The Basics of Healthcare Economics for the Clinical Informatics Exam

What is Health Care Economics?

Health care economic

Resource Scarcity - unlimited wants, limited resources
Opportunity Cost - in a decision, opportunity cost is the cost of the forgone best alternative
Efficiency - best use of resources to maximize goods and services production
Marginal Cost - increase in total cost when a quantity produced increases by a value of “1” unit
Supply-Demand - nit price settles at a point where demand is equal to supply
No perfect information on pricing of services
Patients “need” health care, they don’t necessarily “demand” it
Disease cannot be accurately predicted
Health care generally can’t be substituted for another option
Most health care costs are incurred towards the end of life
Individual and population health depend on many factors
Not everyone can pay even if they receive service
There isn’t enough funding to cover costs
Health financing systems are not transparent
High barriers to entry for financing exist (i.e entering the health insurance market)
Resources (providers, pharmaceuticals, equipment) are limited

Cost Minimization - Compares cost per course of treatment assuming alternative therapies have equivalent effectiveness
Cost-Benefit - Compares differing costs assuming the same outcome is provided
Cost Effectiveness - Compares relative costs and outcomes of two or more courses of action. In health care, this is generally preferred due to the issues with placing a monetary value on health effect.
Cost Utility - Estimates the ratio between the cost of a medical/health activity and the resulting benefit based on the number Quality-Adjusted Life Years (QALYs) – which in the US are valued at about $50,000 per QALY

Are the Economics of Healthcare Getting You Sick?