Concept 55 – Health Care Economics (Giddens)

What is the core economic problem in health care?

Scarcity—finite resources vs. unlimited wants; every choice has an opportunity cost (what you don’t fund or do).

How do supply & demand behave in health care?

Demand is often inelastic (especially emergencies) and information-asymmetric; supply is constrained by workforce, facilities, and regulation.

Give one price-insensitive and one price-sensitive example.

• Insensitive: ED visit for chest pain

• Sensitive: elective imaging with high copay.

What is “flat-of-the-curve” medicine?

Adding more interventions yields little/no health gain and can add harm—classic overuse signal.

Technical vs. allocative efficiency—difference?

• Technical: producing care with least inputs

• Allocative: producing the right mix of services aligned to population needs.

Horizontal vs. vertical equity?

• Horizontal: equal treatment for equal need

• Vertical: unequal (greater) resources for greater need.

Three classic market failures in health care?

Information asymmetry, externalities (e.g., vaccines), and market power (consolidation).

Define & one mitigation.

• More insurance → more use

• Mitigated with deductibles/copays or value-based insurance design.

Why is community rating risky without a mandate/subsidy?

Sicker people enroll, premiums spiral. (ACA uses guaranteed issue, risk adjustment, subsidies.)

One bedside example.

Time spent on non-value tasks reduces time for education/early mobilization.

Why “more RVUs” ≠ “better outcomes”?

Payment often rewards volume; outcomes/experience may not improve.

Do higher prices guarantee better quality?

No—U.S. regional data show large price/use variation with weak quality correlation (see Gawande cards).