The Subject Matter of Health Economics

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Chapter 1

• The Subject Matter of Health Economics

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A. Introduction to Health Care Economics

• What is special about health care economics?
• 1. The degree to which imperfect information
  characterizes
• decision-making in the health care sector
• Uncertainty about health status
• Uncertainty about what treatment to undertake
• Uncertainty about outcome of treatment
• Uncertainty about what treatment will cost
• 2. The importance of externalities
• There are both positive and negative spill-over
  effects on
• decisions individuals and societies make about
  health care.
• 3. The degree of government intervention in
  health care markets,
• even in the United States.

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B. Medical Care vs. Health Care

• Why do we focus so much attention on medical
  care?
• Cost concerns
• Accessibility concerns
• Is this attention warranted?
• Rise in the cost of medical care
• How best to control costs
• How to provide wider access to quality medical
  care

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C. International Comparisons

• 1. The United States spends a higher proportion
  of its GDP on
• health care than does any other OECD country.
• 2. The U.S. does not have better (average) health
  outcomes
• as measured by such indices as life expectancy at
  birth,
• life expectancy at age 60, or infant mortality
  rates.
• 3. There is a very high correlation between
  national income per
• capita and per capita expenditure on medical
  care.
• 4. The United States ranks first in the stock of
  medical technology
• available.

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C. International Comparisons

• Life Expectancy at Birth of Both Sexes in OECD
  Countries, 1999

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C. International Comparisons (cont.)

• 5. Countries vary widely in the proportion of
  expenditure on health
• care that is publicly funded.
• The proportion of expenditure on health care that
  is publicly
• funded in the U.S. is lower than in most
  developed nations
• (including Canada, France, Germany, the United
  Kingdom, the
• Netherlands, Sweden, Italy, Spain and Mexico).
  However, it is
• higher than in many developing nations.
• 6. The United States is the only major
  industrialized nation that does
• not have a system of universal health-care
  insurance.

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C. International Comparisons

• Public Expenditure as Percentage of Total
  Expenditure on Health
• Selected OECD Countries, 2001

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D. The Uninsured in the United States

• 1. The number of uninsured in the United States
  has risen in recent
• years. It is now over 47 million citizens and
  legal residents.
• 2. Insurance coverage varies dramatically by
  state. Some states
• have now introduced programs that require
  employers to provide
• health insurance to employees or pay into a fund.
  Others now
• require individuals to have insurance (e.g.
  Massachusetts).
• 3. The proportion of uninsured varies not only by
  geographic region,
• but by age, income, and race/ethnicity

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D. The Uninsured in the United States

• Percentage of Individuals Under 65 without Health
  Coverage, 2000

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E. The Tools of Health Economics

• Empirical analysis
• Multivariate regression analysis
• Natural experiments, when possible
• Randomized Experiments (example The RAND HIE)
• The Difference in Difference Strategy