Health Economics Lecture Notes PDF

18:09 In our classes, this is a regular lecture in our school, mostly online. Maybe I should mention that in one of our classes, we will have him here to share with us his experience and knowledge. He is a pharmacist; he started at San Marcos. Actually, I had the pleasure to know him when he was a...

18:09 In our classes, this is a regular lecture in our school, mostly online. Maybe I should mention that in one of our classes, we will have him here to share with us his experience and knowledge. He is a pharmacist; he started at San Marcos. Actually, I had the pleasure to know him when he was a student in the Faculty of Pharmacy in Damascus. Later, he started working at Novo Nordisk in sales, then moved into governmental affairs and market access. He has a degree in health economics from Pompeu Fabra---if I pronounce it well. My Catalan is not very strong, but he studied health economics there and practiced this with Novo Nordisk and other organizations. Today, he acts as a consultant with a number of companies, and he lectures in our school but also in the Executive MBA at IESE. If I say something wrong, you might correct me. In any case, I\'m very happy to welcome you back for this lecture, and I will give you the floor to talk to us about your experience with healthcare systems and various other subjects. The floor is yours. \[Name\]: Thank you very much, professors. Thank you. Actually, I really enjoyed the introduction about health, where the whole story starts. Also, I always wonder about the introductions you make for me, and maybe I should consider adding this introduction to my bio. It\'s always a pleasure to work with you and the school. Maybe this is not the first time, as you said, but in fact, this is the first time I\'m giving an academic presentation where we talk about the science of health economics. When it comes to science, for me, automatically R&D comes to mind, which is about questioning rather than just information. Why I\'m saying that is because I not only invite everyone but I urge everyone to ask and challenge the information and the presentation so we can make it better for the next interaction. So, this is what I wanted to say about the presentation. In fact, when we discussed having this presentation, it was a bit of a challenge for me to condense the healthcare system and an introduction to health economics into, I don\'t know, 50 slides. But I can definitely promise you that these slides will be interesting, and we will have a good time enjoying them. Do you see the slide change? Okay. Very good, thank you. So, do I need to speak louder, or is the sound clear enough? Audience Member: Now, it will be better. We can hear you, but maybe it would be better. \[Name\]: Very good. So, the presentation will be split into two parts, as we discussed. First is an introduction to the healthcare system in general, where we give an overview: who are the stakeholders, what is their role, and how do they interact? What types of healthcare systems do we have, the aspects of these systems, the pros and cons of each one of them, then what regulations they have, the payment systems, the financing, the technology, and how we can empower patients. The second part would be, as we said, putting it into science, which is a discipline by itself: health technology assessment. I will just scratch the surface of health technology assessment with an introduction to the discipline, explaining why we need economic evaluation and how we measure outcomes. I will prepare the decision-making process and discuss what barriers and misconceptions we have in health technology assessment. To start with the healthcare system, it refers to the whole ecosystem around health, including institutions, people, and resources used to deliver services in order to meet the needs of the population. The objective of the healthcare system, of course, is to improve the population\'s health, and the system should do that by ensuring timely, accessible, and high-quality healthcare. This is, in a nutshell. Now, it\'s important to know the stakeholders we have in the system. We have the regulator, the provider, the payer, and the patients. I will discuss later what each one of them does. But to describe a healthcare system, we usually describe it from different perspectives and highlight some key components and characteristics of these systems, specifically the regulation, the quality system, the financing, the level of adopting technology and innovation, and finally, the access. Now, these four stakeholders, if we want to list them, include: Regulators: Usually governmental authorities that create policies and standards and oversee the system to ensure safety, quality, and equity. They oversee what other stakeholders are doing and how the system works. For example, we have the FDA in the U.S., the EMA in Europe as authorities, in addition to the local healthcare regulators in each country. In some countries, you may find even local and regional authorities, such as in the UAE, where the authority or the regulator in Abu Dhabi is completely independent from the Ministry of Health, and also the regulation in Dubai is independent from Abu Dhabi and the UAE. Payers: Institutions that finance the system and fund the process. We may have different types of payers depending on the system. It may be government programs such as Medicare and Medicaid in the U.S., or government funding in most European countries. Or we may have insurance systems, insurance companies, or in some other countries, you don\'t have either, and individuals have to pay out of pocket. Providers: All the institutions that deliver the service itself, including clinics, hospitals, doctors, nurses. Patients: The role of the patient is now increasing in terms of playing a bigger role and influencing the healthcare system. Now, this is the way we list them. But if we want to map these stakeholders to see how they interact, I believe this diagram better describes the relationship, where we have the patient in the center, and that\'s why we call it a patient-centric approach. I used colors just because I wanted in the next slide to show the relationship of each stakeholder towards the other two. With this diagram, we can see that each stakeholder needs the other stakeholders in order to serve the patient, who is supposed to be at the center of the whole process. The relationships between the stakeholders are cyclical and interdependent. So each one of them depends on the other two in order to have a smooth process. With this slide, we list what the roles and responsibilities are for each player. Here, I used colors to show the relationship between the stakeholders. Regulators: Ensure quality and compliance, set standards, approve drugs---all these are the core responsibilities of the regulators in terms of regulations and policies. Regulators also oversee the payers and make sure that insurance plans are approved and reviewed continuously to secure proper access to care. They ensure the payers comply with healthcare standards. Of course, the regulator also has an influence on impacting cost and access. Providers: The regulator is responsible for issuing licenses for providers to operate, overseeing their role and practice, and making sure they do their job according to the standards set by the regulatory body. They ensure the quality of services and safety. On the other hand, payers interact with providers on contract negotiation. So, payers fund the process to the providers, and this model can take several forms. The providers may need to take prior approvals from the payers before performing the service itself. Since the payers are the ones funding the process, they need to make sure that everything is done within the guidelines that they enforce. Payers also interact with the patient, whether it is through the insurance system or to make sure that costs are within the framework set by the payer, and they manage the whole process from a financial perspective. The providers\' main target here is the patient, and they provide the service to the patient, making sure that the relationship with the patient is in line with the standards set by the policy. This is when it comes to the interdependent relationships between the stakeholders. Collaboration between stakeholders is key, where, as I said, a patient-centric approach relies on seamless cooperation and shared goals among these stakeholders. Universal Healthcare Systems are funded primarily by the government through either taxes, such as in Europe and Canada, or from national resources by countries where there are no taxes or, until very recently, there were no taxes. The other models for the universal system are public insurance, such as in the U.S., where we have Medicare for seniors and Medicaid for low-income individuals. The whole system here is funded by the government. As we said, we may have a system where universal healthcare is provided for all citizens, such as in the Gulf countries, or for all citizens and residents, such as in Canada. On the other hand, Private Healthcare Systems are provided through either insurance---many insurances are provided by employers in most cases or purchased directly by individuals if it\'s not provided by the employer. Access in this case to healthcare is typically determined by the ability to pay for the insurance. So it\'s not universal; it is very individual, and the level of coverage depends very much on the policy that either the patient or the employer has. 18:27 Another model within the private system is, of course, the out-of-pocket model, where there is no funding process for the service apart from paying for the service that the patient is receiving. This is the very old, classical, basic model of funding healthcare services. Now, if we would like to compare between the two systems, we do this comparison from different perspectives, such as access and finance. From the perspective of finance for the universal healthcare, the pros are: Provides equal access to all individuals because it\'s provided by the government. Essential services are provided. Reduces disparity by covering the entire population. Lowers overall costs since the government will have stronger negotiation power to negotiate services and the purchasing of medicine, for example, rather than each individual buying medicine separately. Reduces the financial burden on individuals, especially when there is a very high-cost treatment such as oncology or surgery. Avoids the proliferation of transaction costs since the process is done by the government. The cons include: Bureaucracy and potential long waiting times for non-emergencies, which affects the quality of services provided. Relatively low incentive for healthcare professionals and entrepreneurs for innovation since providers work as government employees. Possible resource constraints leading to delays in services. Indirectly leads to higher tax rates due to funding through taxes, impacting individuals and the community. Subject to influence from macroeconomics and political agendas, which can affect the quality and availability of care. For the private system, the pros are: Faster access because providers have an entrepreneurial approach to attract patients. Higher flexibility in choosing healthcare providers. Competition allows for greater innovation and diversified service offerings. Healthcare costs can be controlled through individual choice, allowing patients to select the level of service they want based on their ability to pay. The cons include: Access is tied to the ability to pay, impacting low-income populations and leading to inequality in healthcare. Higher out-of-pocket expenses, especially for uninsured individuals. High administrative and transactional costs due to profit motives. Complexity in billing and approvals, requiring patients to wait for approvals before receiving care. However, if we compare universal healthcare with private from the quality and patient experience, we can see that in universal healthcare: There is an emphasis on preventive care because it is run by the government, which is more incentivized in public health initiatives covering the whole population. Ensures inclusion for all, creating trust in the system and social coherence. The disadvantages are: Limited resources impacting innovation. Standardized care might restrict personalized or advanced options, such as precision medicine. Limited provider options and waiting times leading to dissatisfaction. In the private system, we can see: Stronger innovation, individualized care, and higher satisfaction. The disadvantages are: Inequality and frustration due to inadequate medical attention for prevention. The system is incentivized by profits, so prevention is not prioritized, leading to socio-cultural consequences due to dissatisfaction. So, this is in broad terms how we compare private and universal healthcare systems from different aspects. Discussion with the Class: Before we change gears, we have quite a lot of people in the class and online who have experience with healthcare systems. Actually, all of us at some point are face-to-face with the healthcare system, whether private or public. We also have some medical doctors in the room and online who have served in this system. It would be quite interesting, in my opinion, to listen to some opinions about the healthcare system, the pros and cons. Maybe we can start by involving the class. I see three distinctive groups in the class with three distinct differences. We have representatives from Italy, both recipients of care and providers, with one of the most comprehensive healthcare treatments in the world. Italy can be proud of that because it\'s one of the few countries that for many years had absolutely free healthcare. We have representatives from Egypt, which is a hybrid of public tender and also a lot of out-of-pocket expenses. And we have Turkey, which is also one of the countries with a very comprehensive, sometimes a little bit complex, but very comprehensive system that covers all citizens in a very good way. I think I would like to open the floor for a little bit; maybe we can dedicate five minutes to discuss the differences. This is also valid for people who are online with a lot of experience there as well. Student: Here we go. Okay, so I think that one of the most important struggles about our health system here in Italy is that you have to wait too long or face long waiting lists just to access the healthcare system. Otherwise, an important pro is that it\'s accessible to everyone, so the difference with the USA, for example, with Medicare and Medicaid, is that everyone can access the whole system, even low-income patients. So this is a big pro for Europe or other countries. On the other side, there are some cons, such as the waiting lists or taxes, maybe. Professor: Waiting lists in Italy are way too long. We tend to complain sometimes, but compared to other countries, we are not that bad. Now, in countries like the UK with the NHS, the waiting lists are becoming really very long for simple procedures. Maybe you can fix the microphone to hear a little bit about a country where I spent professional time, and professionals spend a lot of energy negotiating with the government, and that means Egypt, which is a country where the government always aims for universal comprehensive coverage---not always successful with that. So we see that Egyptians very often have to put their hand very deep in their pocket to cover their expenses. But I will leave the floor to Ali and Mohamed to tell us about that. We have the benefit of so much experience in the room, and as you remember from the introduction, Ali is a medical doctor, Mohamed is a dentist, so we have a lot of experience in the systems. Ali: Well, if we\'re talking about the health system in Egypt---disastrous, to be honest. It\'s a lot to talk about because we have a problem on each side. First, many people are now counting on private agencies to get treated because at the governmental hospitals and institutes, you don\'t---firstly, you have a problem with the drugs; you don\'t have the medicine, you don\'t have the facilities, there\'s a very big shortage, so that\'s a problem. Also, the number of people is crazy if you compare it with the number of staff---the number of doctors and nurses, which is declining, not increasing. So many people are going to private institutes to compensate, and also it\'s very, very, very high. One positive thing I can say about the health system is you can really have an operation that costs a lot done at a low cost. This is like the only good thing. 18:46 Darya: Yes, hello. Actually, I\'m Lebanese, and I\'m currently living in Lebanon. But what I wanted to add feedback on is the GCC because, in my early days, I actually worked within the insurance sector for DHA and HAD, and the past few years, my experience has been related to Egypt and Saudi. What I wanted to share is actually the experience in Saudi. Saudi is actually very similar to Dubai; we have a regulator to standardize coverage. Of course, each insurance policy can deviate and have its coverage. What\'s nice about it is basically no waiting time; you can get access directly to a specialist. But what\'s happening now is there\'s a huge burden of cost, so we see a large burden of cost on insurance companies, even on regulator-related entities. So it wasn\'t until recently in Saudi that we were actually allowed to introduce the concept of a formulary. The concept of generic and brand was something very strange to the market. Recently, this change started to happen where they are encouraging the use of generic medications, and the co-payment changes accordingly. So if you want to take a brand, you pay a higher copay; if you take a generic, you pay a lower copay. It\'s the same with the tax; a few years ago, they started to implement tax on procedures, not on medications. So this is a standard example of one policy where everybody is covered. Of course, your VIPs or classes have higher privileges, they have more coverages, but it\'s open access. In terms of medication, because medication prices are regulated by the Ministry of Health, depending on your class, you may have access according to your formulary to different medications. In terms of Egypt, what I wanted to add to Dr. Ali is the interesting thing about Egypt\'s market is---it\'s actually very similar to Lebanon\'s market---is while we do have local companies producing certain medications, we also have a large number of imported medications, and by default, the imported medication becomes really, really expensive. This is something you actually see in Egypt\'s market. So you might see the same medication---for example, Glucophage---you might see it made locally at a certain price, and then it might be imported for a different price. Professor: So this is just to pick a nutshell, talking about the stakeholders in this. And we can\'t forget the Ministry of Health because that\'s our main stakeholder in many countries. I would say in all countries, of course, the Ministry of Finance plays a big role. I don\'t think one stakeholder can forget the budget. But in Egypt, there\'s a big effort to localize a lot of manufacturing. So it becomes a little bit of a very complex game, to some extent. And when you drive very much to protect the local industry, what is the outcome? The outcome is somehow you restrict the access to imported medicine because that\'s the protectionism. Of course, Egypt was one of the first ones who initiated this. I say this in a positive way, not necessarily negative, because it has a very big population with very little tax income. Mohamed: I will ask you a very critical question because dental care, to my knowledge, is always private, and a very limited part---less than 10 percent of the people go to the public for dental care. Mohamed: The same in Egypt, but actually, in Egypt, you can have some procedures done in public hospitals. Maybe you can have fillings, not only extractions, not only basic. No, you can do things in college, university also. So there are some services that are basically for free or for a little cost. And also there are private clinics that are dominating most of the service. I have one point concerning Darya\'s talk about Saudi because actually, for the last six years, I worked in Saudi Arabia. So I like what to call a hybrid system; it\'s a new system. It is a mix of the national and the private because the Saudi system in the government covers all citizens, only citizens, not residents. So the government covers only citizens, but yes, on its way. But on the other side, we have the con of very, very long waiting times, up to nine months maybe to see a specialist. So they have come up with a solution. Most of them are working in the private sector, so they are insured---like companies, insurance companies like Bupa, Allianz---so anything covered by insurance, they do it in the private sector. But when it comes to something big that insurance companies won\'t cover, like oncology, like prosthetic parts or something, they wait for the government. So this is a very unique approach to get the most of both universal and private healthcare systems. Professor: In public, the treatment is more prestigious, more luxurious compared to the private. Mohamed: Yes. If you go into King Faisal Specialist Hospital, you think that you enter a five-star luxury hotel, and King Abdulaziz Medical Complex in Riyadh---you have the experience that you enter into a luxury hotel. You go to the private, you just go into a hospital or clinic like everywhere in the world. But the public has this extra luxury. And the interesting thing, since we talk about that, is when it started, the government invested a lot of money in developing this luxury hospital, buying the best equipment. Of course, in the beginning, they didn\'t have so many doctors to run it, so you go into a fantastic place, but the doctors were not up to speed. What they did, paying a lot of money, they attracted a lot of good doctors, and then they elevated the treatment. On the other hand, in other countries, it\'s private. Sometimes it\'s also very fine, but I cannot avoid the temptation to ask about the Turkish system because it\'s very---that in terms of coverage, every person in Turkey has government healthcare. But what are the pros and cons in your experience? Student: I have much more knowledge about pharmacy, but since my father is a doctor, my mother also, I know about something too. In Turkey, it\'s really accessible to enter the hospitals, like government hospitals, but the disadvantage is the waiting list; it may be more crowded. But Turkey is much more popular for foreign people because in Turkey, there are lots of specialized doctors, especially for esthetic and hair transplantation, nose surgery. It\'s really common, and I saw lots of people when I\'m on the plane with hair things. Since the euro and Turkish lira difference, it\'s much more common and cheap. But as a pharmacist, it\'s really hard to find drugs in Turkey because of the euro difference. It\'s really hard for industrial companies to bring the drug from Italy to Turkey. They do not want it, actually, because it is not affordable. But you can buy lots of drugs without any prescription except antibiotics or different kinds. I think it\'s not the same in Italy, as far as I know. And they told me that if you get sick in Italy, do not try to go to the hospital; it is easier to go to Turkey and take medicine. Professor: I\'m not sure about that. What I can say about Turkey, Turkey has one characteristic that is a little bit distinctive. Historically, it has quite an advanced collection, especially among Muslim countries, and for many years until now, it\'s a destination for medical tourism. I mean, people who cannot have an operation or a treatment in their countries, they go to Turkey. Of course, now the situation in Saudi Arabia and the UAE increased, but still, it\'s not possible to get a visa to go to Saudi Arabia to get treatment, while in Turkey it\'s more open borders, so people can go and have treatment easier. So that\'s why still, if I remember well. Anybody from people online who wants to contribute? Otherwise, I will move forward. I will resist the temptation to ask Katerina to comment about the Greek system, or otherwise myself. Katerina: Greece has a similar system to Italy, with a public system and private that is based more on private insurance. So Greek people have private insurance; they pay for everything; they have access to the private. But the best treatment also in Greece, like in Saudi or in Italy, the best treatment is in the public university, well-known faculties, and I get this in most countries around the world, perhaps with the exception of some special cases. But this is the system. One of the problems we have in Greece, one of the problems we have in Italy and the problem that they have in Egypt, so something common among us, is that, as you discussed, the decrease of the number of doctors, the low potential for healthcare provider professions. So that\'s one of the problems we face, as well as we try to---in particular specialties like anesthesiologists, and it\'s the same in Italy; anesthesiology is a problem also in Italy. It\'s very difficult to find professionals. Student: Perhaps it\'s a little bit better, but I\'m sure there is a shortage of some specialties also here. Professor: Okay, so there are too many free places in the specialization figures in hospitals, so they just want to increase the number of specialization spots. \[Name\]: So yeah, we do the same. Professor: You were discussing about regulators, policies, and standards---WHO, FDA. \[Name\]: I\'ll go a little bit faster because it will help to cover the whole part. Professor: Oh, don\'t bother so much because the health assessment is only just an introduction, as we have the subject potentially. \[Name\]: So, moving a little bit faster here. Now, moving to the Regulators and Standards, here we distinguish between two types of regulators---or actually, three types. The first one is more into guiding rather than authoritative regulators, such as the WHO and associations, where they issue guidelines and set standards. They don\'t have enforcing authority on other institutions and are considered as references. Of course, the WHO is the most important model for this type of regulatory body. The second and most influential regulator is the one that has power over the other stakeholders in the system. As we said earlier, the most influential example is the FDA in the States, which not only affects the healthcare system in the U.S., but you can see the spillover effect of the FDA and EMA on other systems. Just to give an example, when a company wants to register a product, for example, in the UAE, the first question asked by the Ministry of Health is whether this product is approved by the FDA or EMA. Here you can see the impact of these regulators beyond their geographical jurisdiction. Within countries, usually the Ministry of Health remains the most influential regulator because they set the standards and, most importantly, they influence licensing for services and product registration. That is for the patterns of regulators. However, some common themes across countries are that we can see patient safety is prioritized when we draft policies, data protection, and secure equitable access. That\'s why I wanted to elaborate a little bit on these three points, where special laws are developed to secure proper implementation of these regulations. So patient safety and quality standards are no longer just guidance; they are enforced by law, and violations make stakeholders subject to even criminal outcomes in many cases. The same goes for data protection and patient privacy, where regulations like HIPAA in the U.S. or GDPR in the EU were developed to secure confidentiality and protection of patient data. I think practice and code of conduct are playing an important role in recent years. Practicing before that was not as enforced as we see it now, where codes of conduct, for example, influence every activity for pharmaceutical companies in their interactions with healthcare professionals. The first point actually is also gaining more importance, which is insurance interaction with providers and the need to have billing between providers and insurance companies compliant with regulations to prevent fraud, especially when the payer is a third party or not directly involved in the process, in order to make sure that there is no overutilization or abuse of the system. The reason why these laws were developed is to make sure that providers practice properly and don\'t lose their license if there was any violation of compliance. Enforcing compliance creates some sort of trust in the system, which will definitely improve the relationship between the patient and provider. At the same time, whenever we have proper systems, it goes without saying that this system will operate in an efficient way that will improve the performance of the system. So there is not only a cultural but a practical outcome for enforcing compliance in the system. \[Instructor:\] I don\'t know if there\'s some sort of interference. I don\'t know if I can do anything from my side to reduce it. Hello. Uh, I\'m saying there is an echo or noise in the sound. Is there anything we can do to reduce it? Anyway. Regarding regulation, giving you an idea about payment methods. Payments can take different forms. For example, these forms are on completely different dimensions. So, on one dimension, the payment could be either fee-for-service or value-based. \[Participant:\] Yes, I do. That\'s why I\'m speaking a little slowly here, but I will manage. Let me continue with the types of payment. On one dimension, the payment could be either fee-for-service or value-based. Fee-for-service is where the patient or whoever is receiving the service pays for the service incurred, whereas in value-based care, the payment is very much on the outcome. \[Another Participant:\] Okay, I will interrupt you here because it\'s quite an interesting subject concerning capitation. I have shown a very high interest in capitation. I don\'t know if you understand the term. The insurance or the government pays the doctor, the clinic, or the provider a fixed amount per year for a patient with a certain disease. And then they care for them within this amount. Also, the provider, the authorities, or the insurance evaluate the outcomes with fixed standard expectations. That was very much in fashion 10--15 years ago. I saw a lot of discussions and applications in the United States. Actually, I saw a lot of implementation in South Africa. I saw some efforts in Europe, but in the last five or six years, I don\'t see much discussion about capitation. I don\'t know if anybody in the class has experience with that or if you want to comment. Sadie, how do you see that in the Emirates? You don\'t use capitation at all, correct? \[Sadie:\] No, actually. The reason you see less capitation now is that DRG is gaining popularity in terms of payment. \[Participant:\] Yeah, the DRG. Here, I refer to the way they bundle the diagnosis. DRG stands for Diagnosis-Related Group, where the payment or the price tag is preset per diagnosis. When they bill, they bill according to that diagnosis, and this is what is paid. This system is gaining more popularity among insurance companies and providers, replacing\... \[Instructor:\] Let\'s move on. Okay. Again, we have talked a lot about out-of-pocket payments and insurance. But within this, I wanted to highlight something you see in the States, which is Pharmacy Benefit Management (PBM). PBMs manage both the value chain and the supply chain. I will mention only this variation, but it deserves a whole lecture on the role of PBMs, where you see that everybody is complaining about their role in inflating costs in the States. \[Participant:\] I think, Sadie, that is a very, very important point here. Because this prescription system is really a very interesting organization. What they do is they buy products from the companies and also ensure that these products are sold to customers. So they have a middle role to procure and distribute the product. I had a slide yesterday. I\'m not going through the whole slide, but what was quite interesting is that a big part of the value of the product is now captured by this organization. What becomes more controversial is that in the last 10 years, we see a lot of consolidation in these players. They merge one after the other and have become very few. I believe at this point in time, in the United States, there are five big companies holding the majority of the market. First of all, because of that consolidation and also because the government was expecting that this would reduce prices, but it has not been demonstrated so much. I don\'t know if anybody from the States here has a comment. \[Participant:\] Uh, I thought it was from before. Apologies. \[Sadie:\] Actually, I just wanted to add something relating to the PBMs. \[Instructor:\] Yes, please.