Insert Discuss the Concept of Economic Efficiency In healthcare economics, economic efficiency refers to the attainment of maximal health benefits, with the use of specific amounts of resources. This means that when allocating resources for healthcare services, efficiency is considered as the point where marginal costs and marginal health benefits converge or become equal. The Appropriate Role of Economics in the Study of the Medical Care Sector There can be no gainsaying the importance of economics when studying the medical care sector. It is by understanding the concept of economic efficiency that allocative efficiency in healthcare services provision can be realized.
This type of efficiency comes about with optimal distribution of healthcare goods and services. Aiming at allocative efficiency is very important, given that realizing it deeply necessitates factoring the preferences of patients or the public, as clients. In turn, the need to respect clients’ preferences is underpinned by the fact that the rates that clients are willing to pay always have to be equivalent with the marginal utility they receive. This is because, optimal distribution is struck only when there is equality between marginal utility and (marginal) cost (Leach, 280).
Conversely, it is only by considering the reality of technical efficiency as a facet of economic efficiency that the healthcare services sector and institutions can aim at having the best incentives and resources. Being the effectiveness with which specific inputs are used to give an output, technical efficiency is favorable when a healthcare institution or sector uses the minimal quantity of input to produce maximum output. Labor, appropriate technology and capital are some of the components of these inputs.
In this effect, considering the economics of technical efficiency compels stakeholders in the healthcare services sector to ensure efficient management and appropriate procurement of resources and equipment. This ultimately keeps the cost of healthcare services provision affordable and thereby leading to the realization of a healthier nation. Strengths and Limitations As already mentioned, one of the strengths of using economics constructs such as technical efficiency, is the realization of a healthier population. Given that technical efficiency factors of production such as capital, appropriate technology and labor are to be managed well to ensure minimal input for the realization of the greatest output, operational excesses such as wastage, workplace larceny and unaccountability are likely to be curtailed.
This leads eventually to lower operational costs and higher financial accessibility of healthcare services. In another wavelength, considering economics in the provision of healthcare services fosters competition in the sector. This is the case since allocative efficiency is only realized in the presence of optimal distribution of healthcare services. The corollary to this is that there will have to be competition to ensure the highest level of efficiency in services provision.
It is this competition that leads to the most refined sources of healthcare services. Younis contends that one of the limitations of over-considering allocative efficiency is that in the quest to outshine other competitors in the field by providing the best goods and services, focus may shift from medical ethics and values. In the quest to ensure the realization of this economic efficiency, healthcare organizations may begin to get inordinately concerned about having the most favorable marginal utility, instead of making the client the center of medical services provision.
Likewise, the pressure to ensure technical efficiency by abating the cost of operation may be mistaken for austerity measures on resources monitoring and regulation (340). Nevertheless, it suffices to reiterate that integrating economic principles and healthcare services provision remains most beneficial if policymakers remember that all efforts and policies must place the patient at the center-most position. Works Cited Leach, John. “Income Disparity, Inequity Aversion and the Design of the Healthcare System. ” Scandinavian Journal of Economics, 111.2 (2009): 277-97.
Print Younis, Z. Mustafa. “Healthcare Policy, Financing and Economics: A Symposium. ” Journal of Public Budgeting, Accounting & Financial Management, 19.3 (2007): 338-41. Print