Health Economics

When we are faced between a dilemma as to which car to purchase or where to invest our money what answers our questions; its Economics always present around us guiding our decision making apparently or virtually. Economics is the study of allocation of scare resources which have alternative uses among different needs. We regularly do a cost benefit analysis in our lives to make sure we get the best with the allocated resources. Same principle is applied in the health sector too and the economics there also is similar with different terminology.

Health Economics is a relatively new and growing branch of Economics that has gained importance with the growing realization of the importance of health and its impact on economic development. It is the use of economic tools in the healthcare industry to obtain maximum efficient and cost effective use of the resources employed. Health Economics tries to ensure that maximum no. of patients are served at a low cost and there is best possible use of resources employed so that the opportunity cost is completely met. Apart from this health economics also has a macro perspective of improving healthcare services so that the nation’s productivity is enhanced and economic development becomes a smooth process.

Human resource is the most precious resource a nation possesses. Effective development and utilization of this resource is very necessary for economic development. A healthy person is a productive person. He is able to earn his livelihood and is an asset to the society and contributes to the nation’s GDP. On the other hand an unhealthy person merely consumes the country’s production without contributing to it thereby, pulling down the GDP. Thus, health economics tries to allocate the available resources in such a manner that maximum proportion of population is benefitted from it and the nation as a whole reaps the benefit.

Most of the under developed and developing economies today face the problem of poor health and mal nutrition as a result of which their productivity is low and there is a high incidence of poverty. It is also true that it is because of high incidence of poverty that a major section of population in these countries is not able to avail health care facilities as purchasing power is positively correlated to health care. Hence, this is a vicious circle which can be broken only by govt. intervention. Although governments in these countries have been spending on health care facilities the spending is not enough to provide health security to all. Apart from this there are numerous leakages in the system too. Health economics can be helpful to govt. in this direction. It can through its tools device proper management of funds, allocation of funds in proper direction so that needs of maximum are satisfied. Apart from this it can also search for new sources of fund. It can also be used by private sector in the health industry to plan investment and spread their service net. Health economics thus, can be used by both public and private sectors in the economy to chalk out a plan of providing health care facilities to maximum proportion of population at a viable price that is neither too high nor too unprofitable; Thereby increasing the health service net of nation.

Health economics uses economic tools like cost minimization analysis, cost effectiveness analysis, cost utility analysis, cost benefit analysis and marginal cost analysis to obtain the end result of optimum use of resources allocated to health sector. All these analysis are used under different perspectives but the end to be achieved is similar. Thus, health economics may be a specialized branch of economics dealing with resource allocation and utilization in health care industry but, at the end of the day it plain economics thriving for optimum use of resources and economic development.