HEALTH

ECONOMICS
 The Concept of Economics
Hesiod, one of the earliest economic thinkers of Ancient
Greece, defined economics based on its connection to
scarcity.

In order to overcome scarcity, labor, materials and time have

to be allocated efficiently. Scarcity, moreover, can only be
partially overcome by an energetic application of labor and
of capital.

Hesiod, emulation leads to the healthy development of a

spirit of competition, which he calls “good conflict,” a vital
force in relieving the basic problem of scarcity.

To keep competition just and harmonious, Hesiod vigorously

excludes such unjust methods of acquiring wealth as
robbery, and advocates a rule of law and a respect for justice
to establish order and harmony within society, and to allow
competition to develop- within a matrix of harmony and
justice.
 The Concept of Economics
Adam Smith is regarded as the father of modern
economics thanks to his development of a multitude of
foundational economic theories and concepts on which
the discipline was built.

Smith argued that by giving everyone the freedom to

produce and exchange goods as they pleased (free trade)
and opening the markets up to domestic and foreign
competition, people's natural self-interest would
promote greater prosperity than could stringent
government regulations.

Adam Smith’s concept of economics is rooted in the idea

of laissez-faire (free market) policies and with the
concept of the invisible hand.
The principle (and problem) of economics is that
human beings have unlimited wants and occupy a
world of limited means. For this reason, the
concepts of efficiency and productivity are held
paramount by economists.

Increased productivity and a more efficient use of

resources, they argue, could lead to a higher
standard of living.
Common Terms in Economics
Economics
is a social science concerned with the production,
distribution, and consumption of goods and services. It
studies how individuals, businesses, governments, and
nations make choices about how to allocate resources

focuses on the actions of human beings, based on

assumptions that humans act with rational behavior,
seeking the most optimal level of benefit or utility

can generally be broken down into macroeconomics,

which concentrates on the behavior of the economy as
a whole, and microeconomics, which focuses on
individual people and businesses.
Types of Economics
MICROECONOMICS
is the study of decisions made by people and businesses regarding the allocation of
resources, and prices at which they trade goods and services. It considers taxes, regulations,
and government legislation.

looks at different parts of human behaviour to figure out how people react to changes in
prices and why they want certain things at certain prices
tries to explain why and how different things have different values, how people make
financial decisions, and how they can trade, work together, and cooperate in the best way
looks at how supply and demand change over time and how well things are made, and how
much they cost
looks at how people divide and share work, set up and run businesses, and deal with
uncertainty, risk, and strategic game theory.
Types of Economics
MACROECONOMICS
studies the behavior of a country and how its policies impact the economy as a whole. It
analyzes entire industries and economies, rather than individuals or specific companies,
which is why it’s a top-down approach.
looks at the economy as a whole, both nationally and globally. It does this by simulating the economy
with a lot of data and variables from the economy.
It could be a certain part of the world, a country, a continent, or the whole world. It mostly looks at
how economies grow, change, and go through cycles.

Foreign trade, government fiscal and monetary policy, unemployment rates, inflation and interest
rates, the growth of total production output as shown by changes in Gross Domestic Product (GDP),
and business cycles that cause expansions, booms, and recessions are all looked at.
Resources
is defined as a service or other asset used to produce
goods and services that meet human needs and wants

Also referred to as factors of production, economics

classifies resources into four categories — land, labor,
capital and enterprise

Are a kind of supply that can be drawn on by a person

or organization in order to function and execute plans
and projects

Resources can be in the form of money, material, staff,

energy, expertise, time and management, among
other things.
Scarcity
refers to a basic economic problem—the gap
between limited resources and theoretically
limitless wants

This situation requires people to make decisions

about how to allocate resources efficiently, in
order to satisfy basic needs and as many
additional wants as possible

Any resource that has a non-zero cost to consume

is scarce to some degree, but what matters in
practice is relative scarcity
Needs and Wants
refers to an individual's basic requirement that must be fulfilled, in
order to survive

NEEDS By the term needs, we mean those requirements which are

extremely necessary for a human being to live a healthy life. They
are personal, psychological, cultural, social, etc. that are important
for an organism to survive.

are described as the goods and services, which an individual like to

WANTS
have, as a part of his caprices.
are defined as something that a person would like to possess, either
immediately or at a later time
are the desires that cause business activities to produce such
products and services that are demanded by the economy
 Goods
In economics, goods are items that add some kind of benefit
to the lives of the people who consume them.
Most companies make and sell goods, whether they're
physical products or services that consumers can regularly
use.
Goods are products and resources that satisfy people's
needs and wants.
A good can be a physical object, a provided service or some
combination of the two.
 Utility

Utility is a term in economics that The economic utility of a good or service

refers to the total satisfaction is important to understand, because it
received from consuming a good directly influences the demand, and
or service. therefore price, of that good or service. In
practice, a consumer's utility is
impossible to measure and quantify.
 Wealth measures the value of all the assets of
worth owned by a person, community, company,
or country.

Wealth is determined by taking the total market

value of all physical and intangible assets owned,

Wealth then subtracting all debts.

Wealth is the accumulation of scarce resources.

Specific people, organizations, and nations are

said to be wealthy when they are able to
accumulate many valuable resources or goods.

Wealth can be contrasted to income in that

wealth is a stock and income is a flow, and it can
be seen in either absolute or relative terms.
 DIVISIONS OF 01. LAND
ECONOMICS Land has a broad definition as a factor of
production and can take on various forms,
from agricultural land to commercial real
PRODUCTION estate to the resources available from a
particular piece of land.

refers to all activities Natural resources, such as oil and gold,

can be extracted and refined for human
which are undertaken consumption from the land.
to produce goods
which satisfy human While land is an essential component
wants. of most ventures, its importance can
diminish or increase based on industry.
 DIVISIONS OF 02. LABOR
ECONOMICS Labor refers to the effort expended by an
individual to bring a product or service to
the market.
PRODUCTION For the early political economists, labor was
the primary driver of economic value.
refers to all activities Production workers are paid for their time
which are undertaken and effort in wages that depend on their
to produce goods skill and training.
which satisfy human Skilled and trained workers are referred to
wants. as “human capital” and are paid higher
wages because they bring more than their
physical capacity to the task.
 DIVISIONS OF 03. CAPITAL
ECONOMICS As a factor of production, capital refers to
the purchase of goods made with money in
production.
PRODUCTION Money facilitates the processes used in
production by enabling entrepreneurs and
refers to all activities company owners to purchase capital goods
which are undertaken or land or to pay wages, therefore, making
to produce goods capital is the primary driver of value.
which satisfy human For example, a tractor purchased for
wants. farming is capital. Along the same lines,
desks and chairs used in an office are also
capital.
 Means to spread
the product Distribution is
throughout the critical for any
marketplace such type of industry
that a large number
of people can buy it DISTRIBUTION or service.

A good distribution
system quite simply
means the company
has greater chance
of selling its
products more than
its competitors.
EXCHANGE
An exchange is a marketplace where
securities, commodities, derivatives and other
financial instruments are traded.

The core function of an exchange is to ensure

fair and orderly trading and the efficient
dissemination of price information for any
securities trading on that exchange.

Exchanges give companies, governments, and

other groups a platform from which to sell
securities to the investing public.
CONSUMPTION
Consumption can be defined in
different ways, but it is best described
as the final purchase of goods and
services by individuals.

The purchase of a new pair of shoes, a

hamburger at the fast food restaurant
or services, like getting your house
cleaned, are all examples of
consumption.

It is also often referred to as consumer

spending.
The Concept of Health
Section 1, Article 25 of the Universal
Declaration of Human Rights states
that:

Everyone has the right to a standard of

living adequate for the health and well-
being of himself and of his family,
including food, clothing, housing and
medical care and necessary social
services, and the right to security in the
event of unemployment, sickness,
disability, widowhood, old age or other lack
of livelihood in circumstances beyond his
control.
The Concept of Health
The Constitution of the World Health
Organization stated in the opening
description that:

Health is a state of complete physical,

mental and social well-being and not
merely the absence of disease or infirmity.

The enjoyment of the highest attainable

standard of health is one of the
fundamental rights of every human being
without distinction of race, religion,
political belief, economic or social
condition.
The Concept of Health
With numerous nation states endorsing
the right to health as part of their
constitution, these nation-state are
legally obliged to safeguard access to
quality health in a "timely, acceptable
and affordable" manner, whilst ensuring
provision for the determinants of health.

The meaning of ‘health’ can be

individually viewed from various
perspectives.
 HEALTH
The World Health Organization constitution
states: "Health is a state of complete
physical, mental and social well-being and
not merely the absence of disease or
infirmity."
 POSITIVE
Positive definition of health and well- being is
where an individual is achieving and
maintaining a healthy lifestyle by being

DEFINITION physically fit and having good mental health.

OF HEALTH
The individual regards the things they
can do well such as walking, running,
having an active life and feeling well as
an indicator of good health and well-
being.
 NEGATIVE
Negative definition of health and well – being
is where an individual believes they have a good
state of health and well- being because they

DEFINITION have nothing wrong with them i.e. no physical

illness, disease, injury, mental stress, free from

OF HEALTH
pain and discomfort.

Individuals with this view regard good health as

normal and do very little to maintain their health
and well- being. They would not consider
themselves ill if they feel a little run down, tired,
depressed, have a cold or a headache.
Health Physical

Dimensions Mental
These five (5) dimensions of
health provide a full picture
Emotional
of health as a change in any Spiritual
dimension affects the
others. Social
 The physical dimension of health refers to the bodily
aspect of health. It refers to the more traditional
definitions of health as the absence of disease and
injury.

01. Physical health ranges in quality along a continuum

where a combination of diseases such as cancer,

Physical
diabetes, cardiovascular disease or hypertension are at
one end and a person who is at optimum physical
condition (think health not fitness) is at the other.

Physical health can affect the other dimensions of

health as a decline in physical health can result in a
decline in other forms of health.
 Mental health refers to the cognitive aspect of health.
Often mental health is linked to or includes emotional
health.

02.
Mental health then includes many mental health
issues such as Alzheimer’s and dementia. It refers to
the person’s ability to use their brain and think. This
may be to solve problems or to recall information, but

Mental
the focus is on the cognitive aspect of the person.

Mental healthcare affect the other dimensions of

health.
Emotional health is about the person’s
mood or general emotional state. It is our
ability to recognize and express feelings
adequately.

03.
Emotional
It relates to your self-esteem as well as
your ability control your emotions to
maintain a realistic perspective on
situations. The relationship between
emotional and mental health is clear and
as such some illnesses relate to both,
such as: depression and anxiety.
 04. Spiritual

Spiritual health relates to our sense of overall purpose in life.

People often find this purpose from a belief or faith system,
while others create their own purpose. A person who has
purpose to life is said to be healthier than those who don’t see
a purpose to life.
 05.
The social dimension of health refers to
our ability to make and maintain
meaningful relationships with others.

Good social health includes not only

having relationships but behaving
appropriately within them and maintaining
Social
socially acceptable standards.
 Social
Income

Determinants Housing
of Health Employment
Gender
Health of Ethnic Minority
Place of Residence
 CHAPTER 2
Understanding the Concepts of
Health Economics
 is the discipline of economics applied
to the topic of health care

HEALTH is an applied field of study that allows

for the systematic and rigorous
examination of the problems faced in
ECONOMICS promoting health for all

is used to promote healthy lifestyles

and positive health outcomes through
the study of health care providers,
hospitals and clinics, managed care
and public health promotion activities
 The healthcare sector consists of
businesses that provide medical services,
HEALTH manufacture medical equipment or drugs,
provide medical insurance, or otherwise

ECONOMICS facilitate the provision of healthcare to

patients.
Health economic principals are used to
address global issues such as migration,
displaced persons, climate change,
vaccine access, injuries, obesity and
pandemics.
 How do we put a value on health?
What factors influence health, besides
HEALTH health care?
What influences the supply and

ECONOMICS demand for health care?

Behaviors of health care providers vs.
those seeking care
What are some alternative approaches
to health care production and delivery?
How can we improve the ways in which
we plan, budget, and monitor health
care?
It focuses on how the economic
behavior of stakeholders and recipients
affects the quality and cost of medical
Why is
care.
HEALTH
It includes how people pay for care, how
those payments are processed, and how ECONOMICS
health systems around the world can be
restructured and improved. important?
Health economics can deliver insights
that inform solutions to some of the
world’s most pressing issues
surrounding health care and well-being.
Spending Understanding the drivers of this
health care spending, how

Growth spending varies across different

regions, and the role technology
can play is crucial for anyone
working in the industry.
The Role
The patient plays a critical role in driving
health care spending, for both themselves and
others.
of the By choosing one prescription or treatment over

Patient another, opting for elective surgery, or using

too much or too little care, individual patients
can significantly impact supply, demand, and
pricing for the entire system.
The Role of While the patient serves as the demand
side of the equation, health care providers
the Provider serve as the supply side.
What services and treatments providers
and Health choose to offer and how much they charge

Care
for them are typically directly related to
the patient’s demands.

Production Yet, several other factors may influence

this decision as well.
 Health insurance is a means for
individuals, employers, and society at
Risk & large to manage costs related to health
care.
Insurance Ensuring stable insurance markets
requires a thorough understanding of risk
and risk pools.
Benefit
The design of employee benefits packages
can be an effective means of controlling
health care costs by forcing individuals to

Design make more efficient decisions about their

care.
 Similarly, health care providers can be
compensated for their time and services in
Payment many different ways.

Reform Fee-for-service, episode-based payment, and

population-based payment models can all be
leveraged to promote effective decision-
making among providers.
 is a process of strategic outreach and
communications designed to attract

Health healthcare consumers, guide them

through their healthcare journey, and
keep them engaged with the health
Marketing system.

is what supports healthcare practices by

facilitating a relationship between
providers and patients.
 In-person sales
Direct mail
Traditional Print advertisements
forms of health Telemarketing
marketing Trade shows
Word-of-mouth marketing
include:
Television ads
Radio ads
 Social media
Email marketing
Digital forms Website
Search engine optimization
of health Search engine marketing

marketing Pay-per-click ads

Content marketing
include: Influencer marketing
Video ads
Internet radio/streaming
service ads
Healthcare marketing supports
consumer-driven care by educating
patients, drawing them into health
Why is
systems, and providing the superior
customer service and engagement
HEALTH
opportunities necessary to maintain
patient loyalty. MARKETING
Healthcare marketing is an important important?
way for practices to retain current
patients and gain new ones from a
responsive website and consistent
branding to search engine optimization,
ads, and social media.
 Increasing the reach of a hospital or

Benefits of healthcare facility

Keeping patients informed of the latest

Healthcare news and information in real time

Attracting new patients to a hospital or

Marketing healthcare facility

Keeping patients engaged as a means

of retention

Using digital marketing as a means of

driving higher-quality leads
Health Care Market System
Health Care Market means end users whose primary business
is the delivery of medical, veterinary or patient care or
treatment, medical diagnostic services, or medical care
provided in connection with disaster relief, including, but not
limited to:
(a) professional medical and healthcare service companies,
businesses, institutions and enterprises,
(b) medical diagnostics facilities and laboratories having
patient interaction,
(c) government and private organizations providing medical
care in connection with disaster relief, and
d) firms selling products or services into such end users;
Law of Demand
Explains how market economies allocate resources and
determine the prices of goods and services.

States that the quantity purchased varies inversely

with price which means that the higher the price, the
lower the quantity demanded.
Demand is derived from the law of diminishing marginal
utility, the fact that consumers use economic goods to
satisfy their most urgent needs first.
The shape and magnitude of demand shifts in response
to changes in consumer preferences, incomes, or
related economic goods, not usually to changes in price.
Law of Supply
It states that, all other factors being equal, as the
price of a good or service increases, the quantity of
that good or service that suppliers offer will
increase, and vice versa.

The law of supply says that a higher price will lead

producers to supply a higher quantity to the
market.
Because businesses seek to increase revenue,
when they expect to receive a higher price for
something, they will produce more of it.
Meanwhile, if prices fall, suppliers are
disincentivized from producing as much.
Law of Demand and Supply
The law of demand holds that the demand level for
a product or a resource will decline as its price
rises and rise as the price drops.

The law of supply says that higher prices boost the

supply of an economic good and lower ones tend to
diminish it.

A market-clearing price balances supply and

demand and can be graphically represented as the
intersection of the supply and demand curves.
Quiz. Identification.
1. This is an applied field of study that allows for the systematic and rigorous
examination of the problems faced in promoting health for all.
2. States that the quantity purchased varies inversely with price which means
that the higher the price, the lower the quantity demanded.
3.
 CHAPTER 3
Structure of the Health System
Health Care System
also sometimes referred to as a health system,
is the organization of people, institutions, and
resources that deliver health care services to
meet the health needs of target populations.

According to the World Health Organization a

health system consists of all organizations,
people and actions whose primary intent is to
promote, restore or maintain health.

includes efforts to influence determinants of

health as well as more direct activities that
improve health.
Health Care System
Health Care Systems differ from nation to nation
depending upon the level of economic
development and the political system in place.
Health care is a priority and source of concern
worldwide.
Every country irrespective of its private, public or
mixed health care system faces challenges with
regard to quality, delivery and cost of services.
Nations design and develop health systems in
accordance with their needs and resources,
although there are common elements present in
virtually all health systems for example public
health measures like vaccination.
Health Care System
A health system is, therefore, more than the pyramid of publicly
owned facilities that deliver personal health services but include
the institutions, people and resources involved in delivering
health care to individuals for example;

A mother caring for a sick child at home;

A child receiving rehabilitation services within the school
setting;
An individual access vocational rehabilitation services within
the work place;
Private providers, behaviour change programmes, such as
vector-control campaigns.
Health insurance organisations, occupational health and
safety legislation which includes inter-sectoral action by
health staff, for example, encouraging the ministry of
education to promote female education, a well-known
determinant of better health.
Human Resource
is the division of a business responsible for
finding, recruiting, screening, and training job
applicants and administering employee
benefit programs.

is a department in a workplace that focuses

on a company's most important asset—its
employees—to ensure they're satisfied,
engaged and have all the resources they
require to perform as expected.
Human Resource
This team manages recruiting, hiring, firing,
training, skills development, policy
implementation, benefits, payroll,
government regulation, legal compliance and
safety and often moderates and helps resolve
conflicts and concerns between employees.

The primary goal of HR is to support

employee recruitment, retention,
engagement, and overall productivity, which
can vary between organizations and
positions.
Key Functions of
Human
Resource
 This responsibility includes critical
Recruitment tasks such as identifying qualifications
and requirements for each position,

and Staffing writing job descriptions and placing job

postings, evaluating resumes,
conducting interviews, completing
background checks and working with
department managers to select ideal
candidates.
 This process introduces new team

New Hire
members to the workplace culture
and provides access to company
resources that may help the
Onboarding employee navigate their
employment journey and settle into
their new role.
 It's the HR department's responsibility
to plan and oversee the training needs

Training and
of employees. Career development
courses and training may include
education on new technology, employee
Development relations or leadership training for
current or prospective supervisors.

Human resources might also

recommend or support employees'
professional development by helping
them earn a certain higher education
degree by developing a tuition
assistance or reimbursement program.
 HR professionals often conduct

Compensation
market research to determine
competitive pay rates and develop a
compensation structure.

and Benefits They also work with insurance

brokers to select health and welfare
benefits such as medical, dental,
vision, life insurance and 401(k) for
employees.
Employee The human resource department helps
support and improve employees' work-
life quality and the company culture.

Well-being They create and oversee programs such

as day care, health and wellness
initiatives, paid time off and other
efforts to keep employees happy and
motivated.
Performance A performance review process
allows managers to check in with
employees one-on-one to discuss
Reviews and performance, define performance
criteria and measurements, set

Promotion expectations and goals which align

with business objectives and drive
employee development while
promoting fairness and
transparency.
Record Human resources employees are

Keeping
responsible for the entire employee
database, the department organizes and
oversees confidential information such
as contracts, wages, job
responsibilities, disciplinary measures
and performance reviews.
 The human resources department
Legal makes sure its organization adheres
to labor, union and federal and state

Compliance laws. This helps keep businesses

compliant with regulations like fair
employment, workplace safety and
much more.
Corporate An effective HR team can also bolster a

Image
company's reputation as a top employer
to work for which can help attract top
talent.

It can also help mitigate and avoid

possible conflicts and situations that
may reduce the image of their employer.
 This act requires companies to

Workplace provide safe and clean work

conditions for staff and human
resources personnel are also well-
Safety versed in this legislation.
Often, human resources set
workplace policies and put together
safety training materials.
They often manage employee
compensation for safety issues or
injuries.
Human Care
Economic Terms
Acquisition The purchase cost of a drug to an

Cost agency, person, or institution.

Capitation A fixed amount of payment per
patient, per year, regardless of the
volume or cost of services each
patient requires.
Clinical The application of interventions
which have been shown to be
Effectiveness efficacious to appropriate patients
in a timely fashion to improve
patients' outcomes and value for
the use of resources.
 Aims to identify and measure the total
costs attributable to a particular
disease.

Cost of They may provide useful information

Illness Study
that can be used in the context of an
economic evaluation of interventions
related to the disease category,
although care must be taken as not all
costs included in a cost of illness study
represent resource costs.
Opportunity The cost of a unit of a resource is the
benefit that would be derived from
Cost using it in its best alternative use.
 Calculated by adjusting the estimated
number of life-years an individual is
expected to gain from an intervention for

Quality-
the expected quality of life in those
years.

adjusted Life The quality of life score will range

Years
between 0 for death, to 1 for perfect
health, with negative scores being
allowed for states considered worse than
death.
Time Individuals are not indifferent to the
timing of costs and benefits,
Preference preferring benefits sooner and costs
later.
 In an attempt to generate measures

Utility Effects which can be used to compare

outcomes across all healthcare
interventions, considerable effort has
been invested in measures of health
status and utility.
 This technique asks people to state
explicitly the maximum amount they
would be willing to pay to receive a
particular benefit.
Willingness It is based on the premise that the
to Pay maximum amount of money an individual
is willing to pay for a commodity is an
indicator of the value to them of that
commodity.
Health Care Cost
The actual costs of providing services related to the delivery of health care,
including the costs of procedures, therapies, and medications.

It can also be defined as:

the expense incurred by providers in the delivery of health care services
the amount that is paid for services rendered by private and public
payers; and
out-of-pocket patient spending for health care services.
Characteristics of the Health
System
A well functioning health system responds in a balanced way to a population’s
needs and expectations by:

ƒ improving the health status of individuals, families and communities

ƒ defending the population against what threatens its health
ƒ protecting people against the financial consequences of ill-health
ƒ providing equitable access to people-centred care
ƒ making it possible for people to participate in decisions affecting their health and
health system