Dr. Christine McMahon
July 19, 2013
Economics focuses on allocation of resources for businesses. Health economics emphasizes the functional capability of the health care system and obtaining the most from available resources. Health economics is not only the concern of economists but also hospital management and health care professionals. In fact, allocation of health care resources affects everyone. The center of health economics analyzes from a macro and micro perspective. Both are the underlying concepts of the health care industry. From another standpoint health economics are also concerned with matters associated with effectiveness and efficiency. Also value and behavior in production and consumption of health care products and services. Health economists study health care systems functioning in addition to health behaviors. Economics can apply to the health care industry from several viewpoints according to research and studies. Economics as it applies to the resources used in patient care is challenging in delivering quality care in health facilities. Health care markets fall short of the characteristics required in determining fair market price that reflects the economic value of resources. However, allocation of hospital resources can be examined by using a theory of production to determine efficient use of resources. Alfred Marshall defined economics as a study of mankind in the ordinary business of life; it examines that part of individual and social action that is most closely connected with the attainment and with the use of the material requisites of well-being. He goes on to say health economic concerns are the allocation of resources for care of sickness which need to be cured for the promotion, maintenance and improvement of health. This is the responsibility of the health sector through the Department of Health. The health care services have corresponding costs and benefits among individual and groups in society, (Marshall, 2013). Resource allocation when applied to economics in health care may be complicated because of market characteristics. These features differ from businesses in a highly competitive market. Health care services recognized as an imperfect market for several reasons: 1) Health care is a heterogeneous product, as the patient can experience a range of outcomes; 2) Insured patients have third-party payers covering their direct medical expenses; and 3) A “market price” is lacking, i.e., no feedback mechanism exists that reflects the value of the resources used in health care, (Scott II, Solomon, & McGowan, 2001, p. 285). Applying economics to health care is essential for improving products, services, and treatment while controlling cost of health providers and suppliers. The impact of economics on the health care system involves the cost providing health care in the United States has been a major concern. The dramatic increase in cost arises at a much faster rate than the growth of the economy. This threatens to crowd most of the economic movement and outcome as long as spending continues. An article in USA today states health care accounts for about one-sixth of the economy that is more than any other industry. Health care spending totals 2.5 trillion dollars that is 17.5% of the gross domestic product, (Johnson, 2009). With cost as a major impact on the economic growth, the increase in poor health care systems is more likely to occur. Ineffectiveness, fraud, abuse, and waste are a major percentage of health care costs and suspend future growth, especially for government programs. Perhaps recognizing the problem areas would help with needed improvements. Health economists have developed specific tools to analyze and collect data essential for making decisions in health care. These methods assist hospitals and service providers monitor and assess types of service as a guide to make...
References: Johnson, The Associated Press, L. A. (2009). Why health care’s economic impact matters. Retrieved from http://www.usatoday30.usatoday.com
NHS Confederation. (n.d.). Variation in healthcare. Retrieved from http://www.nhsconfed.org
Scott II, R. D., Solomon, S. L., & McGowan, Jr., J. E. (2001). Applying Economic Principles to Health Care. Retrieved from http://wwwnc.cdc.gov
The Overview on the Concepts, Principles and Applied Theories of Health Economics. Retrieved from http://www.hubpages.com › ... › Education and Science › Economics › Economists
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