03: health economics

scarcity

resources are limited – there isn’t enough of everything to satisfy everyone’s wants and needs

choice

because resources are scarce, we have to select one thing instead of another

opportunity cost

what you give up when you make a choice – benefits you could have gained from the next best alternative

economics

• achieving maximum value from the deployment of scarce resources

• way of thinking about choice/minimizing regret

basic economic problem

how to allocate scarce resources to best satisfy human wants

Consolidated Revenue Fund

• province’s main operating account

• account where taxes and other revenue are deposited and from which money is withdrawn to pay for public services

per capita allocation

distributing resources on a per-person basis within a population

Gross Domestic Product

total market value of all finished goods and services produced by a country

consumption

what people buy (household spending)

non-durables

things that don’t last long

durables

things that do last a long time

services

getting things done

investments

things that will make money over time

net exports

value of things we sell to other countries minus what we buy from other countries

population needs based funding

allocation of health funds to health authorities based on estimated need

population demographics

age, gender, socio-economic status

inter-regional flows

disconnect of area of residence and HA for treatment

regional cost differences

remoteness, cost of providing large, specialist services

Notice of Compliance

drug meets necessary safety, efficacy, and quality standards required for approval

efficiency

society should use resources for an activity only if the benefits > opportunity cost

technical efficiency

producing the maximum possible amount of output from the inputs used, given the chosen production method

cost-effectiveness efficiency

producing a good using the least-cost method of production from among all technically efficient methods

allocative efficiency

using limited resources to produce and distribute goods and services in accord with the value individuals place on those goods and services

utility

satisfaction derived from goods or activities

equilibrium (Q*)

quantity of a good or service supplied equals the quantity demanded at a particular price

no barriers to entry

new suppliers should be able to enter the market easily

no barriers to exit

suppliers should be able to exit the market without facing significant financial or regulatory penalties

monopoly power

single firm controls a significant portion of the market for a particular good or service

transparency

buyers and sellers are able to access complete and accurate information about the products, prices, and alternatives

information asymmetry

either suppliers or buyers have more information than the other

externalities

actions of one person or business impact others without being reflected in market prices

market failure

happens when allocation of products and services by a free market is not efficient

Pareto Criterion

allocatively efficient when it is impossible to make one person better off without making someone worse off

Potential Pareto Criterion (Kaldor-Hicks)

we are allocatively efficient if the ‘winners’ could compensate the losers and still be better off

Kaldor’s compensation test

actions can be “welfare-enhancing” even if compensation never occurs

health technology assessment

process to evaluate health technologies to decide what to provide/fund

clinical effectiveness

does the technology improve health outcomes relative to other alternatives?

economic evaluation

compares the costs and health outcomes of different interventions to determine which provides the best value over the long term

social and ethical impact

how does the technology affect different populations?

organizational impact

how would adopting the technology impact the healthcare delivery, infrastructure, planning?

budget impact analysis

assesses the short-term affordability of introducing a new intervention, looking at the financial impact on a specific budget, usually over 1-5 years, without directly assessing long-term health outcomes

systematic

unified framework – what are the relevant components of an analysis, how do they relate to one another, how should the analysis be conducted

course of action

particular way of using resources

cost-minimization analysis

• comparison of cost impact of two different technologies

• appropriate only when effectiveness between comparators is equivalent

• does not include qualitative effects

cost-benefit principle

ake an action only if the extra benefits exceed the extra cost

cost-effectiveness analysis

• measure effectiveness in natural units

• compare incremental effects gained by one alternative over another against the incremental resources used by one alternative over the other

incremental cost-effectiveness ratio (ICER)

cost per additional unit of effect

cost-utility analysis

• uses an outcome measure which incorporates subjective valuation of health

• outcome measure is the quality-adjusted life years

sensitivity analysis

technique used to determine how robust an analysis/model is to changes in assumptions or inputs

one way ‘deterministic’ sensitivity analysis

• focus on one ‘parameter’ at a time

• how much does changing this change results?

probabilistic sensitivity analysis

• change all ‘parameters’

• done by sampling from their distributions