Health Economics

Topics: Supply and demand, Medicine, Health care Pages: 5 (1036 words) Published: January 17, 2014
Medical Expenditures. Do increased expenditures = increased health?
- Distinguish diff b/n medical services and health
- Medical Services: Treatment of disease and Preventative measure, Diagnostics, Pain Management, Counseling
- Health: General Well-being.
- Narrowing objective - Affects how you will allocate medical resources.
- To produce health, there are more factors than just medical services
**Provide a medical treatment efficiently ≠ produce health efficiently

Skewed spending concentrated on the top 5% of the population (spend 50% on health care)
Top 1 percent spends 20% of HC expenditures (this is the chronic disease carriers who use most of the medical care resources)

Measuring Health.. Cannot cover the entire spectrum (mental and social well-being)
SLIDE 5: WHAT IS HEALTH? Measures only covers certain aspects like life expectancy (but it doesn’t take into account the quality of life)
The more accurate the definition of health, the more difficult health is to measure. Pg 146: Measures of life status.

Human Capital Theory of Health Care:
Capital can be used as input to produce other products or goods
Human capital was like any other type of capital; it could be invested in through education, training and enhanced benefits that will lead to an improvement in the quality and level of production. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them. The education, experience and abilities of an employee have an economic value for employers and for the economy as a whole.

Health is like capital as well:
Like Human Capital -- Better health = enjoy better life = work more = higher productivity = more financial benefits.
Education is the same.

Other factors that affect the production Health:
Age, sex, lifestyle, income, environment (air/water quality), culture, technology, eating habits, physical activity, education.
Medical care is only one way to increase health. Pg 143.

H is a function of outputs.

Health is the output and the other factors are inputs (medical care, environment, education.. Etc)
The relation between medical inputs and output can be
described by a health production function ---- Health = H ( environment, education, lifestyle, medical care)

Increased Medical Expenditure pg 144
As expenditure increases, the marginal increase in health is smaller -- This is why the US has a high medical expenditure but we don’t have health outcomes that match that.
Compares expenditures to other countries
After 2,500 ($).

As medical care expenditure increases, the rate of health increase becomes smaller and smaller.
US must look into how to change all the factors (other than just medical care) in order to increase Health levels more with the same amount of medical care:
- Pg 149: Determinants of Health Status
- Income
- Education
- Genetics
- New technology
- Change people's lifestyle
- ACA- changing financing and delivery system (using same amount of medical care to achieve better health)

Increased Price = Decreases in the Quantity of Demand - Inverse relationship between Price and Quantity of Demand
Assumption-- We have a budget constraint - scarcity of resources.
Medical care increases human capital.
There is a difference between demand and need.
Demand - having the ability to pay for something
Need - Unconstrained desires

Demand Function - Gives you a measure of Quantity for a corresponding Price (Graph on page 31)
Price goes from P0 to P1 -- Quantity goes from Q0 to Q1
Demand curve = Combination of points that change along the demand curve

Other Factors that Affect Demand Curve:
- Pg 31/ 156
- Income -- When Income increases, the demand curve will shift to the right. (same price but more quantity will be...
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