Role of Economists in the Health Sector

Role of Economists in the Health Sector

Introduction Health Economics??

Why do economists work in health? The health sector is not usually the 1st place people associate with economists. It is not supposed to be about money, profit, production, and markets. Should it not be about medicine, nursing, caring, and the difference between life and death? Surely,  an economist has no wisdom to bring to bear here?

Such views were virtually universal until quite recently but they demonstrate a limited understanding of the role and content of economics. In principle economists are concerned with better choices and in particular making the best use of existing resources and growth in availability of resources. As ecomnomists started to work on problems in health sector, the new discipline of health economics emerged.

Economists in all sectors are concerned with the allocation of resources between competing demands (Samuelson and Nordhaus 2000). Demand is assumed to be infinite-there is no end to consumption aspirations. Resources (like labour, raw materials, production equipment and land), in contrast, are always finite. Thus scarcity of resources (relative to demand) becomes the fundamental problem to which economists address themselves. 

In health sector, such scarcity can be recognized in a host of questions that concern all who work there or use it services.

Why has the volume of resources absorbed by the sector increased so fast over the last four decades?

Why does it seem that no matter how many nurses and doctors are employed, new technologies adopted, new drug therapies introduced, that even rich countries of the world do not seem to be able to provide the highest quality of care for all citizens?

Are we investing in the wrong kinds of health services?

Are we investing in technologies that have a low health output compared to alternative investments?

In poor countries, questions of resources scarcity are starker still. Can we afford, at all, universal access to high-cost services such as cancer care?

All societies must make choices as to how to allocate whatever resources are available to the production of health services, and how to distribute those health services produced between those who want them. These choices are the subject of discipline of health economics. Health economics (and economics in general) is often seen as having 2 branches: the positive branch which is concerned with describing and explaining how such choices are actually made, and the normative branch which is concerned with judging which choices should be made. For example, a health economist might be concerned with health insurance coverage of population. She might take positive positive perspective. Why are ther so many insured? What are the characteristics of  those that are uninsured (are they unable to afford, or do they judge themselves unlikely to need health services?) From a normative perspective it is necessary to establish criteria according to which the situations can be judged. If equity of access to health services is one criterion, and ability to pay is dominant explanation of non-coverage, the situation might be judged ‘bad’, and alternative interventions to reduce the problem evaluated.

Health economists  have evolved different approaches to analyzing and evaluating resource allocation in the health sector which reflect the plan-market dichotomy. In societies in which health services have been largely planned, the main activity of health economists has been the development and application of a set of tools which collectively make up the field of economic evaluation. Economic evaluation  aims to consider whether appropriate services have been adopted in the health sectors, or whatever there is a mix of technologies and interventions which would better meet health sector objectives, such as the improvement of the population’s health, or the equity of access to care.

As health sectors have evolved, especially over the last two decades, richer mixes of planning and markets have been developed in a large number of countries. In health sectors which have traditionally been planned, elements of market mechanisms have been introduced, for example through ‘internal markets’. In health sectors which have traditionally relied to a greater extent on market mechanisms, more planning has been introduced-for example through more intrusive public regulation, or through the use of capitation payment mechanism which shift risk on to providers and thereby pass on the planning role usually carried out by a public sector body. 

Book chapter Health Economics an International Perspective

Barbara Mcpake, Lilani Kumaranayake and Charles Normand ISBN 13:978-0415-27736-5 (pbk)