Health care now consumes about $1 in $6 spent in the United States, up from $1 in $12 in 1960. This increase in spending is not a problem in and of itself; growth in a sector of the economy can be highly desirable if it reflects the development of valuable new technologies (eg, computers).

However, in the case of health care there are good reasons to question whether increases in spending have been consistently worthwhile. One reason for concern is that much of health care spending is covered by insurance.

Insurance helps ensure that high-cost, unpredictable health care is available to people when they need it.

However, insurance also causes individuals to consume health care even when it might not be otherwise worthwhile for them.

Moreover, because patients may not easily understand many of the complex decisions about their care, often spending may not align well with their underlying preferences.

While many efforts are being made to better inform and empower patients to participate in their medical decisions,

health care providers, hospitals, insurers, and policy makers must make decisions that patients cannot fully participate in and that influence patient care.

Social institutions, such as licensure, accreditation, public reporting of outcomes, and market competition, may also help ensure that these parts of the health care system act more effectively as agents of patients.

Health economics is concerned with efficiency, effectiveness, value and behavior in the production and consumption of health and healthcare.





In 1963 Kenneth Arrow drew conceptual distinctions between health and other goods.[2]1Factors that distinguish health economics from other areas include

extensive government intervention,

intractable uncertainty in several dimensions,

Uncertainty is intrinsic to health, both in patient outcomes and financial concerns.

asymmetric information,

The knowledge gap that exists between a physician and a patient creates a situation of distinct advantage for the physician, which is called asymmetric information.

barriers to entry,

externalities and

Externalities arise frequently when considering health and health care, notably in the context of infectious disease. For example, making an effort to avoid catching the common cold affects people other than the decision maker.

the presence of a third-party agent.[2]

In healthcare, the third-party agent is the physician, who makes purchasing decisions (e.g., whether to order a lab test, prescribe a medication, perform a surgery, etc.) while being insulated from the price of the product or service.

Health economists evaluate multiple types of financial information: costs, charges and expenditures.





01. Economic View of Medical Care

01. Methods of Health Care Economic Analysis


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