Health economics is the study of how health care can be made more equitable, accessible and affordable for all. Here is exactly what it means and why it is important.
Health care is one of the most important aspects of human life and well-being. According to the 2019 census, 14% of the American workforce is employed in the healthcare sector, or about 22 million people. In the United States, where health insurance is often tied to the workplace, it is considered a source of sociopolitical tension because the nation spends more than other countries on health care but does not achieve better health outcomes.
Health economics examines the factors that influence the cost and quality of care in this sector. How do patients, providers, insurance companies and the government influence the distribution of health care – and how can it be improved?
What is health economics?
Health economics is an applied field of study that examines and finds systems-based solutions to make health care more equitable, accessible and affordable for all. Health economists seek to understand the role that a wide range of stakeholders (e.g. health care providers, patients, insurance companies, government agencies, businesses and public organisations) play in health care spending.
Health economists are curious to understand what influences health outcomes. In their research, they ask questions such as:
- How can the value of health be determined?
- What factors influence health, apart from health care?
- What influences the demand and supply of health services?
- The behaviour of providers and consumers of health services
- What are alternative approaches to the production and delivery of health services?
- How can we improve health care planning, budgeting and monitoring?
Examples of healthcare economics in the real world
According to Harvard Medical School professors, health economics can be viewed from six perspectives: Spending growth, the role of the patient, the role of the provider, the impact of risk and insurance, benefit design, and payment reform.
Take payment reform as an example: physicians may be remunerated differently than in the past. In recent years, value-based care models such as episode-based payment, pay-for-performance and population-based payment models have helped to make healthcare more equitable. Payment reform affects providers, insurance companies and patients.
Why is health economics so important?
Health economics is important because it focuses on how the economic behaviour of stakeholders and beneficiaries affects the quality and cost of health care. It deals with how people pay for care, how these payments are processed and how health systems around the world can be restructured and improved. By getting to the root of any systemic problem, the same problems can be avoided.
In examining these issues, health economists look at global problems such as migration and displacement, climate change, pandemics and access to vaccines, disease, obesity and more. They apply economic theories to inform the public and private sectors on cost-effective solutions to improve equity in healthcare.
For example, a health economist might examine health care quality and income disparities in West Africa by assessing the average cost of health care and insurance in the region. Possible solutions include the use of digital technologies to deliver health care directly through a mobile phone or laptop.
Similar to public health and population health, a bird’s eye view of the health and well-being of society from a macro perspective, but also a closer look at specific population groups, can have a positive impact. Health economics can provide insights that contribute to solving some of the world’s most pressing health care and welfare problems.
Who should study health economics?
Understanding how economic behavior influences health and health care decisions can be useful for anyone interested in this field. However, the following groups of people can benefit most from studying health economics:
Physicians: doctors, nurses and caregivers can evaluate new treatments, technologies and services to understand how to provide value-based care. Healthcare professionals benefit from understanding the economics of these developments.
Administrative assistants: Healthcare administrators process insurance tickets and manage financial metrics for healthcare providers. Understanding the complexities of the health economics can provide the necessary context for working with insurance providers and using new technologies to process payments.
Policy makers or public health officials: policy makers at the local, state, federal or international level will benefit from understanding the economic relationships between stakeholders and the community at large.
Corporate executives: With many Americans privately insured, health care is becoming a major cost factor for employers. Corporate executives need to understand the perspectives of health economics to keep their employees, shareholders, and even customers happy.
Healthcare economics with Coursera
Immerse yourself in the exciting field of health economics and contribute to the future of health care. Consider enrolling in The Economics of Health Care Delivery course at the University of Pennsylvania, part of the Business of Health Care specialisation offered in partnership with Wharton and Penn Medicine. You will be trained by experts in business economics, health care management and health care policy to develop the skills necessary to successfully navigate the rapidly changing landscape of this fast-growing industry.