Principles in Health Economics and Policy PDF
Preview Principles in Health Economics and Policy
Principles in Health Economics and Policy This page intentionally left blank Principles in Health Economics and Policy Jan Abel Olsen 11 1 Great Clarendon Street, Oxford OX2 6DP Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York © Oxford University Press, 2009 The moral rights of the authors have been asserted Database right Oxford University Press (maker) All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging-in-Publication Data Data available Typeset by Cepha Imaging Private Ltd., Bangalore, India Printed by the MPG Books Group in the UK ISBN 978–0–19–923781–4 10 9 8 7 6 5 4 3 2 1 Whilst every effort has been made to ensure that the contents of this book are as complete, accurate and-up-to-date as possible at the date of writing, Oxford University Press is not able to give any guarantee or assurance that such is the case. Readers are urged to take appropriately qualified medical advice in all cases. The information in this book is intended to be useful to the general reader, but should not be used as a means of self-diagnosis or for the prescription of medication. Preface This book is based on the view that there are four principal questions facing health policy makers in all countries. These four questions are universal in that they are equally relevant no matter how much money a country spends on its health services, and no matter the political system. The questions are recurrent in that they tend to pop up constantly when health policy reforms are being discussed. The structure of this book reflects the following logical order of these questions: 1) How should society intervene in the determinants that affect health? Needs for health care depend on how our health is being affected by the phys- ical and social environment as well as by our health related lifestyle. There are various ways in which the health affecting circumstances that surround us can be improved and healthy choices can be encouraged. To which extent should society intervene? 2) How should health care be financed? The more needs for health care, the more money is required to finance it. Revenues can be raised through: i) patient payments (‘out of pocket’ at the point of delivery), ii) taxation (and social insurance), and iii) private health insurance. Rarely would we find that a country has chosen only one of the three sources, most often we find a combination of at least two. For which reasons would we prefer one source of financing over the other? 3) How should health care providers be paid? Once revenues have been collected, there are various ways in which to pay providers of care. The key issue is whether it should be activity based or not. Hospitals may receive fixed annual budgets, or they can be reimbursed depend- ing on how many patients have been admitted and what types of care have been provided. Primary doctors can be salaried, or remunerated depending on their number of patients and what services they provide. Why, and to what extent, should payments be activity based? vi PREFACE 4) How should alternative health care programmes be evaluated when setting priorities? Once revenues are raised and providers are paid, resources are allocated to competing health care programmes. If you believe that health care should be distributed on the same principle as ordinary market goods, resources would simply be allocated to those services that patients are willing and able to pay far. However, if you believe that health care should be distributed depending on people’s needs, you must evaluate the competing alternatives in order to find where they improve the most health. Which methodologies are appropri- ate for assessing the degree to which new treatment programmes are efficient and equitable? A closer look at these questions makes it quite evident that the answer you give to 4) would influence your answer to 2), in that if you think health care should be distributed according to health needs, then you cannot hold that all health care should be financed in a way that is dependent on ability to pay such as patient payment or private insurance. Clearly, there are no universally correct answers to these questions. The answers depend on the objectives of the health service, and these objectives are normative in that they reflect value judgements. Interestingly though, most health policy objectives can be understood as being concerned with efficiency and/or equity. Therefore, you need to understand these crucial concepts and how they relate to health policy. So, before diving into the four principal ques- tions, the first part of the book explores the concepts of efficiency and equity. First of all, though, a scene setting context of health care and health will be outlined. Acknowledgements First and foremost I want to acknowledge Paul Dolan for letting me draw heavily from our joint book Distributing health care, OUP, 2002. Without that book as a basis, I would not have started writing this one. Many thanks Paul, and thanks for supporting me to get on with it. This book was written while spending a sabbatical year at The London School of Hygiene and Tropical Medicine. I am grateful to its Department of Public Health and Policy for providing me with work space, and to my colleagues there for many stimulating discussions. I would like to thank Tony Culyer, Tor Iversen, Ivar Sønbø Kristiansen and Jon Magnussen for their comments on particular chapters, and Birgit Abelsen for providing Figures 1.3–6. The usual disclaimer applies. This page intentionally left blank Contents Part 1 The context of health and health care 1 Health and health care 3 1.1 What is health? 3 1.2 What is health care? 6 1.3 What do health care and health do for people? 8 1.4 Health and health care across the world 11 1.5 Conclusion 14 2 Economics and efficiency 17 2.1 More in means more out—but at a diminishing rate 19 2.2 Substitution: ‘more than one way to skin a cat’ 24 2.3 Scarcity: a dismal reality for the dismal science 32 2.4 Supply and demand—and the magic equilibrium 38 2.5 Conclusion 44 3 What makes the market for health care different? 47 3.1 The perfect market model and the imperfect market for health care 47 3.2 Asymmetric information and the agency relationship 52 3.3 Externalities: selfishly motivated 55 3.4 Conclusion 59 4 Equality and fairness 61 4.1 Externalities: unselfishly motivated 61 4.2 Transfers in cash or in kind 64 4.3 Three theories of distributive justice 67 4.4 The health frontier and trade-offs 72 4.5 Conclusion and some conceptual clarifications 77 Part 2 Intervening in the determinants of health 5 The health environment 85 5.1 The physical environment 85 5.2 The social environment 89 5.3 Conclusion 92
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