Health care economics is fundamentally related to the value which persons attach to the value of life. It deals with the economics behind the manufacturing and consumption of heath care goods and services. Such as any other industry in question, it tries to find out answers to the conditions under which markets fail, and the related issues of hoe efficiency can be obtained.
Like opposed to any other sorts of goods, expenditure on health care products doesn't provide any visible gain in the present period. The is an constituent of time inconsistency included where individuals doesn't know if investing in heath care today will if at all reap any advantages in future as future is itself not fixed. This field of study is relevant to behavioural economics in which individuals behavior under different conditions is studied which on many occasions may turn out to be irrational.
One of the causes why markets fail is due to asymmetric information. In health economics, it takes part because of the presence physician. Obviously, the physician is in a position to diagnose health problems when visited by a patient. At the present, as the patient is unaware of his degree of ailment, the physician can take undue benefit of his lack of information and may ask him to carry out different tests, or prescribe expensive medicines and therefore pocket a large share of revenue. Health Care is as well an area where individuals invest in dissimilar insurance schemes. Such types of schemes serve to cover the expenditures on premature diseases or operations (specific health problems as mentioned in the scheme). Though, an individual’s state of health is his private information and he certainly wouldn’t want to reveal that in front of the insurance agent! And, an individual who is sick or supposes a health disorder in future is possible to buy insurance on priority basis.
This condition considers to the problem of moral hazard, in which the insurance agency not being capable to distinguish among a normal and a sick person ends up insuring a sick person who’s possibility of using up his insurance coverage is higher! Suitable screening procedure should be conducted before giving away the insurance. In this regard, individuals are possible to be investigated on the basis of their previous medical history which will be an indicator of the probability of contracting illness. Such persons are charged a very high premium since the probability of redeeming their insurance package is extremely high. For elderly citizens, health insurance markets are still missing as catering to this section of population includes high risk on the part of insurance company.
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