EconomicsAssignment

OnInefficiencies

In Health careMarkets

Inefficiencies In Health Care Market

BMAN/Ft/08

Ω Devesh HeeramanΩ Vesika DalliahΩ Tevishna SunasseeΩ Yanishta MaureeΩ Varuna BeeharryΩ Heman Jaunky

What is Health?

Health

Social Well Being

MentalAbsence

of disease

Physical

Good Health enable people:

Good Health

Society as a whole benefits from people’s good health just as individuals do.

So that’s why government provide Public Health

Public Health is the protection and improvement of the health of entire populations through community-wide action, primarily by governmental agencies.

Goals Of Public Health• To prevent human disease, injury, and disability

• Protect people from environmental health hazards

• Promote behaviors that lead to good physical and mental health

• Educate the public about health• Assure availability of high-quality health services.

However Public Health Vary in different parts of the

worlds……Depending upon Prevalent health problems

• In developing countriesMost Common Health Problems

»Sanitation Problems»Limited Medical Resources

Public health officials devote resources to:

• Establish good sanitation systems

• Immunization programs to curb the spread of infectious diseases

• Provide routine medical care to rural and isolated populations

In industrialized nations,

• Good sanitary food, good water supplies, excellent medical resources have reduced rates of infectious disease.

• Instead, accidents and diseases such as lung cancer, heart attacks, and strokes are among the leading causes of death.

In these areas, public health goals include

• education programs to teach people how to prevent accidents

• lessen their risk for disease

• the maintenance of the excellent disease prevention systems already established.

So far we have seen about Public Health - protection and improvement

of the health - Government

• Health care is the prevention, treatment, and management of illness and the preservation of mental and physical well being through the services offered by the medical, nursing, and allied health professions.

There is also Health Care

HEALTHCARE IN MAURITIUSA general overview of the healthcare system The healthcare service:

• Free healthcare service in the public sector• 8 private clinics and 4 public hospitals• Many well-stocked pharmacies

As of 1999,there were about: -0.9 physicians per 1000 people

-3.1 hospital beds per 1000 people• Total healthcare expenditure was estimated at 3.4% of GDP

• As from 2000,100% of the population had access to safe water and adequate sanitation

Birth and Mortality rate in Mauritius

-In 1998, maternal mortality rate was 55 per 100000 live birth -From 2000, 75% of married women were using contraception

• In 2000,-average life expectancy was 72 yrs

-infant mortality rate was 16 per 1000 live birth

• In 2002,-birth rate was estimated at 16.34 per 1000 people

-overall mortality were estimated at 6.8 per 1000 people

The future problems that may cause an increase in the death

rate in Mauritius:• Cardio vascular- disease

– In the mid 1990’s, 47.2% of Mauritius’s male population smoked

• HIV– At the end of 2001, people living with HIV was estimated at 700(including 0.1% of the adults population) compared to 0.08 per 100 adults in 1999

According to the World Health Organisation report

• 5.3% of children 3-6 yrs of age were anemic in 1995

• In 1997, immunisation for children up to one year-old were: diphtheria, pertussis and tetanus, 89%, and measles, 85%.

Reforms in the health sector in Mauritius

• Reforms were announced in the 2003/2004 budget

– Introduction of a 24 hr family doctor service

– Expansion of high-tech medical services

– Greater emphasis on health promotion and preventive medicine

•Other development in the health sector

– Construction of a new hospital on the site of Dr Jeetoo Hospital

– Construction of a new outpatient Department at victoria Hospital

– Completion of a new psychiatric hospital at Brown Sequard

– Purchase of new high-tech equipment– Recruitment of additional doctors, nurses, health care assistants, midwives and other support staff

– Allocation of Rs 2 million by the government for the reintroduction of Ayurvedic and other traditional medicines in government hospitals on a pilot basis

Inefficiencies in health care markets

• For the market to be efficient there should be equity and fairness

• Even leaving aside unequal access by family budget, there are allocative inefficiencies in health care markets.

• Allocative Efficiencies are where the products that are most wanted must be produced.

• Allocative Inefficiencies are where the goods that are less demanded are producing less or not produced at all.

How can a market be inefficient?A market can be inefficient if:

• If it's not perfectly competitive. • If there are external costs and benefits

• If there are information problems

Saying a market is "inefficient" means that there is some way to make some people better off without making anybody else worse off.

What are externalities?• It’s a situation where a third party is affected, negatively or positively by the decisions or actions which are taken by others.

• Externalities can cause market failure if the price mechanism does not take into account the full social costs and social benefits of production and consumption.

PRIVATE AND SOCIAL COSTS

• Social cost includes all the costs of production of the output of a particular good or service. We include the third party (external) costs arising, for example, from pollution of the atmosphere.

• SOCIAL COST = PRIVATE COST + EXTERNALITY

MARKET FAILURE AND EXTERNALITIES

• When negative production externalities exist, marginal social cost > private marginal cost. This is shown in the diagram below where the marginal social cost of production exceeds the private costs faced only by the producer/supplier of the product.

Why do externalities lead to market failure?

• If we assume that the producer is interested in maximising profits - then they will only take into account the private costs and private benefits arising from their supply of the product. We can see from the diagram below

Market Failure

•Market failure is the condition where the allocation of goods and services by a free market is not efficient.

•In theory, markets produce the goods and services we want in the right quantities.

•But in reality the real world markets do not always work in the way theory predicts.

Why Markets Fails?

• We face acute information problems which make rational purchasing decisions difficult if not possible. Example, we do not know the best way to treat a stomach ulcer.

• Externalities lead to market failure. There are strong externality effects related to health.

• For example caring for a sick person can impose financial costs on that person’s family.

Three main reasons for market failure (relative to Pareto efficiency) to occur.

• Imperfect competition which can take different forms such as monopsonies, cartels or monopolistic competition.

• Actions of an agent can have externalities, which are innate to the method of production, or other conditions important to the market.

• Nature of goods can lead to market failure.

Market failure in health care market

• Externalities- are costs and benefits in consumption or production of goods and services that are not borne by the individual consumer or producer.

• Health care markets will not lead to Pareto efficiency if there are externalities.

• There are 4 types of externalities:1. External costs of production2. External benefits of production3. External costs of consumption4. External benefits of consumption.

Health care provision• The aim of any government by definition is geared towards welfare maximisation. Such type of merit goods should be provided by the govt.

• Avoid consumer’s exploitation.• Avoid nepotism and despotism.• Ethical considerations have led to government intervention in health care market.However, private sector firms should have contributed to the provision of health care.

• Transfer of technology. For example in Mauritius, health services are co-provided.

• Increase competition between private sectors and public sectors.

• Moral duty of private sector entrepreneurs in return to compensate the community from the services that these private sector firms are getting.

Yanishta

To reduce these inefficiencies there are

various measures that can be used.

• Decreasing the direct labor component of health care via computerization

• Increasing direct capital utilization efficiencies

• Reducing prescription drug prices

• Reducing government support for questionable end-of-life health care borne

Analysis:• The measures to reduce inefficiencies is likely to get far more public attention

• These measures may make many people unhappy in the short- term but in the long term it would be beneficial

The End…

• Thanks for being a good audience