Health economics (part 1): what is the value of health care?

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Better health care is not cheaper

What does the phrase “spend money wisely on health care” mean? Spending is an expense, and when buying something, the buyer hopes they made a “good buy” that has value.

Usually, “value for money ratings” are used to determine value. These assessments have gained traction in many countries when it comes to drugs and allowances related to medical devices, diagnostic tools and public health programs, and they attempt to make sense of spending based on value.

However, the first step towards comprehension is to recognize that better health care is not cheaper health care. “Value for money” or “spending wisely” is not about cost savings.

The government must ensure that public capital investments in the Malaysian health system make the best use of limited resources. Health expenditure should result in the production of maximum health gains.

Savings for public sector budgets may be sustainable, but this is not the primary goal that ensures Malaysians continue to receive the best health care possible.

Profitability and cost savings

Heated debates over “value” are ongoing among top health economists; and patients, hospitals, governments and health insurers (the people who pay). However, with the advent of the Covid-19 pandemic, these discussions have highlighted an urgent need to clarify the existing paradigm of “value”: the exchanges of opinions go from that of everyday life to a serious one where the value of health care is determined by severe post-pandemic conditions.

At present, there are probably more divergent possibilities for assessing value in health economics: this includes demystifying “cost-effectiveness” and “savings” to a broad audience, especially when it is s. it is about the why and how of health financing.

While everyone loves a bargain, prudent spending is best. New drugs on the market are attracting the interest of potential buyers: who may or may not be willing to pay for the drug, so buy.

Either way, it’s safe to assume that buyers who pay for a new drug will want to know if it’s worth it. Most people want to be confident in the efficacy of the drug, therefore to know that their “purchase” is a wise expense: that they spent their money wisely.

“Health is a value in itself. It is also a prerequisite for economic prosperity ”

Fifteen years ago, it was globally recognized that:

Health is a value in itself. It is also a prerequisite for economic prosperity. People’s health influences economic outcomes in terms of productivity, labor supply, human capital and public spending. Health care spending is recognized as growth-friendly spending. Profitable and efficient health expenditure can increase the quantity and productivity of labor by increasing healthy life expectancy. – The European Commission (2006, 2012)

Fifteen years later, in 2021, Health Minister Khairy Jamaluddin called for health budgets to be seen as investments and not expenditures, especially in cancer prevention and treatment.

He said: “People who are healthier and able to survive cancer can continue to work to help rebuild their lives, the economy and the country”.

Ultimately, the main goal of health spending is to achieve maximum health gains. Of course, these gains come at a price, with the realization that financial resources are limited.

It is no longer possible to meet all the increasing demands for healthcare, again due to limited resources. On this occasion, due to the aging of the Malaysian population, medical advances, the high prevalence of non-communicable diseases and the recent Covid-19 crisis.

Rarity and choice: the best possible investment for maximum health gains

How is the country ensuring the best possible use of limited health care resources? Public investment in capital, the money that society invests in health care, must be spent to obtain the best possible return: the production of maximum health gains.

Savings in the health sector are beneficial, as long as they do not lead to any loss of quality that would lead to any loss of health.

Cost-effectiveness and economic evaluations of health care

The desire to achieve “profitability” becomes evident when health care budgets are limited. Spending on health care is minimal at best.

In an ideal world with unlimited resources, society would be willing to pay for any available treatment, provided there is a gain in health.

In reality, the available budgets do not allow the public health sector to invest in all desired health investment items, even if the production of maximum health gains is promised.

The increase in fiscal budgets only underscores a modest increase for health care, and limits remain. Decision-makers are faced with difficult decisions on which medications Where public health programs invest in.

Decisions are often made based on trends in past spending and slicing budgets.

Of course, there are also factors such as political pressures and perceived barriers to participation in the health economy, which continue to push decision-makers to make decisions that are not necessarily the most beneficial to the health of the person. population.

The perfect balance? Is there one in health care?

The World Health Organization (WHO) and the Organization for Economic Co-operation and Development (OECD) stress that health policies must take more account of economic evaluations of health care.

Indeed, good health policies help the country to be efficient and to spend limited budgets wisely. Without well-thought-out policies and strong and equitable leadership, health systems do not automatically use their resources efficiently or provide balanced responses to the challenges facing a population’s needs and expectations.

As Malaysia continues to go through the Covid-19 crisis, Malaysians are battling the enormous pressure on humanity and the healthcare system. The country is faced with the challenge and the opportunity to ask: How can health care adapt in order to provide more effective methods to meet: (i) the needs of patients; (ii) develop resilience and preparation for the future; and (iii) provisions for higher value care.

For decades, the field of health economics and outcomes research (HEOR) has grown and used a variety of methodologies to perform clinical and economic evaluation of health interventions. These tools continue to provide a reliable foundation from which to draw information on value and effectiveness across the healthcare system.

June WY Choon, PhD, writes for Health economics today. His next article will illustrate the importance of health economics assessments in the health sector and how health economics can be applied to make the most of budget constraints to provide the best value for money. (or even save public money).

June Choon was a former academic and health economics researcher at Monash University. She is now Senior Scientific Officer at Health Economics and Outcomes Research (he or) – a HEOR unit of the Galen Center for Health and Social Policy.

  • This is the personal opinion of the author or post and does not necessarily represent the views of Code blue.


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