Economic Analysis in Health Care

by Stephen Morris (Brunel University ); Nancy Devlin (City University); David Parkin (City University)

• ISBN13: 9780470016855
• ISBN10: 047001685X
• Format: Paperback
• Copyright: 2007-06-01
• Publisher: WILEY

Summary

Health economics is concerned with the evaluation of the effectiveness of health care, particularly by examining the social opportunity costs of alternative forms of treatment. The peculiar nature of the market for health care - that doctors have a major influence on both supply and demand -.has attracted attention, as has the study of the options available for financing such services. Economic Analysis in Health Care provides a comprehensive coverage of both the economics of health care systems and the evaluation of health care technologies. It has been written as a core textbook for advanced undergraduate and postgraduate students with knowledge of economic analysis and will appeal to an international audience. Adopts an international perspective, using examples and case studies from the UK, the rest of Europe, and other countries. Contains detailed exposition of the economic theory alongside relevant examples and applications Focuses on both market-related and economic evaluation aspects of health economics (some books focus purely on market-related aspects) Strong author team with very broad experience of writing and teaching health economics

Author Biography

Stephen Morris is a member of the Health Economics Research Group at Brunel University. He is the author of “Health Economics for Nurses: An Introductory Guide”, and has published over 20 academic papers in peer-reviewed journals. He has taught Health Economics at both Undergraduate and MSc level. and is a former Senior Lecturer at Tanaka Business School.

Nancy Devlin is Professor of Health Economics at City University, London. Nancy has published 23 papers on Health Economics since 2000, on topics including health care priority setting, economic evaluation of health care, management of waiting lists, measuring and valuing health states and health care reforms.

David Parkin is Professor of Health Economics at City University, London and is director of City’s MSc in Economic Evaluation. He has taught health economics for 25 years, at both undergraduate and postgraduate level, and has published 50 articles in peer-reviewed journals and books. He is also the organizer of the UK Health Economists’ Study Group.

Table of Contents

Preface	p. xiii
Introduction to Economic Analysis in Health Care	p. 1
Life, Death and Big Business: Why Health Economics is Important	p. 1
Health Care as an Economic Good	p. 3
Health and Health Care	p. 6
Wants, Demands and Needs	p. 7
The Production of Health and Health Care	p. 8
Deciding Who Gets What in Health Care	p. 10
Is Health Care Different?	p. 12
Describing versus Evaluating the Use of Health Care Resources	p. 14
Judging the Use of Health Care Resources	p. 17
Summary	p. 20
Health Care Markets
The Demand for Health Care	p. 23
Demand, Profits and Health Policy Targets	p. 23
Consumer Choice Theory	p. 24
Preferences and Utility	p. 24
Budget Constraints and Maximisation	p. 26
Demand Functions	p. 30
The Determinants of Demand	p. 32
Estimating Demand Functions	p. 36
Price and Income Elasticity of Demand	p. 37
Modelling Choices About Health	p. 40
Understanding Consumption of Health and Health Care	p. 41
Understanding Investment in Health Care	p. 43
Predictions of the Grossman Model	p. 45
Needs, Wants and Demands	p. 47
Asymmetry of Information and Imperfect Agency	p. 48
Aggregate Demand for Health Care: Theory and Evidence	p. 51
Conclusion	p. 55
Summary	p. 56
The Production and Costs of Health Care	p. 59
Introduction	p. 59
The Theory of Production	p. 60
Production Functions	p. 60
Isoquants	p. 61
Marginal Products	p. 62
Substitutability between Inputs	p. 63
Production Frontiers	p. 65
Multi-Product Firms	p. 66
Returns to Scale, Additivity and Fixed Factors	p. 69
Costs	p. 73
Costs and Production	p. 73
Cost Functions	p. 77
Economies of Scale, Short-Run Cost Functions and Economies of Scope	p. 78
Summary	p. 85
The Supply of Health Care	p. 87
Firms, Markets and Industries in the Health Care Sector of the Economy	p. 87
Structure, Conduct and Performance in the Health Care Industry	p. 90
Profit Maximisation Models	p. 95
How Firms Maximise Profits	p. 96
Perfect Competition	p. 100
Monopoly	p. 103
Monopolistic Competition	p. 105
Oligopoly	p. 109
Game Theory	p. 110
Goals Other than Profit Maximisation	p. 114
Growth Maximisation	p. 116
Behavioural Theories of the Firm	p. 118
Utility Maximisation	p. 119
Maximising Net Income per Physician	p. 121
Summary	p. 123
Markets, Market Failure and the Role of Government in Health Care	p. 125
Introduction	p. 125
Using Perfectly Competitive Markets to Allocate Resources	p. 126
Equilibrium in Competitive Markets	p. 126
The Efficiency of Competitive Markets	p. 126
Market Failure in Health Care	p. 129
Externalities	p. 129
Caring Externalities	p. 130
Market Power	p. 132
Public Goods	p. 133
Information Imperfections	p. 134
Government Intervention in Health Care	p. 136
Direct Government Involvement in the Finance and Provision of Health Care	p. 137
Taxes and Subsidies	p. 137
Regulation	p. 138
Provision of Information	p. 139
Theory of Second Best	p. 139
Government Failure	p. 144
Summary	p. 145
Health Insurance and Health Care Financing	p. 149
Uncertainty in Health Care	p. 149
Attitudes to Risk	p. 152
Diminishing Marginal Utility of Income	p. 153
The Demand for Health Insurance	p. 154
Total Premium	p. 154
Fair Premium	p. 154
Risk Premium	p. 155
Risk Pooling	p. 155
The Supply of Health Insurance	p. 157
The Market for Health Insurance	p. 157
Health Insurance Market Failures	p. 158
Adverse Selection	p. 158
Moral Hazard	p. 160
Non-price Competition	p. 163
Incomplete Coverage	p. 165
A Health Care Financing Framework	p. 166
Third-Party Payers	p. 167
Reimbursement	p. 167
Retrospective Reimbursement	p. 167
Prospective Reimbursement	p. 169
Integration between Third-Party Payers and Health Care Providers	p. 172
Preferred Provider Organisations	p. 173
Health Maintenance Organisations	p. 173
Point-of-Service Plans	p. 173
Options for Health Care Financing	p. 175
Private Health Insurance	p. 175
Social Health Insurance	p. 175
Taxation	p. 176
The Key Features of Health Care Systems	p. 176
Summary	p. 179
Equity in Health Care	p. 183
Introduction	p. 183
Equity in the Finance of Health Care	p. 185
Vertical Equity	p. 186
Kakwani's Progressivity Index	p. 187
The Relationship between Progressivity and Health Care Financing Systems	p. 189
Horizontal Equity	p. 190
Equity in Distribution	p. 192
Equity in the Distribution of Health Care, of Health or of Utility?	p. 192
Some Concepts of Equity	p. 193
Measuring Equity in Distribution	p. 196
Horizontal Inequity	p. 197
Vertical Equity	p. 200
Inequalities in Health	p. 202
Summary	p. 205
Economic Evaluation in Health Care
Welfarist and Non-Welfarist Foundations of Economic Evaluation	p. 209
The Normative Economics Foundations of Economic Evaluation	p. 209
Welfare Economics	p. 210
The Pareto Principle	p. 211
Potential Pareto Improvements	p. 216
Social Welfare Functions	p. 220
Measurability and Comparability of Utility	p. 225
The Application of Welfare Economics	p. 226
Non-Welfarism?	p. 231
Is There a Link Between Welfarism and Non-Welfarism	p. 236
Conclusion	p. 237
Summary	p. 238
Principles of Economic Evaluation in Health Care	p. 241
What is Economic Evaluation?	p. 241
The Economic Foundations of Economic Evaluation	p. 243
Cost-Benefit Analysis	p. 243
Cost-Effectiveness Analysis	p. 246
Economic Evaluation Applied to Health Care Programmes	p. 248
Decision Rules for Cost-Benefit Analysis	p. 250
Decision Rules for Cost-Effectiveness and Cost-Utility Analysis	p. 252
Ratio Measures	p. 253
The Cost-Effectiveness Plane	p. 253
The Ceiling Ratio and Acceptability	p. 255
The Incremental Cost-Effectiveness Ratio	p. 255
Net Benefits	p. 258
Probabilistic Approaches	p. 260
Decision Analysis	p. 261
Equity in Economic Evaluation	p. 262
Summary	p. 263
Measuring and Valuing Health Care Output	p. 265
Introduction	p. 265
Monetary Valuations of Health Care Benefits	p. 266
Revealed Preference	p. 266
Stated Preference	p. 267
The Measurement of Health Outcomes	p. 274
Making Health Status Indicators Fit for Purpose	p. 275
Generic and Specific Measures	p. 277
Profiles and Indices	p. 279
Measuring Health-Related Quality of Life: an Indifference Curve Approach	p. 282
The Measurement of Health Gain	p. 285
Non-Monetary Valuation of Health States	p. 288
Rating Scales, Category Scales and Visual Analogue Scales	p. 289
The Standard Gamble	p. 290
Time Trade-Off	p. 292
How Do We Choose Between These Methods?	p. 294
Multi-Attribute Utility Measures	p. 295
The Valuation of Health States: Willingness to Pay for Health Changes	p. 296
The Value of Life	p. 301
Summary	p. 302
Economic Evaluation Methods	p. 305
Introduction	p. 305
Selecting the Viewpoint	p. 306
Estimating Costs	p. 310
Methods and Data Used in Estimating Costs	p. 312
Issues in Costing: Where Do We Draw the Line?	p. 313
Issues in Costing: Should Future Costs and Cost Savings Be Factored into Analyses?	p. 314
Issues in Costing: What If Cost Data Are Sourced from Different Time Periods?	p. 315
The Measurement of Health Gain	p. 315
Measuring Quality-Adjusted Life Year (QALY) Gains	p. 315
Measuring Healthy Year Equivalents (HYEs)	p. 317
Measuring Disability-Adjusted Life Years (DALYs)	p. 318
Discounting	p. 319
The Rationale for Discounting Monetary Costs and Benefits	p. 319
The Discounting Formula	p. 320
The Choice of Discount Rate	p. 323
Discounting Health Effects	p. 324
Modelling-Based Economic Evaluation	p. 326
Using Multiple Sources of Data	p. 327
Decision Analysis	p. 328
Markov Models	p. 332
Trial-Based Economic Evaluation	p. 334
Dealing with Uncertainty: Sensitivity Analysis	p. 335
One-Way Sensitivity Analysis	p. 336
Multi-Way Sensitivity Analysis	p. 337
Statistically-Based Sensitivity Analysis	p. 338
Summary	p. 340
The Use of Economic Evaluation in Decision Making	p. 343
The Decision-Making Context: Why is Economic Evaluation Used?	p. 343
Who Buys Economic Evaluations? Does It Matter?	p. 352
Is Economic Efficiency All That Matters?	p. 353
Need	p. 353
Equity	p. 354
Process-of-Care Considerations	p. 357
Ethical Imperatives	p. 358
How is Economic Evaluation Used to Make Decisions in Practice?	p. 359
Cost-Effectiveness League Tables	p. 359
Programme Budgeting and Marginal Analysis	p. 362
Programme Budgeting	p. 363
Marginal Analysis	p. 364
Cost-Effectiveness Thresholds	p. 364
Evaluating Economic Evaluation	p. 369
Summary	p. 371
References	p. 373
Author Index	p. 387
Subject Index	p. 391
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