Who is a Health Economist?

IIHMR University Jaipur India

                     An Exclusive Health Research and Post Graduate University

 

Health economics is one of those rapidly growing fields that bring down business with health care together. A health economist has a unique passion for using their knowledge of economics by applying it to a variety of challenges in health and medicine. As the population continues to grow, the demand for quality and cost-effective health care similarly grows, leaving careers in health economics vital to sustaining our health care system.

Who is a Health Economist?

Health economists are professionals who investigate how our funds and resources are used in health care. They also focus on the distribution of resources and the maintenance of health in the health care system. They ponder over the questions of various alternatives available for health care and then decide about choosing the best alternative. They may work in the public side of health care or they may be employed by privately owned companies. A health economist will use his skills and the tools learned during his education and career experience to analyze health care and its many subfields. Health economists will evaluate health care policies and respond to numerous challenges in the health care field.

How do resources invested in good health contribute to a Nation’s Economy?

Good health contributes to the nation’s economy in the following four ways:

Enhanced Workers’ Productivity

The most obvious gains from healthier workforce are savings of workdays, enhanced workers productivity, greater better-paying job opportunities and longer working lives. A study on lepers in urban areas of Tamil Nadu concluded that if deformities with them are eliminated then the expected annual earnings of those with job will enhance by more than three times. The study also concluded that if deformity of all 645,000 lepers in India is eliminated, it would add an estimated $130 million to the country’s GNP (1985). If elimination of 1% of the disease burden of leprosy can boost India’s GNP by such a huge magnitude, then it would be interesting to estimate the effect of complete elimination or near to complete elimination of disease burden in India on India’s GNP.

There is strong link between poverty and ill health. Ill health creates immense stress even among those who are financially secure. Onset of a long and costly illness can drive the economically well-off into poverty. Hence, it is essential to prevent the non-poor from falling into poverty trap and reduce suffering of those who are already below poverty line.

Improved Utilization of Natural Resources:

Health investment also contributes to better utilization of economic resources of a country. Many

Developing economies waste huge sum of money on treatment of various diseases rather than their prevention. This leads of wastage of resources. In Sri Lanka, for example, the near-eradication of malaria during 1947-77 is estimated to have raised national income by 9 per cent in 1977. Over the period of three decades, the cumulative cost of such an initiative was $52 million as compared to the cumulative gain in national income of $7.6 billion, implying a spectacular benefit-cost ratio.

Eradication of diseases also enhances labor productivity. The investment made in treating disease can be diverted to other productive uses. Thus, health spending contributes to improved use of factors of production, viz. land, labor and capital.

Multiplier Effect of Health Expenditure Extending to Next Generation:

Poor health conditions, inadequate sanitation and nutrition adversely affect the benefits of schooling, primarily in three ways:

(i)                 decreased enrolment resulting in increased illiteracy,

(ii)               poor ability to learn resulting in high dropout rates,

(iii)             Limited participation by girls either due to poor health of self or others in family.

Good health at the initial stage of life, i.e. among children from 1-6 years of age is a pre-requisite for future development of these children. A child who is physically and mentally fit at the age of 5 or 6 years is more likely to enroll for school and will develop a strong foundation through active learning and regularity in class. A study conducted in Nepal concluded that the probability of attending school is only 5 per cent among nutritionally stunted children as compared to 27 per cent for those at the normal level.

A study suggests that four years of primary education boosts farmers’ annual productivity by 9 per cent, on an average, and workers who do better at school earn more. Studies in Ghana, Kenya, Pakistan, and Tanzania indicated that the workers who scored 10 per cent above the sample mean in various cognitive tests had a wage advantage ranging from 13 to 22 per cent. In a study conducted in Nepal, it was found that farmers with better mathematical skills were more likely to adopt new crops which were more profitable’.

Long run Reduction in Cost of Medical Care:

Health spending in short run prevents and reduces the incidences of diseases in long run and results in huge savings in treatment costs. For some diseases, the expenditure pays for itself even when all the indirect benefits – such as higher labor productivity and reduced pain and suffering – are ignored.

Polio is one such example. As per some estimates made in America in certain region, prior to the eradication of polio showed that investing $220 million over 15 years to eliminate the disease would prevent 22,000 cases and save between $320 million and $1.3 billion (depending on the number of people treated) in annual treatment costs. The programmer’s net return, after discounting at even as much as 12 per cent a year, was estimated to be between $18 million and $480 million.23 Thus, money spent on healthcare in short run results in multiple gains in terms of improved health and cost savings in long run.

How does the discipline of Health Economics contribute to the Indian Healthcare Sector and resultantly Indian Economy?

The World Development Report 1991, published by World Bank asserts: “the challenge of development is to improve the quality of life, especially in the world’s poor countries. A better quality of life generally does not call for higher incomes but it involves much more. It encompasses as ends in themselves better education, higher standards of health and nutrition, less poverty, a cleaner environment, more equality of opportunity”

Necessarily, health has to be defined from a practical point of view and, therefore, it has been defined according to life expectancy, infant mortality and crude death rate etc. Thus, the World Banks Report emphasizes among other things, health and quality of life as essential components of economic development.

This can happen only with the continued commitment of the government to spend on physical, mental, educational and emotional development of a child who is a prospective human capital of the country.

The figure below explains the three stages framework of health-wealth nexus. India is currently in stage 2 as depicted in the figure below. A rapid transition is needed in which efficient health systems improve quality of life, well-being of people and reduce burden of diseases, which will in turn increase productivity and growth in the country (stage 3). India needs a huge public investment in order to push Indian health sector from stage 2 to stage 3.

Health Economist ensures that human resource, which is the only active factors of production, activates the other factors. Improvement in health standards such as increase in life expectancy, reduction in infant and maternal mortality and access to health services with equity has been one of the major thrust areas in social and economic development programmers of developing countries. Health economist helps in running these programs efficiently.

Health economist understands that health is a very peculiar asset because unlike almost anything else, including even some other forms of human capital, it is almost entirely inalienable. Health Economist is required in an economy because health has great value-in-use but no value-in exchange. Good health cannot be purchased from any source through money or any other means. Thus Health Economist’s role is important to ensure judicious use of economic resource in creating as asset called Health, which has a huge implication in the growth of the economy.

Some examples of challenges faced by Health Economists and their contribution in overcoming them:

The challenges of increasing urbanization with rapid growth of slums and low income families in cities have raised the need for health care facilities in and around urban slums. The Eleventh Five Year plan has focused on accessibility of health services in closer proximities of urban slums and in the areas where 20% or more of population are SC/ST or other minorities are concentrated.

Achievement of health objectives involves much more than curative or preventive medical care. Many communicable diseases can be prevented through a combination of health and non-health interventions such as safe drinking water and sanitation which directly contribute in reducing the burden of communicable diseases. Besides high levels of air pollution, unhygienic living conditions combined with malnutrition may cause respiratory problems and other communicable diseases. An onslaught of new diseases such bird flu, swine flu, Japanese fever etc. is taking heavy toll of population in India and other developing countries.

India doesn’t have the resources to combat the huge challenge of Non-Communicable diseases. It can only be overcome by investing economy’s scarce resources judiciously in a mix of preventive and curative healthcare model.

The growing size of healthcare sector in India

The healthcare sector in India will grow to $158.2 billion in 2017 from $78.6 billion in 2012. "The healthcare sector is growing at a 15% CAGR and jumped from $45 billion in 2008 to $78.6 billion in 2012 and expected to touch $158.2 billion by 2017," Equentis Capital said in its report.

The country's healthcare system is developing rapidly and it continues to expand its coverage, services and spending in both the public as well as private sectors, it said.

India being a country with growing population, country's per capita healthcare expenditure has increased at a CAGR of 10.3% from $43.1 in 2008 to $57.9 in 2011 and going forward this figure is expected to rise to $88.7 by 2015.

Demand growth, cost advantages and policy support were instrumental in attracting FDI inflows into the healthcare sector. During April 2000-March 2013, FDI inflows for drugs and pharmaceuticals stood at $10.3 billion, while inflows into hospitals and diagnostic centers, and medical appliances stood at $1.6 billion and $0.6 billion, respectively.

Growth in the public sector

Government is committed to increase public spending on health from its current level of 1 %. As a result the size of existing governmental programs and schemes will increase and new schemes will be added to it. NRHM is being reconstituted as NHM, incorporating both urban and rural health.

Growth in the private sector

The private sector has emerged as a vibrant force in India's healthcare industry, lending it both national and international repute. Private sector's share in healthcare delivery is expected to increase from 66% in 2005 to 81% by 2015. Private sector's share in hospitals and hospital beds is estimated at 74% and 40%, respectively.

There is substantial demand for high-quality and specialty healthcare services in tier-II and tier-III cities. To encourage the private sector to establish hospitals in these cities, government has relaxed the taxes on these hospitals for the first 5 years.

Growth in the Insurance sector

Over the years, health insurance is gaining momentum in India; gross healthcare insurance premium is expanding at a CAGR of 39% over FY06-10. This trend is likely to continue, benefitting the country's healthcare industry

Growth in mobile technology, KPOs

Strong mobile technology infrastructure and launch of 4G is expected to drive mobile health initiatives in the country. Mobile health industry in India is expected to reach $0.6 billion by 2017, the report said.

To standardize the quality of service delivery, control cost and enhance patient engagement, healthcare providers are focusing on the technological aspect of healthcare delivery.

Digital health knowledge resources, electronic medical record, mobile healthcare, hospital information system are some of the technologies gaining acceptance in the sector. Going forward, the healthcare sector's spending on IT products and services is expected to rise from $53 billion in 2012 to $57 billion in 2013.

Telemedicine is also a fast emerging sector in India. In 2012, the telemedicine market in India was valued at $7.5 million, and is expected to rise at a CAGR of 20% to $18.7 million by 2017. With increased private participation, the healthcare sector has also witnessed rise in FDI inflows. As per law, 100% FDI is permitted for all health-related services under the automatic route.

Job Outlook for Health Economist

The job outlook for health economists is excellent right now. This is due, in part, to the diverse range of opportunities for health economists. These careers include work in hospitals, academia and research, universities, health insurance corporations, pharmaceutical companies, governmental bodies and even international funding organizations and NGOs. With so many environments to choose from, a health economist will likely find the right area of health economics to apply his or her skills and training. Salaries typically vary depending on the sector and level of seniority but generally speaking, the business side of health care tends to provide some of the highest salaries in health care – sometimes surpassing those of physicians.

Jobs in Private Sector particularly Insurance Industry

In the private sector, a health economist can provide services for biotechnology companies and private health insurance companies, among many others. For instance, a health economist might design a strategic plan for a specific new technology or product. In this way, a health economist will maximize the company's profits as they find more efficient ways to do business and increase exposure and profit from marketing.

Jobs in Government Sector

There are many opportunities for a health economist to work in the government sector. A health economist might investigate and assess health care policies such as those affecting occupational health. In this way, a health economist helps to monitor the quality and cost effectiveness of procedures and regulations. They will also apply their skills to ensure that health care can be sustained and that it is operating within a safe and effective framework. Health economists may also evaluate medical benefits and applications for specific services and products. They will make policies for the effective delivery of health system in India.

Jobs in Research Sector

A health economist plays a key role in the research sector, where involvement could include the analysis of data for clinical trials relating to costs and health care infrastructure. Another important research area would involve the physician and patient relationships in terms of patient care and costs. A health economist may collect data on how health care services are applied and used at different levels of healthcare. A health economist will conduct economic evaluations and evaluate the impact of health schemes.

Jobs as a Consultant

As a health economist, you might choose to work as a consultant. In this role, you would provide consulting in health economics and you would also perform modeling and forecasting. This kind of role is highly analytical and aims to improve existing structures to provide future successes. In a consulting role, you might also work at the international health care level, where you could examine and analyze macroeconomic regulations and how they affect different countries. You may even look at how various policies can provide support to several countries and how communication might be improved.

Right Education for Health Economist

At the very minimum, a health economist usually requires a post graduate degree in economics although given the competitiveness of the field, a post graduate degree in Health Economics with some aspects of management is highly recommended for the best chances of success. But that is not enough. A person has to acquire knowledge about health systems, policy, public health, epidemiology, demography and challenges faced by the healthcare sector.

Some famous Health Economists from India

A.K. Nandakumar

Mr Nandkumar is a  health economist by training specifically interested in health care financing, resource tracking, universal healthcare, and healthcare policy and research. He is the Chief Economist for Global Health at USAID. After an enriching stint with Deloitte consulting returned as Professor of the Practice at Brandeis University. Director of the PhD Program at The Heller School for Social Policy and Management at Brandeis University and the Director of the Institute for Global Health and Development. He had worked in the Indian Administrative Service during the early years of his career. His recent research has focused on the fungibility of donor assistance, factors affecting technology adoption in low and middle-income countries, the linkages between health expenditures and maternal and infant mortality, and the relationship between growth in a country’s income and its healthcare spending.

Rajeev Ahuja

Mr. Rajeev Ahuja, PhD, is an economist working in the Health, Nutrition, and Population unit of the World Bank, India office. Although, his work at the Bank has been focused on issues in health care financing in India, he considers himself as a human development finance specialist, with special interest in donor financing. He has been closely involved in project preparation and implementation activities of the Bank in the health sector in India.

Barun Kanjilal

Dr. Barun Kanjilal is health economist. After postgraduation, he obtained a PhD in Economics from Louisiana State University, U.S.A. where he worked as a post-doctoral researcher. He has been appointed as Adjunct Associate Professor in the Department of Public Health Policy and Administration at the University of North Carolina at Chapel Hill, USA. Dr. Kanjilal has published/presented several papers on applied economics in international journals / conferences. His current research and teaching interests are in the application of various quantitative tools in the area of health economics and financing.

Most of these prominent people working in the area of health economics are Health Economists by training. They took their degrees in economics or other subjects and then pursued their career in health care. The reason for this is that ‘Health Economics and Financing’ as a stream has very recently become a part of academia in India.

A Course on Health Economics Finance and Insurance will thus fill the gap in terms of a specialized degree, which can serve the demand of the health care sectorIt can thus be concluded that looking at the current growth rate in the healthcare sector, those who hold degree a specialized degree in Health Economics, Financing and Insurance will be in great demand.

If one has an analytical mind and strength for investigation and logic coupled with a deep interest and care for improving the health of the public, then a career in health economics will probably prove exciting and rewarding.