"Health economics is a branch of economics concerned with issues related to scarcity in the allocation of health and health care. Broadly, health economists study the functioning of the health care system and the private and social causes of health-affecting behaviors such as smoking."
Helge: I think that spirometry could be considered as a tool that can distinguish some of the effects of smoking.
A seminal 1963 article by Kenneth Arrow, often credited with giving rise to the health economics as a discipline, drew conceptual distinctions between health and other goals.
Helge: We've discussed health care economics in relationship to Carpal Tunnel Diagnostics for several years. There is a resistance to change in the system. New technologies are adapted slowly if they are threatening existing money making practices.
Factors that distinguish health economics from other areas include extensive government intervention, intractable uncertainty in several dimensions, asymmetric information, and externalities.
Helge: Government intervention could be a possibility, but there is much more lip-service and talk than real action in this field.
Governments tend to regulate the health care industry heavily and also tend to be the largest payer within the market. Uncertainty is intrinsic to health, both in patient outcomes and financial concerns.
Helge: It takes a long time for policy makers to learn and understand what could be good and cheaper in the long run.
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. Externalities arise frequently when considering health and health care, notably in the context of infectious disease. For example, making an effort to avoid catching a cold, or practicing safer sex, affects people other than the decision maker.
Helge: The medical experts do have an advantage, they are trusted and they do have a strong voice. New ideas don't grow in a top-down and authoritarian environment.
The scope of health economics is neatly encapsulated by Alan Williams' "plumbing diagram" dividing the discipline into eight distinct topics:
- What influences health? (other than health care)
- What is health and what is its value
- The demand for health care
- The supply of health care
- Micro-economic evaluation at treatment level
- Market equilibrium
- Evaluation at whole system level; and,
- Planning, budgeting and monitoring mechanisms.