What is Health Economics?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 14 October 2019
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Health economics is the study of health care availability from an economic perspective, looking at what impacts availability, access, and pricing. Examining the economics of health care can provide important information for people interested in health care reform or the analysis of the efficiency and effectiveness of a health care system. In a region where disparities in health care are present, economic analysis may be an important step in figuring out how to correct those disparities.

Health care is a very large industry including a number of different components. There are direct aspects of the industry like health care providers, diagnostic labs, medical equipment manufacturers, and pharmaceutical companies. In addition, the industry also includes indirect participants like health insurance companies selling a variety of financial products related to the industry. Both the public and private sectors of the economy can be involved, as seen in government programs to pay for health services for low income individuals, as well as things like private hospitals.

The study of economics is often considered to be a study of scarcity, looking at how availability of resources impacts their ultimate price, and, by extension, who can access them. In health economics, people look at the distribution of health services in a given area, identifying areas where health resources are scarce or abundant. People in a rural area, for example, might face scarcity of health care services in response to low demand, especially for specialty services that few residents need.


People can study health economics for a variety of reasons. Some people are interested in finding ways to improve access to health care and may be involved in programs intended to promote availability of health care services. Insurance companies want to identify potential profit and loss areas. Economists are often interested in the impacts of the health care sector on the larger economy. Sociologists and policy makers involved in health care policy and the study of health access may want to study health economics to do their jobs more effectively.

This field includes maintaining and analyzing statistics about health care access and availability of health services. People who study health economics can also examine different aspects of the health care industry, dividing it by sector to learn more about high and low performing sectors. Their work can also include tracking the fortunes of publicly traded companies in the health care business, as well as studying government allocations of funds to learn more about where this money goes and how it is used.


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