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Economic Analysis in Health Care / Edition 1

Economic Analysis in Health Care / Edition 1

by Stephen Morris, John Appleby, David Parkin

ISBN-10: 047001685X

ISBN-13: 9780470016855

Pub. Date: 06/04/2007

Publisher: Wiley

Health economics is concerned with the evaluation of the effectiveness of health care, particularly by examining the social opportunity costs of alternative forms of treatment.  The peculiar nature of the market for health care – that doctors have a major influence on both supply and demand -.has attracted attention, as has the study of the options


Health economics is concerned with the evaluation of the effectiveness of health care, particularly by examining the social opportunity costs of alternative forms of treatment.  The peculiar nature of the market for health care – that doctors have a major influence on both supply and demand -.has attracted attention, as has the study of the options available for financing such services.

Economic Analysis in Health Care provides a comprehensive coverage of both the economics of health care systems and the evaluation of health care technologies.  It has been written as a core textbook for advanced undergraduate and postgraduate students with knowledge of economic analysis and will appeal to an international audience.

  • Adopts an international perspective, using examples and case studies from the UK, the rest of Europe, and other countries.
  • Contains detailed exposition of the economic theory alongside relevant examples and applications
  • Focuses on both market-related and economic evaluation aspects of health economics (some books focus purely on market-related aspects)
  • Strong author team with very broad experience of writing and teaching health economics

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Table of Contents


Chapter 1 Introduction to Economic Analysis in Health Care.

1.1 Life, Death and Big Business: Why Health Economics is Important.

1.2 Health Care as an Economic Good.

1.3 Health and Health Care.

1.4 Wants, Demands and Needs.

1.5 The Production of Health and Health Care.

1.6 Deciding Who Gets What in Health Care.

1.7 Is Health Care Different?

1.8 Describing versus Evaluating the Use of Health Care Resources.

1.9 Judging the Use of Health Care Resources.


Part I Health Care Markets.

Chapter 2 The Demand for Health Care.

2.1 Demand, Profi ts and Health Policy Targets.

2.2 Consumer Choice Theory.

2.2.1 Preferences and Utility.

2.2.2 Budget Constraints and Maximisation.

2.3 Demand Functions.

2.3.1 The Determinants of Demand.

2.3.2 Estimating Demand Functions.

2.3.3 Price and Income Elasticity of Demand.

2.4 Modelling Choices About Health.

2.4.1 Understanding Consumption of Health and Health Care.

2.4.2 Understanding Investment in Health Care.

2.4.3 Predictions of the Grossman Model.

2.5 Needs, Wants and Demands.

2.6 Asymmetry of Information and Imperfect Agency.

2.7 Aggregate Demand for Health Care: Theory and Evidence.

2.8 Conclusion.


Chapter 3 The Production and Costs of Health Care.

3.1 Introduction.

3.2 The Theory of Production.

3.2.1 Production Functions.

3.2.2 Isoquants.

3.2.3 Marginal Products.

3.2.4 Substitutability between Inputs.

3.2.5 Production Frontiers.

3.3 Multi-Product Firms.

3.4 Returns to Scale, Additivity and Fixed Factors.

3.5 Costs.

3.5.1 Costs and Production.

3.5.2 Cost Functions.

3.5.3 Economies of Scale, Short-Run Cost Functions and Economies of Scope.


Chapter 4 The Supply of Health Care.

4.1 Firms, Markets and Industries in the Health Care Sector of the Economy.

4.2 Structure, Conduct and Performance in the Health Care Industry.

4.3 Profi t Maximisation Models.

4.3.1 How Firms Maximise Profi ts.

4.3.2 Perfect Competition.

4.3.3 Monopoly.

4.3.4 Monopolistic Competition.

4.3.5 Oligopoly.

4.3.6 Game Theory.

4.4 Goals Other than Profi t Maximisation.

4.4.1 Growth Maximisation.

4.4.2 Behavioural Theories of the Firm.

4.4.3 Utility Maximisation.

4.4.4 Maximising Net Income per Physician.


Chapter 5 Markets, Market Failure and the Role of Government in Health Care.

5.1 Introduction.

5.2 Using Perfectly Competitive Markets to Allocate Resources.

5.2.1 Equilibrium in Competitive Markets.

5.2.2 The Effi ciency of Competitive Markets.

5.3 Market Failure in Health Care.

5.3.1 Externalities.

5.3.2 Caring Externalities.

5.3.3 Market Power.

5.3.4 Public Goods.

5.3.5 Information Imperfections.

5.4 Government Intervention in Health Care.

5.4.1 Direct Government Involvement in the Finance and Provision of Health Care.

5.4.2 Taxes and Subsidies.

5.4.3 Regulation.

5.4.4 Provision of Information.

5.4.5 Theory of Second Best.

5.5 Government Failure.


Chapter 6 Health Insurance and Health Care Financing.

6.1 Uncertainty in Health Care.

6.2 Attitudes to Risk.

6.3 Diminishing Marginal Utility of Income.

6.4 The Demand for Health Insurance.

6.4.1 Total Premium.

6.4.2 Fair Premium.

6.4.3 Risk Premium.

6.5 Risk Pooling.

6.6 The Supply of Health Insurance.

6.7 The Market for Health Insurance.

6.8 Health Insurance Market Failures.

6.8.1 Adverse Selection.

6.8.2 Moral Hazard.

6.8.3 Non-price Competition.

6.8.4 Incomplete Coverage.

6.9 A Health Care Financing Framework.

6.10 Third-Party Payers.

6.11 Reimbursement.

6.11.1 Retrospective Reimbursement.

6.11.2 Prospective Reimbursement.

6.12 Integration between Third-Party Payers and Health Care Providers.

6.12.1 Preferred Provider Organisations.

6.12.2 Health Maintenance Organisations.

6.12.3 Point-of-Service Plans.

6.13 Options for Health Care Financing.

6.13.1 Private Health Insurance.

6.13.2 Social Health Insurance.

6.13.3 Taxation.

6.13.4 The Key Features of Health Care Systems.


Chapter 7 Equity in Health Care.

7.1 Introduction.

7.2 Equity in the Finance of Health Care.

7.2.1 Vertical Equity.

7.2.2 Kakwani’s Progressivity Index.

7.2.3 The Relationship between Progressivity and Health Care Financing Systems.

7.2.4 Horizontal Equity.

7.3 Equity in Distribution.

7.3.1 Equity in the Distribution of Health Care, of Health or of Utility?

7.3.2 Some Concepts of Equity.

7.3.3 Measuring Equity in Distribution.

7.3.4 Horizontal Inequity.

7.3.5 Vertical Equity.

7.3.6 Inequalities in Health.


Part II Economic Evaluation in Health Care.

Chapter 8 Welfarist and Non-Welfarist Foundations of Economic Evaluation.

8.1 The Normative Economics Foundations of Economic Evaluation.

8.2 Welfare Economics.

8.3 The Pareto Principle.

8.4 Potential Pareto Improvements.

8.5 Social Welfare Functions.

8.6 Measurability and Comparability of Utility.

8.7 The Application of Welfare Economics.

8.8 Non-Welfarism.

8.9 Is There a Link Between Welfarism and Non-Welfarism?

8.10 Conclusion.


Chapter 9 Principles of Economic Evaluation in Health Care.

9.1 What is Economic Evaluation?

9.2 The Economic Foundations of Economic Evaluation.

9.2.1 Cost–Benefi t Analysis.

9.2.2 Cost-Effectiveness Analysis.

9.3 Economic Evaluation Applied to Health Care Programmes.

9.4 Decision Rules for Cost–Benefi t Analysis.

9.5 Decision Rules for Cost-Effectiveness and Cost–Utility Analysis.

9.5.1 Ratio Measures.

9.5.2 The Cost-Effectiveness Plane.

9.5.3 The Ceiling Ratio and Acceptability.

9.5.4 The Incremental Cost-Effectiveness Ratio.

9.5.5 Net Benefi ts.

9.5.6 Probabilistic Approaches.

9.5.7 Decision Analysis.

9.6 Equity in Economic Evaluation.


Chapter 10 Measuring and Valuing Health Care Output.

10.1 Introduction.

10.2 Monetary Valuations of Health Care Benefi ts.

10.2.1 Revealed Preference.

10.2.2 Stated Preference.

10.3 The Measurement of Health Outcomes.

10.4 Making Health Status Indicators Fit for Purpose.

10.4.1 Generic and Specifi c Measures.

10.4.2 Profiles and Indices.

10.4.3 Measuring Health-Related Quality of Life: an Indifference Curve Approach.

10.5 The Measurement of Health Gain.

10.6 Non-Monetary Valuation of Health States.

10.6.1 Rating Scales, Category Scales and Visual Analogue Scales.

10.6.2 The Standard Gamble.

10.6.3 Time Trade-Off.

10.6.4 How Do We Choose Between These Methods?

10.7 Multi-Attribute Utility Measures.

10.8 The Valuation of Health States: Willingness to Pay for Health Changes.

10.9 The Value of Life.


Chapter 11 Economic Evaluation Methods.

11.1 Introduction.

11.2 Selecting the Viewpoint.

11.3 Estimating Costs.

11.3.1 Methods and Data Used in Estimating Costs.

11.3.2 Issues in Costing: Where Do We Draw the Line?

11.3.3 Issues in Costing: Should Future Costs and Cost Savings Be Factored into Analyses?

11.3.4 Issues in Costing: What If Cost Data Are Sourced from Different Time Periods?

11.4 The Measurement of Health Gain.

11.4.1 Measuring Quality-Adjusted Life Year (QALY) Gains.

11.4.2 Measuring Healthy Year Equivalents (HYEs).

11.4.3 Measuring Disability-Adjusted Life Years (DALYs).

11.5 Discounting.

11.5.1 The Rationale for Discounting Monetary Costs and Benefi ts.

11.5.2 The Discounting Formula.

11.5.3 The Choice of Discount Rate.

11.5.4 Discounting Health Effects.

11.6 Modelling-Based Economic Evaluation.

11.6.1 Using Multiple Sources of Data.

11.6.2 Decision Analysis.

11.6.3 Markov Models.

11.7 Trial-Based Economic Evaluation.

11.8 Dealing with Uncertainty: Sensitivity Analysis.

11.8.1 One-Way Sensitivity Analysis.

11.8.2 Multi-Way Sensitivity Analysis.

11.8.3 Statistically-Based Sensitivity Analysis.


Chapter 12 The Use of Economic Evaluation in Decision Making.

12.1 The Decision-Making Context: Why is Economic Evaluation Used?

12.2 Who Buys Economic Evaluations? Does It Matter?

12.3 Is Economic Effi ciency All That Matters?

12.3.1 Need.

12.3.2 Equity.

12.3.3 Process-of-Care Considerations.

12.3.4 Ethical Imperatives.

12.4 How is Economic Evaluation Used to Make Decisions in Practice?

12.5 Cost-Effectiveness League Tables.

12.6 Programme Budgeting and Marginal Analysis.

12.6.1 Programme Budgeting.

12.6.2 Marginal Analysis.

12.7 Cost-Effectiveness Thresholds.

12.8 Evaluating Economic Evaluation.



Author Index.

Subject Index.

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