An Introduction to Health Economics and Management

Session Report
Srinidhi Kavirayani

Introduction to Health Economics

In the ninth session of the Fundamentals of Public Policy one-month certificate course, Professor Mukul Asher presented an introduction to Health Economics and Management. Prof Asher began his presentation by introducing healthcare as an important economic concept that examines and finds system based-solutions to make healthcare more accessible, equitable and affordable to all. He highlighted that healthcare is not a welfare scheme and that the government has to provide healthcare services to all using limited resources, thus making it a complex economic problem. He explained how healthcare is a managerial problem as well, since people, systems and resources have to be managed in an optimal way to maximize utility. 

Talking about the field of health economics in India, Prof Asher said that it is still in its infancy as compared to the rest of the world, which is why it is critical to engage in this sector. 

Funding and Financing

Prof Asher then moved on to explain the funding and financing of healthcare services, while also underscoring the nuanced difference between the two. He explained that funding concerns the percentage of the GDP for a country, which is spent on health care. On the other hand, financing concerns instruments used to fund health care.  While funding is an opportunity cost, financing includes the out of pocket expenditure, insurance and government sources of money. 

Prof Asher listed out the key health financing instruments while discussing a balanced approach to funding and financing healthcare, particularly in India. 

Healthcare Management and Stakeholders

In this part of the lecture, Prof  Asher deliberated on six ways through which health care economics can be approached. He looked at the spending growth, role of the patient, role of the healthcare provider, risk and insurance impact, benefit design and  payment reform as the six key areas of approach towards health economics. Prof Asher also spoke about how policy makers fail to consider the complexity of healthcare management in their decisions especially in the Indian context and highlighted the effect of this inefficiency on the different stakeholders. 

Economic Concepts for Health Policy and Governance 

Prof Asher delved deeper into the economic concepts relevant for a nuanced understanding of health policy and governance. He explained the agency theory, moral hazard theory, economic role of insurance and the concept of adverse selection. He built on a strong foundation of these economic concepts, while also simultaneously shedding light on the ethics of “doing” healthcare. He explained the different trade offs in resource allocation and policy decisions often faced by policy makers in the healthcare management. He also addressed the critical issue of minimizing mortality and damage to human lives. 

Governance of Healthcare

Moving towards the governance aspect of healthcare, Prof Asher briefly explained governance and defined the word formally as “rules that distribute roles and responsibilities among stakeholders.”  He then built upon the core functions of social health insurance organizations, listing out the important roles and duties performed by the organizations. Prof Asher discussed the failures of governance in health care management, its implications and its adverse effects. Furthermore, he listed out stakeholder-wise purposes in the governance of healthcare. 

Looking forward to the solutions, Prof Asher underscored the requirement of a system counterweighting incentives and disincentives to shape their economic behavior. He also stressed on recasting the existing generic model of health system with the government at center to a more collaborative model.

Issues and Challenges

Towards the end of his lecture, Prof Asher addressed the key issues and challenges pertaining to the healthcare sector. He identified developing long term health care organizations, structures,  and financing modes as one of the key bottleneck issues in the sector. He also underscored the urgency of the issue in a country like India and how it would affect especially the older populations to live an independent and healthy life. 

Conclusion

In his presentation on Health Economics and Management, Prof Mukul Asher emphasized the importance of viewing healthcare as an economic concept, highlighting the need for accessible, equitable, and affordable healthcare solutions. He discussed the infancy of health economics in India compared to global standards, indicating a critical need for development in this sector. Prof Asher differentiated between funding and financing in healthcare, highlighting the instruments used for each. He also examined six key areas in healthcare economics, including spending growth and the role of stakeholders, emphasizing the complexity policymakers face in decision-making with respect to healthcare management.

Additionally, Prof Asher delved into economic concepts relevant to health policy, governance and healthcare management, discussing agency theory, moral hazard, and the economic role of insurance. He stressed the need for a nuanced approach to health policy to minimize mortality and damage to human lives. Furthermore, he explored governance in healthcare, discussing the roles and responsibilities of stakeholders, and highlighted the need for a collaborative model in health systems. Finally, he addressed key challenges in the healthcare management, including the development of long-term healthcare organizations and financing modes, particularly important for the aging population in countries like India.

Acknowledgment: Written by Srinidhi Kavirayani, intern at IMPRI.

Posted by Reetwika Mallick, intern at IMPRI.

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