Health Economics (Term Paper Sample)

Health Economics - MMB725020 Student's Name Institutional Affiliation Course Number and Name Instructor Name Due Date Section B Question 1 (Total 20 marks) * Describe the conditions which must be met for a normally competitive market to be in equilibrium. (300 Words) 10 Marks Under the general equilibrium theory in economics, there are various conditions that define a perfect market which is collectively called perfect competition. Economists say a perfect market occurs when the demand for the output of every producer in the market is elastic (Lepervanche & Howard, 2019; Diaz-Caballero et al., 2021). This implies that the output of the seller is small and only forms a negligible proportion of the market. In the healthcare market, the conditions that define a perfect market competition include: * Many buyers and sellers Homogeneous products in a perfect market have many buyers and sellers. This means that no single buyer or seller can dictate the price and product output of the whole industry (Paquet-Clouston et al., 2018). Hence, an individual seller cannot succeed in influencing the market price by decreasing or increasing supply. Similarly, an individual buyer cannot control the market with their failure to buy. * Perfect Knowledge of the Market All the buyers and consumers have perfect knowledge regarding the quality, price, and any other aspects of the goods or services (Munoz, 2019). In health care, these include aspects such as efficacy and need. The condition of perfect knowledge force sellers to avail of products at the existing market rates and the buyers agree to buy at that price. * No barriers to entry or exit. There is freedom for enterprises to enter and leave the market of their own free will. There are no licensing or educational barriers required for a physician to join the market or Certificate of Need (CON) required for hospitals. Hence, when the industry is making profits, new firms are free to join the market and during losses, some businesses leave which implies that, in the long run, firms will make normal profits (Rasda et al., 2021). * No artificial restrictions in the market There is total openness in the processing of buying and selling as any player in the market is free to buy and sell from or to anyone. There are no elements of discrimination from both the seller and the buyer (Gane, 2020). The government, producers, and other agencies are not making any attempts to influence the supply, demand, or price of commodities. * What are the key differences between public systems for providing healthcare compared with private insurance systems? (300 Words) 10 Marks The public systems for providing healthcare and private insurance systems are both meant to aid individuals in deferring their medical care expenses (Curto et al., 2019). However, the fundamental differences between the two lie in their advantages and disadvantages. Difference in Costs The difference here lies in the cost of healthcare service and how it is paid. The public side represents a non-profit type of health insurance where the government charges its citizens higher taxes that are used in covering medical expenses (Yip et al., 2019). Under private insurance, the service providers charge insurance premiums to cover medical needs. The companies make profits from insurance premiums implying that private health insurance costs a lot more than public insurance. Differences in Features The goal of public health insurance is to cover all the medical needs of every individual to ensure they do not have to pay additional money from their pocket (Das et al., 2018). Hence, there are no restrictions with regard to pre-existing conditions. On the other hand, many private health insurance companies do not cover pre-existing conditions. As a result, there are higher premiums for those with chronic conditions. Differences in Cost Saving Tactics Public insurance reduces overheads from the administrative perspective to ensure every citizen gets the medical care they need. For the private insurance sector, the ways of cutting costs or increasing revenue are diverse. Individuals in poor health conditions or who are at higher risk of illness are charged more premiums than people considered healthier (de Moor et al., 2018). The sector also denies insurance to the sick on some occasions or excludes past health issues from their health coverage. Quality of Insurance The quality of healthcare insurance under private insurance depends on the amount of premium paid by the insured (Pichler et al., 2019). Those with basic plans get little coverage compared to those who pay more. The quality of coverage in the public sector is generally constrained by congestion with frequent long waiting lists making the services poor in comparison with private health insurance. Question 2 (Total 24 Marks) * Describe technical efficiency. What kind of evaluation techniques can we use to answer technical efficiency questions? (200 Words) 6 Marks Technical efficiency is the physical relationship between resources such as capital and labor and health outcomes. A position that is technically efficient is only realized when if a set of input resources result in the maximum possible levels of improvement in the health outcome (Ferrerira & Margues, 2019). An intervention is also said to be technically efficient if it is possible to get the same or greater outcomes with less of a particular input. For instance, considering a case of osteoporosis treatment using alendronate, Dudeney & Lieberman (2000) conducted a randomized trial that revealed that a daily dose of 10 mg was equally as effective as a dose of 20 mg. this implies that the 10mg dose is technically more efficient. One of the most reliable evaluation methods for technical efficiency is the data envelop analysis. This method is used in economics and operations research to aid in the measurement of production frontiers (Stefko et al., 2018). The approach puts emphasis on the performance variation among elements. It measures the empirical accuracy of production efficiency concerning decision-making units The only concern with the technique is the improvement of its effectiveness and reliability has prompted researchers to investigate more on the ways its disadvantages can be reduced and its advantages strengthened. The method has a strong link to production efficiency which is helpful in understanding whether a resource is contributing positively to the desired health outcomes. * Briefly describe the cost-utility analysis technique of economic evaluation. (150 Words) 4 marks This refers to an analysis in economics where a program’s incremental cost from a given point of view is compared to the incremental health improvement expressed in the unit of quality-adjusted years (QALYs). This technique is important in the comparison of two procedures or two drugs that could be having different benefits (Manchikanti et al., 2018). The cost-utility analysis incorporates an increase in the changes to the quality of life and increases in the survival time under one measure. In this case, quality of life is provided as a utility value given on a scale of zero to one where one represents the perfect quality of life while zero represents a state of death. The technique uses incremental cost-utility ratios that make it possible for the costs of achieving health safety via drug treatment to be compared with similar ratios obtained from other interventions in health, for example, screening using mammography). * Define variable cost and fixed cost in an economic evaluation. (150 Words) 4 Marks Variable costs refer to those costs that increase or decrease in value depending on how much output is produced by an entity. This implies variable costs rise if production is increased and when production is decreased, variable costs reduction as well (Hall, 2018). On the other hand, fixed costs represent those expenses whose value remains constantly similar regardless of how many levels of output are achieved. These costs do not depend on the specific business activities of an organization and they may include property, rent, depreciation, insurance, and taxes. For healthcare, there is a significant level of challenge when it comes to the management of the two costs. According to Roberts et al., variable costs in medication and supplies are ‘saved’ in situations where services are not provided (Roberts et al., 1999). They say a hospital’s reduction in services does offer cost savings in the short term. This implies that the long-term objectives for such enterprises should reduce fixed costs. * It has been observed that “Quality-adjusted life years (QALYs) are the most common way of measuring health benefits in health research”. What are the main reasons for this? (200 Words) 6 Marks As an economic tool, quality-adjusted life years (QALYs) are essential in the determination of whether or not a treatment procedure or medicine offers good value for money. Value for money in this context means that the outcome of a treatment process reflects the true value of resources invested in the treatment procedures and the medication offered. What makes QALYs so instrumental is that it takes into account two important aspects which is the quality of life. These are key requirements and important objectives for any practicing entity (Benjamin, 2022). People not only want to lead better lives in terms of quality but the length of life is also important. So when this method combines these two important life aspects and comes up with one measure, it makes it exactly what is needed in healthcare. Medical facilities use this method in the assessment of clinical and cost-effectiveness, by measuring the cost per QALY for different drugs. When the comparisons are made, the medicines that have low costs per QALY are regarded as those providing value for money. Similarly, those with a higher...