Introduction to Health Economics Health as (a shared) Investment This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License. Your use of this material constitutes acceptance of that license and the conditions of use of materials on this site Copyright 2018, Teaching Vaccine Economics Everywhere. Use of these materials permitted only in accordance with license rights granted. Materials provided “AS IS”; no representations or warranties provided. User assumes all responsibility for use, and all liability related thereto, and must independently review all materials for accuracy and efficacy. May contain materials owned by others. User is responsible for obtaining permissions for use from third parties as needed. Outline • Health markets differ from other markets • Staying healthy can take a lot of our time • Health services like vaccines can be a mixed public private good • The free rider problem • Rationale for public (or private or mixed ) provision • Communication and advocacy issues to increase demand Investing in Health Care Health Production Inputs Outputs Capital Stock of Health Over Health Care Time Healthy Days Diet Physical Health Exercise Mental Health Environment Activity Income Limitation Time Time Period A Model for Money Spent Producing Health A Model for Time Spent Producing Health An analysis of 365 days or 100% Time Improving Health 20% Working 45% Producing Home Goods 25% Lost to illness 10% Issues that emerge: (a) Time spent producing health, reduces time spent on other activities. (b) Time spent on health investment increases health stock, and reduces time lost on ill health. (c) Time costs mean that even free services like vaccines have a cost (d) Choice to spend time getting vaccinated implies that the time spent is rewarded by health benefits and more earnings Rationale for government involvement 1. To ensure that health care services are available to the poor regardless of their ability to pay for services. 2. Minimizing negative externalities 3. Maximize positive externalities 4. To ensure aspects of health service quality that customers cannot detect What is a public good? Private Goods Public Goods • Possible to exclude some • Impossible to exclude anyone people from consuming • George consumes, no impact on • If one person consumes, Elizabeth (non-rival) another cannot (rival) • Example Air Quality • Example-Sandwich By Artem Svetlov Are vaccines public goods? Herd immunity and smaller rich poor As injections gaps • Are they excludable? • Is this excludable? • Are they rival? • Is this rival? Duality • A single vaccine is a private good • A thousand vaccines confers a public good The Free-rider Problem • Free riding is an attempt to benefit from a public good without sharing in the cost • Examples Free Riding and Vaccines • What happens when someone free rides on the vaccine system? • Do they receive private protection? • Consider measles • Consider tetanus • Consider HPV • Do they receive herd immunity? But why do people opt-out? • Level of benefit from one injection • Goes down (to zero) as coverage goes up (to 99.9%) • Not all risks are perceived the same • Risks imposed by someone else worry us more • Human-made risks worry us more than natural risks • Risks we cannot control worry us more • Risks that come from untrusted sources worry us more Vaccine Hesitancy (Gowda & Dempsey, 2013) How can we address free – riding? • Providing incentives to vaccination • Conditional cash transfers • This create a price that is below zero • Mandatory (forced) vaccinations • Fines or punishments or denied school entry if not vaccinated • Requires trust and low perceived risk • Reshaping social norms to encourage prosocial behavior – social nudge • Persuasion based on “Good Parenting” Vaccine Advocacy - Summary Steps • Listen to people–citizens, politicians, nurses, CHWs • Involve people to make a plan based on data • Create messages and materials and check them with stakeholders • Build and sustain strong coalitions • Engage policy and decision makers • Inform and involve the public in designing messages • Monitor and evaluate your work Vaccines as a public good – Public Role • Vaccines offer positive externalities • Most vaccines are low cost and cost-effective • Recent analysis shows that investment of $1 in a portfolio of vaccines, would return up to $16 (2011- 2020). • Some childhood vaccines like measles and tetanus protect the poor more than the rich • Makes it important that delivery systems reach the poor • Free riding requires a public solution Vaccines as a Public Good – Why Public Provision • Immunization is in public interest because benefits extend beyond those who receive the vaccines • Even small costs to households can be barrier to access and if they are deterred society cannot achieve benefits of herd immunity. • As coverage increases the unvaccinated groups may have more vaccine resistance due to free riding Public/ Private/ Mixed Approach? • Private Not For Profits (PNFP) and private sector can potentially help public sector vaccinate • Helpful if government has limited workforce • Helpful if they bring in financing • Unhelpful if private sector poaches workers • Unhelpful if their quality is poor • Private sector needs regulation to ensure clients are not taken advantage of • Private sector won’t automatically address free riding Summary • Health is produced from inputs, but people have to spend time to get inputs and make themselves healthy • Time is not free • Public goods are non-excludable, non-rival • Vaccines are dually an individual private good with private costs and a public good on a social scale • Free riding occurs in vaccine choices • Requires a people-engaged strategy.