Health economics, in comparison with other fields of economics, is relatively new.
The main idea in it is to assess the relationship between the following factors: age, life expectancy, current and expected health care costs, as well as the government’s contribution in filling the gap between its services and what is readily available at public sector hospitals.
The challenge is not only in the quality of the health care services provided by the public sector, but also how many cases can they handle at any given point. And when the total health care bill is produced, it’s hefty.
Another factor that needs to be considered here is insurance companies and their role in getting their health insurance premiums from private companies along with government institutions, and then assessing what is okay to spend the money on and what’s not.
This, of course, includes the lengthy wait to get approvals on expenses such as surgeries and such.
Otherwise the business model implemented by insurance companies is the same across industries, and they exist whether the money is spent at private hospitals or publicly-owned and managed ones.
Health care spending is part of a government’s main expenditure, and is also a main component of GDP. It exists in all countries in varying proportions.
For example, the first type of spending is directed towards countries that still suffer from diseases such as typhoid, malaria, hepatitis, etc. as spending is used to make available vaccinations and treat patients.
The second type of spending would be a mix of providing vaccinations for the earlier mentioned diseases with some spending directed towards what is referred to as diseases of the developed economies. These are diabetes, high blood pressure, cholesterol, heart diseases, nervous system malfunctioning, psychological treatments, etc.
As per the Economist’s estimates, health care spending is at 43 per cent in China and 44 per cent in India, while spending in the UK and the US is at 12 per cent.
The higher percentages in China and India are not because of significantly bigger populations, but because of an increasing share of the middle-class. Just like research in health care advances with economic development, diseases of developed economies have their own toll in it.
There are many factors that play pivotal roles in their introduction to developing and developed economies. One is stress that can be the result of financial troubles, work issues, or even personal matters.
Another is higher income and higher disposable income, which in some instances mean that people can afford to dine out more frequently than they used to. In cases where someone is in hurry to go to work, junk food is the optimal option to pick on your way to work or on the way back home.
Not only that, an increase in consumption of tobacco, meat products and soda drinks can add to the chances of getting any of the developed world’s diseases.
A certain level of consumption of these does exit even prior to one’s increase in income, but the increase of its consumption whenever possible - over time of course - builds up to getting such ailments, especially if exercise is not part of a person’s lifestyle.
Health care expenses are always going to be part of government budgets, but that doesn’t mean they can’t be reduced.
For developed economies, the issue has more to do with lifestyles and undesired consumption which can be lessened by raising awareness, imposing quotas and tariffs on the import of components, and imposing taxes on final products to target consumers directly.
Mexico has just imposed a one-peso tax on every litre of soda, along with an 8 per cent tax on junk food. France’s tax on tobacco has at least reduced its consumption by young people.
Even though the effect did not involve the entire population, it did achieve a specific result that can turn into a habit and, hopefully, a lifestyle choice.
A healthier population does not only mean increased productivity but also reduced health care bills now and in the long run.
Health insurance made compulsory by public and private sectors and privatisation of hospitals in terms of management, like in Thailand, will dwarf health care expenses in government budgets, with improved quality of services being a bonus.
Now the thought I want to leave you with is: how can a balance be achieved between ageing populations and health care bills?
(The writer is a commercial consultant and a commentator on economic affairs. You can follow him on Twitter at www.twitter.com/aj_alshaali)