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Questions and Answers
The equilibrium price reflects the value placed on the first unit purchased.
False
Which factor influences patient demand in healthcare?
In a competitive market, prices reflect __________ costs.
production
What principle determines the least costly method of producing medical services?
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Match the following healthcare concepts with their descriptions:
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What is the implication of the two fundamental theorems in health economics?
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Input combinations in healthcare do not change over time.
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State one condition that affects market applicability in the healthcare sector.
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Which of the following characteristics contributes to market failure in healthcare?
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Government provision of healthcare services is always necessary in the case of market failure.
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What type of demand is healthcare an example of?
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Consumption of healthcare can create __________, impacting the utility of others.
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Which perspective asserts that healthcare is distinct from other goods?
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Informational asymmetries occur when patients have more information than providers.
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In terms of healthcare, what does the concept of 'need' refer to?
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Match the following concepts to their definitions:
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Which of the following is NOT considered a health care function?
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What attributes characterize beneficiaries of health care services?
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Catastrophic spending refers to health care payments that keep households above the poverty line.
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_____ spending refers to health care payments that exceed a threshold amount and cause financial hardship.
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Match the following terms to their definitions:
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Which age group falls within the beneficiary characteristics?
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What is the ethical position regarding catastrophic spending?
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The mean positive gap and overall mean are used to measure the intensity of impoverishing spending.
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What represents a condition for gross investment in health in period t-1?
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The Philippine National Health Accounts include social care among its primary areas of concern.
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What are the four main inclusion criteria of the Philippine National Health Accounts?
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One of the categories of proximate determinants of health is __________.
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Match the following factors with their corresponding categories in the framework for analyzing health determinants.
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Medical tourism is considered in the Philippine National Health Accounts.
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Which of the following is NOT considered a proximate determinant of health?
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Identify one source of data used in the Philippine National Health Accounts.
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What is a common measure used in Cost-Utility Analysis (CUA)?
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Cost-Benefit Analysis (CBA) considers the distribution of net benefits among affected individuals.
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What does the acronym ACUR stand for in the context of CUA?
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The method used in CBA that assesses an individual's value based on their contribution to society is called the ______ Approach.
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Match the following concepts with their definitions:
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Which of the following is NOT a limitation of Cost-Utility Analysis?
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Quality Adjusted Life Years can make changes in quality of life comparable to changes in the length of life.
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What does the acronym WTP stand for in the context of CBA?
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In Cost-Utility Analysis, the concept of ______ evaluates the utility of an intervention by the number of DALYs prevented.
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Which analysis is best for evaluating each intervention separately based on monetary equivalents?
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Match the health measures with their definitions:
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Marginal opportunity cost of resources should not be measured when budgets change.
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Name one benefit of using Quality Adjusted Life Years in health assessments.
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The threshold value for cost-utility ratio is used to determine if an intervention should be performed based on its ______.
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Cost-Utility Analysis does NOT include which of the following considerations?
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Study Notes
Demand for Treatment
- Patient demand is expressed through physician consultations and treatment decisions.
- Physicians select settings based on prices, costs, and treatment efficacy.
- Institutions demand manpower and other inputs based on changes in institutional settings.
- Prospective health professionals' demand is based on the market demand for professionals.
Price as an Allocation Tool
- Market systems use prices to allocate resources.
- Consumer choice is influenced by income and prices.
- Equilibrium price reflects the value placed on the last unit purchased.
Competitive Market
- Prices reflect production costs.
Efficient Price System
- Marginal benefits equal marginal costs.
Functions of Price
- Price incentives consumers to limit service use.
- Price rations available services.
- Price informs providers about demand changes.
Optimal Production Method
- Marginal productivity of any input and relative costs determine the least costly production method.
Technical Efficiency
- Technical efficiency maximizes output from given inputs.
Economic Efficiency
- Economic efficiency chooses the least costly combination of technically efficient inputs.
Optimization Issues
- Using specific standards could hinder economic efficiency.
- Input combinations change over time due to cost and productivity variations.
Two Fundamental Theorems
- Competitive equilibrium is Pareto optimal.
- Pareto optimal allocations produce a perfectly competitive economy.
Implications
- Non-market arrangements are only justified by market failure.
- Efficiency and distributional concerns should be separated.
Healthcare is Different
- Healthcare exhibits characteristics affecting market applicability.
- Non-market institutions may achieve higher Pareto efficiency than the market.
Market Failure
- Healthcare exhibits characteristics that lead to market failure.
Government Provision Not Necessary
- Market failure does not necessitate government provision.
Non-Market Institutions
- Non-market institutions may attempt to overcome market inefficiencies, but can also introduce their own problems.
Characteristics of Healthcare
- Healthcare demand is derived from the demand for health itself.
- Healthcare consumption can affect the utility of others (externalities).
- Healthcare production may exhibit increasing returns to scale.
- Providers have more information than patients (informational asymmetries).
- Uncertainty exists about the need for and effectiveness of healthcare.
- Healthcare goods vary in their distinctive features (heterogeneity).
- Perspectives on distinctiveness differ – some emphasize its distinctiveness, while others believe it is not so different.
Derived Demand
- Demand for healthcare is derived from the demand for health.
- Healthcare is consumed for its indirect effect on health.
Simple Consumer Framework
- Welfare effects of healthcare depend on the technical relationship between healthcare and health.
- This relationship should be knowable by a third party.
Efficiency Concepts
- Technical and cost-effective efficiency concepts can be applied to healthcare consumption decisions.
- Production considers supply-side considerations.
- Use considers both supply and demand-side considerations.
- Choosing health levels involves trade-offs between health and other goods.
Implications for Normative Analysis
- Need becomes relevant for the normative analysis of healthcare utilization.
- Need is based on technical effectiveness – requiring an effective service to improve health.
- Need depends on the ability to benefit from healthcare.
- Demand depends on preferences and ability to pay.
Beneficiary Characteristics
- Attributes of those receiving health care goods or services or benefiting from health activities.
Health Care Functions
- Curative care.
- Rehabilitative care.
- Medical goods.
- Preventive and public health services – maternal and child health, school health services, prevention of communicable and noncommunicable diseases, occupational health, other public health services, food, hygiene, and drinking water control.
- Governance, health system, and financing administration.
- Ancillary services.
Disease Categories
- Infectious and parasitic diseases.
- Reproductive health.
- Nutritional deficiencies.
- Noncommunicable diseases.
- Injuries.
- Non-disease specific.
- Other unspecified.
Age Categories
- 0-4
- 5-9
- 10-14
- 15-19
- 20-39
- 40-49
- 50-64
- 65 and older.
Catastrophic Spending
- Health care payments that exceed a given threshold, typically a proportion of prepayment income.
Impoverishing Spending
- Health care payments that push households below the poverty line.
Nature of Health Care Payments
- Involuntary.
- Undeliberate.
- Non-discretionary – resulting from unforeseen health shocks.
Difference from Other Consumption Items
- Health care payments do not add to welfare but restore it.
Ethical Position on Catastrophic Spending
- No one should spend more than a given fraction of their income on health care.
Catastrophic Payment Gap
- Captures the amount by which payments exceed the threshold.
Measurement Methods for Catastrophic Payments
- Mean positive gap.
- Overall mean.
Limitations of Catastrophic Spending
- Does not fully indicate the hardship caused by health care expenses.
Impoverishment Consideration
- Considers the impact of health care payments on a household's ability to purchase other essential goods and services.
Impoverishing Spending Measures
- Compare poverty levels with and without considering out-of-pocket (OOP) payments.
Effects Examined
- Poverty headcount (fraction of households in poverty).
Equilibrium of Stock of Health (H) & Gross Investments (Z)
- Maximizes utility (U) function of total consumption of health services, stock of health, and consumption of another commodity.
- Subject to: net investment on stock of health.
Household Production Function
- Subject to: household production function.
- Subject to: gross investment in health.
- Subject to: single full wealth (goods budget constraint, total amount of time available).
Equilibrium Conditions
- First order optimality conditions for gross investment in period t-1: present value of marginal costs of gross investment in health = present value of marginal benefits.
Philippine National Health Accounts (PNHA)
- Provides a comprehensive framework for analyzing health expenditures in the Philippines.
PNHA Inclusion Criteria
- Primary intent for use is to improve, maintain, or prevent deterioration of health status.
- Qualified specialized knowledge and skills are required.
- Consumption is for final use of people residing in the country.
- A transaction of health care services or goods occurs.
Special Areas of Concern
- Medical tourism (imports included, exports excluded).
- Informal pays (included).
- Multisectoral issues (generally excluded).
- Well-being services (generally excluded).
- Social care (generally excluded).
PNHA Tables
- Financing.
- Production.
- Consumption.
Data Sources for PNHA
- Households.
- National Government.
- Local Government.
- Social Security Agencies.
- Private Insurance.
Framework for Analyzing Health Determinants
- 1984 Mosley and Chen model for child mortality – socio economic determinants → proximate determinants → disease risk and outcomes.
Categories of Proximate Determinants
- Maternal Factors - age, parity, birth interval, and other aspects of fertility.
- Environmental Contamination - transmission of infectious agents through air, food/water/fingers, skin/soil, inanimate objects, insect vectors.
- Nutrient Deficiency - intake of calories, protein, and micronutrients.
- Injury - physical injury, burns, poisoning, accidental or intentional.
- Personal Illness Control - preventive measures, medical treatment.
Limitations of the Model
- Does not account for distribution of life years.
- Not suitable for multiple effect comparison.
- Does not determine if the highest-ranked measure should be performed.
Benefits in Cost Utility Analysis (CUA) - Cardinal Utility
- Multidimensionality – effects of an intervention.
- Utility – preferences of health outcomes.
- Common measure – Quality Adjusted Life Years (QALYs).
Quality Adjusted Life Years (QALYs)
- Health state evaluation.
- Indifference – surviving one year in a health state with utility index x vs. fraction x of a year in perfect health.
Indices of Comparison
- ACUR (Average Cost Utility Ratio) – independent interventions.
- ICUR (Incremental Cost Utility Ratio) – mutually exclusive interventions.
Applicability
- CUA is applicable to medical and non-medical interventions.
Limitations of CUA
- Whose utility function for health states?
- Rank measure – does not help determine up to which cost-utility ratio an intervention should be performed.
- No guarantee a budget will be used to maximize health benefits.
- Should measure marginal opportunity cost of resources of budget.
Disability Adjusted Life Years (DALYs)
- Low of life in years of full health – standardized life expectancy of 80 for men, 82.5 for women.
- Utility of intervention is measured by the number of DALYs prevented.
Quality Adjusted Life Years (QALYs) - Detailed
- Morbidity weights – people concerned by intervention.
- QALY of person = multiply expected duration of health state with its morbidity index.
- Makes changes in quality of life and changes in length of life comparable.
Health Years Equivalent
- Health profiles.
- Likely sequence of health states caused by intervention.
- How many years in perfect health would they find equally attractive.
Benefits of Cost Benefit Analysis (CBA)
- Units of money.
- Extension of human life and changes in quality of life are converted to monetary equivalents.
- Suitable to evaluate interventions separately.
Worthwhile Intervention
- Worthwhile if the Average Cost Benefit Ratio (ACBR) is equal to or greater than zero.
Benefits over Time
- Benefits over time are converted to present value using an appropriate discount rate.
- The highest net benefit should be adopted.
- Calculate incremental cost benefit ratios and apply a threshold value of one additional unit of ABCR.
Human Capital Approach
- Individual’s value depends on the contributions to welfare of fellow citizens.
- Net value of implicitly consuming a person has no value.
- The appropriate measure of society’s welfare is GNP.
- The approach is operational and easy, but ethical underpinnings (ignoring prisoner rights, pleasure of living) are questionable.
Willingness to Pay (WTP)
- Subjective utility - disposable income and length & quality of life.
- WTP - maximum amount of money a person would pay to obtain the intervention.
- Decision-making rule: worthwhile if total WTP > exogenous cost of intervention.
- WTP > cost
- Subjective WTP - a welfarist approach.
- Distribution of benefits among individuals is irrelevant with CBA – individuals all have the same weight.
- CBA does not guarantee all affected individuals will have a positive net benefit.
- CBA ≠ Pareto criterion.
CUA vs CBA
-
Similarity
- Neither considers how net benefits from an intervention are distributed.
-
Differences
- CUA fails to recommend if a project should be carried out unless there is a predetermined health care budget.
-
How benefits accrue to affected people
- CUA: extra welfarist
- CBA: conventional utility of welfare economics
- CUA: health; CBA: utility.
Costs
- Direct, indirect, intangible.
- Government Perspective - direct costs only.
- Indirect costs - costs from time loss due to illness or disability, for example.
- Intangible costs - costs from pain, suffering, or loss of quality of life.
- Model Development - Transition Probabilities - informs patient movement between health states in decision trees or state transition models.
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