ECONOMICS & FINANCING OF
HEALTH CARE SYSTEMS
SUMMARY | HEPL 2022-2023
Erasmus University Rotterdam
Door Tim Dings
Tim Dings | 2022-2023
,Lecture 1 – Course introduction (30/08/2022)
Introduction to course
Main purpose is to introduce various conceptual frameworks that help to understand and
use economic concept and principles applied to healthcare systems.
→ make the introduction course on economics on Canvas!
Course set-up
There are 15 topics. For each one of them is a separate on-campus plenary meeting. For
each meeting there is a preparatory video, literature and small assignment. In addition,
there are 3 online sessions for Q&A (2x) and exam review (1x). Finally, there are 2 group
assignments with a peer review (we give each other a grade).
Examination
1 midterm exam (10%) and 1 final exam (90%).
- Midterm: topic 1-9, 90 minutes, 30 ABCD questions
- Final: Topic 1-15, 120 minutes, 8 essay questions
Literature
The economics of Health and Health Care 8th international edition.
Guest lecture: Difference in Health Economics & Market access
Health economics focuses on the analysis and understanding of efficiency, effectiveness,
values and behaviors in the production of consumption of health and healthcare.
VS
Market access refers to the process of ensuring that treatments for which market
authorization has been obtained from regulatory authorities are available to all patients who
may benefit.
Stages in release of a new drug in a market
1) R&D stage: market access landscape (is there a need for the product), stakeholder
mapping, evidence generation
2) Launch phase: payer value narrative to show the value of the product, economic
evaluation, budget impact, stakeholder engagement, contract tools
3) Design RWE (real world evidence) trials, focus on evidence generation, market access
KPI (key performance indicators)
Tim Dings | 2022-2023
,Lecture 2 - Demand for health care (30/08/22)
Health care demand characteristics
- Demand for health care is derived from the demand for health. Health care in itself
has no utility, but only if it can improve health.
- Demand for health care is often not well defined. People are uncertain about what
and how much care they need. Thus, a high level of uncertainty in this market.
- Health care demand is not independent from health care supply. Doctors can shift
the demand curve for health care (=supplier-induced demand).
- Price often plays a limited role as a determinant of health care demand. People
typically pay only part of the price and do not even know the true price.
- Health care is not only a consumption but also an investment good.
Basic models of health care demand
A) Medico-technical model: doctor is in the lead,
acting as a perfect agent for patient. Only one
determinant: need.
B) Neo-classical: the patient/consumer is in the lead,
having perfect information.
- Imperfect agency model: demand is determined by
both doctors and patients as information is part of
the transaction.
Utility theory & health care demand
Consumer demand is determined by
consumers who maximize utility subject to a
budget constraint. Demands are reliant on:
- Needs (health status) = position of
indifference curve U.
- Wants (preferences) = slove of
indifference curve
- Budget
Roles of price in health care demand
Consumers typically only pay part of the price. They therefore play a limited role in health
care but are not unimportant
Price elasticity
Effect of price change on demand. For consumers the relevant price is the out-of-pocket
price (copayment).
Selection bias
Selection effect: healthy individuals are likely to choose higher copayments. Due to this
selection bias, out-of-pocket price elasticities are likely to overestimate the true price effect
on demand for care.
Tim Dings | 2022-2023
, High copayment people are generally healthier and they buy less healthcare whereas the
low copayment people are generally higher consumers of healthcare.
How to deal with selection bias?
C) Correct for relevant background variables
D) Quasi experimental methods
E) RCT
Role of income in health care demand
Income is another potentially important determinant of health care demand. Can be
analyzed both at an individual as on a country level. The impact of income on demand may
be strongly related to the role of (out-of-pocket) prices. Income elasticities are and
important tool for measuring the impact of income on health care demand. An income
elasticity below 1 is important, above 1 is a luxury good. On a country level the income
elasticity for health care demand is larger than 1. If GDP rises, proportionally more than the
rise of the GDP is spent on health care.
Tim Dings | 2022-2023
HEALTH CARE SYSTEMS
SUMMARY | HEPL 2022-2023
Erasmus University Rotterdam
Door Tim Dings
Tim Dings | 2022-2023
,Lecture 1 – Course introduction (30/08/2022)
Introduction to course
Main purpose is to introduce various conceptual frameworks that help to understand and
use economic concept and principles applied to healthcare systems.
→ make the introduction course on economics on Canvas!
Course set-up
There are 15 topics. For each one of them is a separate on-campus plenary meeting. For
each meeting there is a preparatory video, literature and small assignment. In addition,
there are 3 online sessions for Q&A (2x) and exam review (1x). Finally, there are 2 group
assignments with a peer review (we give each other a grade).
Examination
1 midterm exam (10%) and 1 final exam (90%).
- Midterm: topic 1-9, 90 minutes, 30 ABCD questions
- Final: Topic 1-15, 120 minutes, 8 essay questions
Literature
The economics of Health and Health Care 8th international edition.
Guest lecture: Difference in Health Economics & Market access
Health economics focuses on the analysis and understanding of efficiency, effectiveness,
values and behaviors in the production of consumption of health and healthcare.
VS
Market access refers to the process of ensuring that treatments for which market
authorization has been obtained from regulatory authorities are available to all patients who
may benefit.
Stages in release of a new drug in a market
1) R&D stage: market access landscape (is there a need for the product), stakeholder
mapping, evidence generation
2) Launch phase: payer value narrative to show the value of the product, economic
evaluation, budget impact, stakeholder engagement, contract tools
3) Design RWE (real world evidence) trials, focus on evidence generation, market access
KPI (key performance indicators)
Tim Dings | 2022-2023
,Lecture 2 - Demand for health care (30/08/22)
Health care demand characteristics
- Demand for health care is derived from the demand for health. Health care in itself
has no utility, but only if it can improve health.
- Demand for health care is often not well defined. People are uncertain about what
and how much care they need. Thus, a high level of uncertainty in this market.
- Health care demand is not independent from health care supply. Doctors can shift
the demand curve for health care (=supplier-induced demand).
- Price often plays a limited role as a determinant of health care demand. People
typically pay only part of the price and do not even know the true price.
- Health care is not only a consumption but also an investment good.
Basic models of health care demand
A) Medico-technical model: doctor is in the lead,
acting as a perfect agent for patient. Only one
determinant: need.
B) Neo-classical: the patient/consumer is in the lead,
having perfect information.
- Imperfect agency model: demand is determined by
both doctors and patients as information is part of
the transaction.
Utility theory & health care demand
Consumer demand is determined by
consumers who maximize utility subject to a
budget constraint. Demands are reliant on:
- Needs (health status) = position of
indifference curve U.
- Wants (preferences) = slove of
indifference curve
- Budget
Roles of price in health care demand
Consumers typically only pay part of the price. They therefore play a limited role in health
care but are not unimportant
Price elasticity
Effect of price change on demand. For consumers the relevant price is the out-of-pocket
price (copayment).
Selection bias
Selection effect: healthy individuals are likely to choose higher copayments. Due to this
selection bias, out-of-pocket price elasticities are likely to overestimate the true price effect
on demand for care.
Tim Dings | 2022-2023
, High copayment people are generally healthier and they buy less healthcare whereas the
low copayment people are generally higher consumers of healthcare.
How to deal with selection bias?
C) Correct for relevant background variables
D) Quasi experimental methods
E) RCT
Role of income in health care demand
Income is another potentially important determinant of health care demand. Can be
analyzed both at an individual as on a country level. The impact of income on demand may
be strongly related to the role of (out-of-pocket) prices. Income elasticities are and
important tool for measuring the impact of income on health care demand. An income
elasticity below 1 is important, above 1 is a luxury good. On a country level the income
elasticity for health care demand is larger than 1. If GDP rises, proportionally more than the
rise of the GDP is spent on health care.
Tim Dings | 2022-2023
