Managerial Economics

Health economics – The Primer This series of articles will introduce readers to the emerging field of health economics. We will review how health economics influence decision making process in health care and the basic tools used in health economics. * 1. The Role of Health Economics * 2. Cost of Health Care * 3. Should Oncologists Care About Cost-Effectiveness Analyses? * 4. Classification of Health Economic Analyses * 5. Health Economics Research: Cost Utility Analysis And More * 6. How Much Does a Healthy Year of Your Life Cost? . The Role of Health Economics Economic analysis is increasingly used as part of the decision making process in health care. Read more about it here. Health economics aims to find the best way to satisfy the ever increasing demand for health care given the limited resources. It is estimated that health care spending in the U. S. Will reach 7% of GAP in 2020. That is health care spending might exceed military spending and/or education spending in the near future. This is inevitable given an aging and expanding U.
S. Population. Health economics will play an important role in the future when we try to figure out the best ways to maximize the benefits of health care spending. Cost-effectiveness analyses of health care interventions have become one of the focal points in the decision making process in health care. The introduction of any health technology, whether it is a new drug or a new medical device, is often associated with an increase in health care costs. This will limit the funding available for other interventions.
Health economics will help policy makers, health care providers, and insurance companies to determine whether the new intervention is cost-effective in comparison to other options. To address the need for improving the quality, safety, efficiency, and effectiveness of health care, the U. S Department of Health and Services has created the Agency for Healthcare Research and Quality (ARQ) You can go to the agency website and find a lot of economic information available on major diseases and conditions, such as cancer, heart diseases and diabetes.

For instance, the Agency for Healthcare Research and Quality estimates that there were 559,650 cancer deaths in 2007 and more than 10 million people in the U. S. Living with cancer. There were about 1. 5 million of new cases of cancer in 2007. The total cost of cancer in 2007 was $206 billion . The annual direct medical cost of cancer, defined as personal health care expenditures for hospital and nursing home care, drugs, home care, and physician and other professional services”, was $77 billion. You can also learn that collateral cancer screening is very cost effective.
The cost per quality- adjusted life year (GAL.) saved by collateral cancer screening is less than $14,000. For comparison, the cost per quality-adjusted life year saved by breast cancer screening is GAL. accounts for how the presence of certain conditions affects quality of life. One year of perfect health is equivalent to 1. 0 GAL., Managerial Economics By exhumations have some value between O and 1 . In the U. K, the National Health Service established the National Institute for Clinical Excellence (NICE) with similar objectives.
The National Institute for Health and Clinical Excellence is particularly known for its tough stance on expensive drugs. Sources Machismo NV, Coiffed ABA, Edwards NM, et al. Priorities among effective clinical preventive services: results of a systematic review and analysis. Am J Prep Med. 2006 July;31(1):52-61. Panel Backs Covering Eye Treatment in U. K. , Wall Street Journal, ANITA GRAIL, August 28, 2008; page 82 Read more: http://www. Bright. Com/health/technology/articles/ 6763. SSP#Thessalonians 2. Cost of Health Care There are several types of health care costs.
They are direct costs, indirect costs, intangible costs, opportunity cost, average cost, incremental cost and marginal cost. We briefly review direct and indirect costs here and use oscilloscope as an example of how to calculate direct costs. Direct costs include all costs directly related to the health care intervention under consideration. Direct costs have two components (I) direct medical costs such costs of drugs, tests and procedures and salaries of nurses and doctors and (it) direct non-medical costs such as cost of transportation of tenants.
One way of calculating direct costs is using health care coding systems. One of the most popular coding systems is the CPA code set, where CPA stands for Current Procedural Terminology. The CPA code system describes in details medical, surgical and diagnostic services and is maintained by the American Medical Association. Any health care intervention performed on a patient will be assigned a CPA code by the health care provider and will be billed according to the CPA code of the procedure. Indirect costs measures the impact of diseases or conditions on productivity.
Often, lath economists use gross earnings to estimate indirect costs. Total health care cost is the sum of direct costs and indirect costs. For instance, the total health care cost of cancer in 2007 is $210 billion, of which, $77 billion is direct medical costs. Another example is collateral cancer screening by oscilloscope. According to the ARQ report, the costs for oscilloscope without phlebotomy can be calculated based on the following CPA codes 45378 (diagnostic oscilloscope), 60105 (colon screen in high risk individuals) and 60121 (colon cancer screening for non high risk individual).