of justice or fairness
Health inequity:
differences in health that are not only unnecessary and avoidable
but in addition unfair and unjust.
Margaret Whitehead 1991tives
ECONOMIC EVALUATION
AIM Efficiency: allocating resources in such a way that
maximises the (health) benefits to society and minimises
costs
Measure of efficiency is the incremental cost-effectiveness ratio or
incremental net benefit
How:
Cost Minimisation Analysis (CMA)
Cost Effectiveness Analysis (CEA)
Cost Utility Analysis (CUA)
Cost Benefit Analysis (CBA)
Incremental cost-effectiveness ratio (ICER)=
Measure of the extra cost of a health care program relative to the extra
benefits
Lower ICER is better value for money
Why?
ECONOMIC INTENCIVES AND CONSUMER BEHAVIOUR
What are incentives and who is homo economicus?
Influencing consumer behaviour:
Incentives to increase the use of health services
Incentives to decrease the use of health services
Influencing provider behaviour
GPs
Hospital management
WHAT IS INCENTIVES
Factors that make one sort of behaviour more likely than
others
Mainly (not exclusively) financial
Can be manipulated in the interests of policy
ECONOMIC MAN-HOMO ECONOMICUS
Current economic thinking (neoclassical economics) is
individualist and rationalist
The individual in question is homo economicus (Becker
1993):
Best judge of own interests (consumer sovereignty)
Self-interested
Rational
COSTS AND BENIFITS OF IMMUNISATION
Costs
Financial (if any)
Time and effort to attend clinic
Risk of side effects
Benefits
Reduced risk of infection
APPLYING THE ECONOMIC MODEL
The economic viewpoint says that rational parents will weigh
up the costs and benefits of vaccination before deciding
whether or not to go ahead
BUT lets look at the benefits again
SOCIAL VS PERSONAL BENIFITS
Immunisation also decreases the risk of infection in the
broader community (herd immunity)
This is an example of a positive externality
BUT as immunisation levels in the community increase the
personal benefits decline (Why?)
Social and personal benefits diverge
Once herd immunity is achieved personal costs of
immunisation begin to exceed personal benefits
Rational parents may refuse to have their children vaccinated
Financial incentive to parents may be seen as an attempt to
increase the personal benefits of immunisation
INCENTIVES TO INCREASE UTILISATION
Immunisation policy: Australia 1998
Payments to parents (April 1998)
Childcare Assistance and Childcare Rebate ($20.50-$122 per week)
Maternity Immunisation Allowance (one-off $208)
Means tested
Exemptions: medical/philosophical
Payments to GPs (July 1998)
GPII Scheme: monitoring promotion provision
Payment for notification to ACIR
Payment for outcome: tiered based on % fully immunised
Infrastructure funding
IS THE INCREASE RELATED TO THE INCENTIVES?
2001 survey: increase greater for families receiving child care
benefits (10% vs 7% difference not significant)
Would we expect a relationship?
2016 Expected change in legislation:
Complete immunisation required in order to receive Child Care Benefit
Child Care Rebate Family Tax Part A end of year supplement
Parents with children who are not immunised and do not have a medical
exemption will not be able to access these payments
INCENTIVES TO REDUCE THE UTILISATION
GP consultations Overutilisation
Medicare reduces the price of the consultation (to $0 if GP bulk bills)
Rational consumer is more likely to consult a GP for minor self limiting
conditions than if they had to pay full cost
Co-payment: patient pays the first few dollars of the cost of consultation
EFFECT OF CO-PAYMENT
RAND Health Insurance Study (Manning et al 1987)
Fewer GP consultations among groups facing higher copayment
Utilisation of lower income groups fell more than that of higher
income groups
higher price elasticity
BUT families did not cut back on less effective or medically
unnecessary payments..
WHAT DO THESE RESULT TELL US?ll us?
Patient is not fully informed about the need for and
effectiveness of health care (not a sovereign consumer)
After the initial consultation demand is likely to be initiated by
the doctor
Incentives to reduce utilisation of GP consultations would be better
targeted at the doctor
INFLUENCING PROVIDER BEHAVIOUR


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