In order for the students of health care economics to understand the topic, it is imperative that the term economics is defined. Scholars have defined economics as the study of market forces which includes individuals making choices over the scarce resources (Timmreck, 1997). These market forces are the forces of demand and supply over which people have to weigh different alternatives or choices.
- Scarcity is the concept of limited resources which is the backbone to the thinking of economists. Due to the limited resources in the economic concept, economists recommend an important principle of opportunity cost. This principle implies that the cost of an alternative product should be forgone in the process of pursuing a certain action.
Health care resources- are resources such as medical personnel, medical supplies, and capital inputs.
- Medical supplies could include medications, patient gowns and bandages among others. Medical personnel include nurses, doctors, receptionists, equipment technicians and administrators.
- Capital inputs are care facilities such as hospitals, diagnostic and therapeutic equipment and nursing homes among other facilities. The process of administering health care to patients requires a combination of some or all the resources named above.
For instance, while a doctor is needed to provide medical services, the laboratory is required to help in carrying out tests and the beds and rooms are required for patients to rest. Patients are then required to pay hospital charges, laboratory fee, doctors’ fee and other charges that could fully or partially compensate for the costs of offering such services. Usually, these healthcare resources are scarce and will be administered to patients based on their urgency of the service needed and how much the patient can afford.
Costs- Cost can be described as the value of the opportunity forgone as a result of using resources in an activity. Healthcare costs are the actual costs of supplying services that are demanded in the process of health care delivery (Getzen, 2007). These cost issue include the costs of procedures, medications, therapies, cost of insurance, the cost of technology and the cost of illness. The charges that are set for services are as a result of hospital costs. These costs are attributed to the health care episode of a particular patient, and they are direct costs plus a certain appropriate proportion of overhead for administration, building and maintenance, personnel, equipment and, other variable, fixed and marginal costs. While marginal and variable costs are related to the condition of health care seeker, fixed costs are attributed to the capital resource of the health care facility. In essence, these costs are distributed according to resource utilization in the process or offering health care. In general, when analyzing health care differential costs, the costs pertain to services, institutions, and other resources. Availability of the resources and the ability to bear the costs associated with the service determines the quality of health care received by the patient.
Quality-Quality of health care could refer to the degree to which healthcare services, for populations and individuals in particular, increase the likelihood of the anticipated health outcomes that are consistent with the current knowledge of professionalism (Timmreck, 1997). Good quality results from managing the individual or the population’s health care through application of medical expertise in a timely and a culturally sensitive manner within the available resource constraints. Clearly, lack of vital resources could affect the quality of care given, but on the other hand, it is possible to provide high quality care in environments with severely constrained resources. The process of elimination of poor quality health care services giving better care besides stopping overuse of some care, providing enough supply of essential clinical services, and reducing some variable costs through ending misuse of unneeded services. Other measures of ensuring high quality include malpractice litigation, good use of technology; use of nationally and locally approved clinical guidelines that ensure cost-effective treatments and better health comes. Improved health outcomes and ultimate health has also been associated with paying physicians based on their performance.
Technology- hospitals hope to reduce medical errors, such as administering the wrong medication and dosage, and ordering through technology. Technology is believed to provide access and sharing patient information more easily leading to improved care. It also argued that governments can make a lot of saving through the use of technology to improve efficiency (Murray and Frank, 2000). But, some health care institutions have not embraced technology due to high implementation costs that deter these care providers from adopting new technology. Health provision related technology is very costly and the providers are currently expected to bear most of the purchase and installation costs. Besides bearing high costs, care providers are expected to adjust their human resource requirement in terms of training to prepare them to incorporate technology. Though it is not clear whether technology will deliver widespread improvements in efficiency, quality of care and cost saving, some tested examples have indicated that health technology may hold for the reformation of entire health care system.
Getzen, T. E. (2007). Health economics and financing. NJ: John Wiley and Sons.
Murray, C.J., & Frenk, J. (2000). A Framework for Assessing the Performance of Health Systems. Bulletin of the World Health Organization 78(6), 717-31.
Timmreck, T. C. (1997). Health services cyclopedic dictionary: a compendium of health-care and public health terminology. Sudbury, Mass: Jones and Bartlett Publishers.