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Economics refers to a science that specializes on the concept of scarcity. When it is applied in the health care industry, it refers to the universal desire to achieve value for money by not only ensuring the clinical effectiveness but also cost effectiveness of healthcare provision (Haycox, 2009). The main aim of this essay is to describe the history and evolution of health care economics and the timeline of health care funding using defined economic terms.
The term cost effectiveness in healthcare implies desires to achieve a predetermined objective at least either cost or optimize the benefit to the entire population of patients at the least resources. Efficiency is the evaluation of how resources are used to achieve the specified objective. Outcomes measurement and definition in health economics is faced with difficulties. This is because health has no accepted definition but has a wide range of physical, mental, and social characteristics. This wide range of characteristics and their subjective nature emphasizes difficulties in addressing most economic outcomes of healthcare (Haycox, 2009).
History and Evolution of Health Care History
Globally health systems have underwent through tough times in the recent past, largely in response to escalating costs. These changes have been more dramatic and to some extent even traumatic to many residents especially in the United states. Here, in a short time the health care system has changed from being a largely unorganized assortment of individual clients and their physicians, to a highly interlinked system consisting of many corporate bodies (Dranove, 2003).
The term-managed care has been used to lump of together all these changes. Initial concerns were about the costs of health care, but the availability and quality availed are also a concern. From an economic point of view, health care market is characterized by various departures from a perfect market concept assumption. The most significant of these, are the uncertainties about the demand for health care, which leads to rise in the market for insurance and information disorientation in the insurance market leading to inappropriate selection. This deviation from perfect competition results in inefficiency.
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The presence of these market imperfections coupled with sizeable appropriate government interventions leads to inefficiencies in the health care industry market. This is not the case in a perfect market, whereby the government interventions occurs only for desirable reasons such as redistribution (Cox, 2004).
In most countries, the health care funding programs are made of both private and public insurers. However, in the United States the private insurers are more than the public. The financing of health care systems centers around two streams of money. First, there is the collection of money for health care; that is money coming in and the others are the reimbursement of money to health care service providers.
In U.S, these the responsibility of these two functions is shared between private insurance companies and the government. The Government uses the generated taxes to reimburse providers who take care of patients enrolled in programs such as Medicaid and Medicare. Either it pays private insurers premiums for federal and public employees. Private insurers accept premiums from government, individuals, and businesses. They in turn, reimburse providers who take care of patients with private insurance. Providers include; doctors, allied health professionals, hospitals and other heath care facilities (Chua, 2006).
During the cause of history, health care economics have experienced transformation. Previously the changes may have been due to evolutionary modifications occurring globally. However, currently the leading contributing causes of these changes are the advancement in technology. The other thing is how medical treatment is offered. Either the arrangement between physicians and clients has become formal with hospital structures. With the gradual decrease in funds for hospitals, arrangements were made for the entry of insurance schemes. The insurance providers are either governmental or private, with the latter dominating the market.