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Aro's classic paper: How did the birth of health economics change our horizons?
Health Economics As a branch of economics, the main topics of concern include efficiency, effect, value and individual behavior in the production and consumption of health and health care.The importance of this discipline lies in how to improve health outcomes and lifestyle patterns through interactions between individuals, health providers and clinical settings.
Health economics is not just about the allocation of resources, it also explores the health effects of healthy behaviors such as smoking, diabetes and obesity.A classic paper published by Arrow in 1963 is widely regarded as a symbol of the birth of health economics, which proposes the conceptual difference between health and other commodities.
The four main characteristics of health economics include: extensive government intervention, uncertainty in several aspects, information asymmetry, and the existence of third-party agents.This makes health economics distinct from other economic disciplines.
For example, in health care, the patient's health insurance company acts as a third party agent and bears financial responsibility for the medical services and goods consumed by the patient.This structure makes many traditional economics’ laws unapplicable, and prices and quality are often hidden by third-party payment systems of insurance companies and employers.
Aro's research is not only limited to the efficiency of the medical market, but also takes into account the complex interactions between the supply and demand of medical services.However, health economics also faces great challenges, such as the common measurement method of QALY (Quality Adjustment Life Year) is difficult to accurately evaluate and often relies on some unreasonable assumptions.
Historical Background
Looking back on history, the foundation of health economics can be traced back to ancient Greek times.Aristotle once explored the relationship between farmers and doctors, which shows that health has long been valued.In modern times, William Petty pointed out the economic benefits of medical expenses to workers, and these early observations laid the foundation for later developments in health economics.
Especially after World War II, medical expenses increased significantly due to rapid advances in medical technology and organizational changes.According to data, between 1960 and 2013, the proportion of health expenditure to GDP in the United States rose from 5.0% to 17.4%.Such growth shows that society's emphasis on health care has gradually increased.
The rapid growth of health expenditures not only puts financial pressure on individuals, but also a major burden on governments and businesses.Therefore, how to effectively manage health resources has become an urgent problem.
Health needs and technical evaluation
Analysis of health needs is usually based on people's desire for health, which makes health insurance a derivative need.In health economics, individuals are seen as healthy producers and consumers.Gosman's model emphasizes this view that health is an asset that depreciates over time and therefore requires constant "health investment".
With the advancement of health technology, economic assessment has become an important part of the technical assessment process in many countries.Institutions such as NICE in the UK and IQWiG in Germany have taken the cost-effectiveness of new drugs into consideration.Such evaluation methods promote the rational allocation of medical resources.
The necessity of intervention
The failure of the health insurance market is the main reason for the government's intervention.In some cases, such as HIV/AIDS or cancer, private insurers may be reluctant to provide insurance because of the high risk, causing a vacancies in the market.In such a situation, the role of government becomes crucial.
The government can make up for the shortcomings of the market by subsidizing people who cannot afford insurance, or providing necessary medical services in certain special circumstances.
On the other hand, the monopoly phenomenon in the medical market also makes intervention particularly important.In the sparse number of hospitals, patent-protected drugs and certain insurance markets, monopoly leads to an increase in medical expenses, which is a burden for both individuals and society.
Conclusion
Health economics not only changes our understanding of health systems and health behaviors, but also triggers a series of new thinking on market operations.Through Aro's research, health economics has been able to move from the academic edge to the mainstream, forming far-reaching disciplines.Faced with complex health and medical challenges, we can’t help but ask: How to further utilize the principles of health economics to improve the supply of medical services in the future?
