What is Health Economics?

Health economics is an applied field of study that focuses on the systematic and laborious examination of the problems faced in promoting health. By applying various economic theories, health economics aims to grasp the patterns of individuals, health care providers, public and private organizations, governments, etc. in decision making. A health economist works to identify, measure, value, and compare costs and consequences of alternative prevention strategies². Health economics is used to promote healthy lifestyles and positive health outcomes through the study of health care providers, hospitals and clinics, managed care, and public health promotion³.

Health economics pillars can be used to address global issues such as, but not limited to, migration, climate change, vaccine access, pandemics, etc. Through application of the theories of production, efficiency, disparities, competition, and regulation, health economists can better inform the public and private sector on the most efficient, cost-effective, and equitable action plan. Such research can comprise the economic evaluation of new technologies, the study of appropriate prices, antitrust policy, optimal public and private investment, and strategic behavior³.

As stated previously, this profession is in high demand globally, and this role can work in the public and private sectors. Health economists can work in the following organizations: International Agencies such as the World Health Organization (WHO), World Bank, United Nations. Health economists can work in the federal government with the Center for Medicare and Medicaid, The Agency for Healthcare Quality and Research (AHRQ), Center for Disease Control and Prevention (CDC). There are roles for health economists in the consulting realm, as well as pharmaceutical and medical device companies. Moreover, this role is imperative for health insurers and managed care organizations, and within research & academic institutes⁴.

The goal of health economics is to promote healthy lifestyles and positive health outcomes through the study of health care providers, hospitals and clinics, managed care, and public health promotion³. There are various methods health economists use to measure this, such as cost analysis. Exploring the costs of cancers, hospital acquired infection, an outbreak investigation for a local health department are some examples of how this method of cost analysis is utilized. Another method is to compare two or more programs in terms of costs and benefits, which is called economic evaluation.

An example of this would be diagnostic options for HIV, vaccine strategies, injury prevention programs, etc². Decision and transmission modeling is another method utilized by health economists. They do this by developing and testing regression models, agent-based models, and simulations, to name a few. Health economists have used this in HIV diagnosis and treatment, and in state public health resource allocation options. Furthermore, these health economics methods are commonly used in health technology assessments (HTA).

HTAs are a structured analysis of a health technology or a technology-related issue that is carried out for the purpose of providing input to a policy decision¹⁰. This assessment is needed now more than ever as technological innovation in health care has boomed, along with health care costs, and continues to do so.

Health Economics vs. Healthcare Financing

One clear distinction that needs to be discussed is the difference between health economics and healthcare financing.

While health economics is a rather broad term, healthcare financing is narrow and very specific in this case. Health economics is the review and assessment of various strategies in health promotion. Health financing is the optimum allocation of assets and focuses on obtaining funds. In other words, broadly health economics works through various questions related to the distribution of scarce resources, whereas health financing focuses on how money for healthcare services is generated⁶.

With that distinction clearly explained, within health economics specifically, there are three basic types of health economic evaluations: cost effectiveness analysis, cost-utility analysis, and cost-benefit analysis. Cost effectiveness analysis relates to a single clinical or natural measure of effectiveness⁷. An example of this analysis are activities of daily living, pain reduction methods, or a unidimensional outcome. Cost-utility analysis relates to the costs and benefits of interventions where there is no single outcome of interest and is useful to compare programs across different treatment areas⁸. In a cost benefit analysis, all costs and outcomes of an intervention/program are attached to a monetary value⁸.

If you are interested in health economics, health equity may be something that comes to mind as well.

During the past 20 years, health care systems have been met with increasing financial pressure due to the astronomical increase in health expenditures. These increasing prices make it hard for all people to access these services, thus creating inequities among populations. Various therapeutic innovations have increased health inequities among groups of countries or within countries. There must be a deliberate effort to assess these inequities, and improve availability and access to care for all¹⁵.

So why pursue a career in health economics? Health economics is a relatively new, and complex discipline⁶. It requires individuals to balance conflicting goals within the public and private sector on the most efficient, cost effective, and equitable plan to proceed. Health economists also require an understanding of the current health system landscape, and what behaviors affect health, such as obesity, smoking, and so on. 

Health economists have the following skills to achieve success in their careers:

• analytical and critical thinking skills (ex: analysis of data sets),

• ability to create and conduct studies independently,

• excellent communication skills,

• highly proficient in statistics and math,

• understanding of the current health sector (value based care programs, current public policy, etc.)⁹.

The primary qualifications to be a health economist are a master’s degree and at minimum 2 year’s professional experience. There are numerous health economics programs offered at universities across the nation. For example, Columbia University offers an MS in health economics and policy, and Cornell University has a similar program as well¹³.

Another avenue you can take to obtain this career path is to pursue a Master of Public Health with a concentration in health management, policy and economics. If you are interested in working on a global scale within health economics, a degree that can help you achieve this distinction is a Master of Health Science in global health economics, which is offered at Johns Hopkins University¹⁴. This degree provides courses that include economics, international relations, public health issues, and political science topics. Upon graduation, roles such as data analyst, policy analyst, research associate within clinical trials are all within reach.

Another option is to pursue a terminal degree in health economics⁴. For example, the University of Washington has a doctoral degree program in health economics and outcomes research that will prepare candidates for numerous roles in academia, big data research, informatics, pharmaceutical, biotechnology, health-systems, managed care organizations etc.¹¹. The University of Colorado Denver has a PhD program as well that is designed to train scientists to engage in modern economic research related to questions relevant to the health care sector and public health.  It is an on-campus program, which is housed in the Colorado School of Public Health¹². 

All in all, health economists are in high demand and work diligently to grasp the patterns of individuals, health care providers, public and private organizations, and governments from a local to global scale. This role will be essential in how the world tackles public health problems of today and the future.

If you are interested in pursuing this career, please begin to review our summary of MPH programs here.