1. L1_317_Jan 8, 20081 INTRODUCTION What is health? WHO (World Health Organization) Definition : Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.World Health Organization) To go to the WHO website, right click on the link to pull up a menu, select “hyperlink”, and left click “open”. Then select FAQs at the bottom of the webpage.

2. L1_317_Jan 8, 20082 Problems with the WHO Definition of Health Too comprehensive (includes socio-economic well-being): by including socio-economic well-being in the definition, healthcare policy would include the pursuit of socio-economic goals, however such goals are generally the responsibility of non-healthcare policy. Assumes a saturation point exists (complete physical, mental, social well-being): it is unlikely that there is ever a point where it is impossible to improve one’s physical, mental and social well-being

3. L1_317_Jan 8, 20083 Health is a person’s state of physical and mental well-being Health or Health Status (HS) is the level at which a person is functioning physically and mentally Problem: Should the definition be age related? For example, is it reasonable to expect a 70 year old person to run a mile in the same time as a 17 year old person? This is an important issue since it determines the healthcare goals we set for ourselves, and thus the healthcare costs we incur. Health Economist’s Definition of Health

4. L1_317_Jan 8, 20084 Measuring Health Status Some frequently used measures of health status at the Societal (Public Health) level: i) age-specific morbidity rates (lower prevalence of ill health by age group) ii) age-specific mortality rates (lower death rate by age), which implies increased life expectancy iii) per capita disability days./// Health status can be measured at two levels: i) Societal (aggregate level, i.e, public health) ii) Individual

5. L1_317_Jan 8, 20085 Aspects of Public Health Measures of Health Status Public health measures of HS generally focus on the proportion of the population that experiences the HS problem severely enough to be over the threshold to be included in the group of people having the problem However, one would also like to know how severely the group is affected by the problem. Adding a severity component to a binary measure is difficult

6. L1_317_Jan 8, 20086 HS Measures at the Individual Level There are many dimensions to an individual’s HS e.g.: -full use of the senses and physical/mental abilities (what is full use??), absence of pain, the degree of the disability, etc. Health Economists have tried to develop summary measures of a person’s Health Related Quality of Life (HRQoL) In these measures: Perfect health status yields a HRQoL score =1 Death has a HRQoL score = 0 In some measures extreme suffering can yield a score of less than 1 Later in the course we will discuss techniques for generating HRQoL scores

7. L1_317_Jan 8, 20087 The need for measuring HS accurately - a comprehensive measure of HS is needed to accurately assess the HC => HS relationship, i.e. the response of HS to HC - an incomplete measure of HS will give a biased perception of the response of HS to HC i.e., of the effectiveness of healthcare -example: if pain is not properly captured by the measure of HS then HC aimed at reducing pain will not appear very effective. e.g. hip replacement improves mobility and eliminates pain If mobility and absence of pain are not captured by the definition of HS then HC aimed at improved mobility and pain reduction will not appear to be contributing to improved HS. ///

8. L1_317_Jan 8, 20088 What is Healthcare? Healthcare is the set of goods and services that are used to produce/promote better health status (HS) Problem: What are healthcare (HC) goods and services? Many goods/services affect HS, e.g.: food, shelter, clothing sanitation, safety goods These goods are generally not considered HC goods/services. ///

9. L1_317_Jan 8, 20089 Defining HC Goods Two Alternative Definitions: 1. By convention/consensus: e.g Drs, nurses/drugs/hospitals etc. Problem with this definition: How are new goods to be classified as healthcare or non- healthcare goods?

10. L1_317_Jan 8, 200810 Healthcare Goods Defined by Characteristic Definition 2. By Characteristic of the Good A HC good/service is a good or service that is consumed solely, or primarily, for its anticipated positive impact on HS, but is not consumed for its own sake./// This is the preferred definition

11. L1_317_Jan 8, 200811 Two Key Points About HC Goods 1. HC goods are not consumed for their own sake, they only yield utility indirectly through improved HS. 2. At the time of consumption HC goods frequently yield disutility directly, e.g., - a visit to the dentist - an operation - a painful or embarrassing diagnostic procedure.///

12. L1_317_Jan 8, 200812 Importance of HC for HS Historically, what has been HC’s contribution to improved HS? Improved HS more the result of improved: - sanitation - diet (lifestyle) - shelter - exercise (lifestyle) - literacy/education See Folland/Goodman/Stano: pp. 92 – 99 (5 th ed’n) for examples HC primarily affects HS within the framework set out by these more fundamental factors.///

13. L1_317_Jan 8, 200813 What Is the Economics of Healthcare? Economics of health vs. the economics of healthcare. Economics of health: two way relationship between health and economic activity: 1) health status affects economic activity, e.g. ill or poorly nourished are not productive 2) maintaining good health status requires resources, including healthcare. Making good use of these resource inputs is an economic issue Economics of healthcare: study of how goods/services are used to produce/promote better health.

14. L1_317_Jan 8, 200814 Focus in the Economics of Healthcare The focus in the economics of healthcare is on: i)what HC goods and services to produce ii)how to produce the HC goods and services iii)for whom the HC goods and services should be produced iv)how the HC goods and services should be be paid for