COSTS OF HEALTHCARE

DEFINITION
A COST IS THE VALUE OF MONEY THAT HAS BEEN USED UP TO PRODUCE SOMETHING, AND HENCE IS NOT AVAILABLE FOR USE ANYMORE. (WIKIPEDIA) COST REFERS TO THE EXPENSES INCURRED BY THE PRODUCER TO PRODUCE THE GOODS AND SERVICES (HARISH BASAVAIAH-2009)

CONCEPT
1. ACCOUNTING COSTS CONTRACTUAL CASH PAYMENTS WHICH THE FIRM MAKES TO OTHER FACTOR OWNERS FOR PURCHASING OR HIRING THE VARIOUS FACTORS OF PRODUCTION EG.RENT, WAGES , INTEREST

2. ECONOMIC COSTS ACCOUNTING COST+TOTAL MONEY INVOLVED.

EXPENDITURE WHICH IS INCURRED BY THE ENTERPRENEURON ALL THE INPUT OR RESOURCES TO PRODUCE GOODS AND SERVICES

3. ACTUAL COSTS TOTAL EXPENDITURE WHICH IS ACTUALLY SPENT TO PRODUCE THE ITEMS 4. OPPORTUNITY COST IT IS THE NET RETURN THAT COULD BE REALIZED IF A RESOURCE WERE PUT TO ITS NEXT BEST USE. IT IS "WHAT WE GIVE UP" FROM "THE ROAD NOT TAKEN."

5. SUNK COST(ACTUAL COST) THESE ARE COSTS THAT WERE INCURRED IN THE PAST 6. INCREMENTAL COST ADDITIONAL COST OF PRODUCING AN ADDITIONAL OUTPUT

9. EXPLICIT COST ACTUAL PAYMETS MADE BY THE EMPLOYER TO OBTAIN RAW MATERIALS ,INTERET BORROWED ON FOUNDS, RENT ETC 10. IMPLICIT COSTS THE MONETARY (R/T MONEY) INCOME THAT A FIRM GIVES UP WHEN IT USES A RESOURCE THAT IT OWNS RATHER THAN BUYING IT FROM THE MARKET. EG.OWN LAND

11. FIXED COST COSTS THAT DON'T CHANGE OVER A PERIOD OF TIME AND DON'T VARY WITH OUTPUT. E.G. SALARIES, RENT, TAX, INSURANCE, HEATING AND LIGHTING. FIXED COSTS CAN ALSO BE CALLED INDIRECT COSTS AS THEY ARE NOT DIRECTLY ASSOCIATED WITH THE FINAL PRODUCT

12. VARIABLE COSTS: COSTS THAT VARY DIRECTLY WITH OUTPUT SO WHEN OUTPUT INCREASES, VARIABLE COSTS ALSO INCREASE. E.G. RAW MATERIALS, ELECTRICITY. VARIABLE COSTS CAN ALSO BE CALLED DIRECT COSTS AS THEY ARE DIRECTLY ASSOCIATED WITH PRODUCTION.

TYPES
COSTS ARE CLASSIFIED INTO FOLLOWING CATEGORIES: 1. COST BEHAVIOR BASIS (A) FIXED COST (B) VARIABLE COST (C) SEMI-VARIABLE COST- THESE COSTS HAVE FIXED AND VARIABLE ELEMENTS. E.G. A PERSON WORKING FOR THE COMPANY MAY HAVE A FIXED SALARY BUT MAY ALSO EARN COMMISSION ON SALES.

2. COST INVENTORY BASIS (A) PRODUCT COST AND (B) PERIOD COST

Product cost costs that are the cost of manufacturing a product are called product cost. Product cost includes direct material, direct labour, direct expenses Period cost They are charged against the revenue of the relevant period. Period costs include all fixed costs and total administration, selling and distribution costs.

COST OUTPUT RELATIONSHIP

TOTAL COST FIXED+VARIABLE COST

ie, TFC+TVC=TC

COST EFFECTIVENESS COST-EFFECTIVENESS ANALYSIS (CEA) IS A FORM OF ECONOMIC ANALYSIS THAT COMPARES THE RELATIVE COSTS AND OUTCOMES (EFFECTS) OF TWO OR MORE COURSES OF ACTION COMPARES THE COSTS AND HEALTH EFFECTS OF AN INTERVENTION TO ASSESS THE EXTENT TO WHICH IT CAN BE REGARDED AS PROVIDING VALUE FOR MONEY. THIS INFORMS DECISIONMAKERS WHO HAVE TO DETERMINE WHERE TO ALLOCATE LIMITED HEALTHCARE RESOURCES. CER =Costs of intervention Health effects produced

COST BENEFIT
CBA IS USED IN THE ASSESSMENT OF WHETHER A PROPOSED PROJECT, PROGRAMME OR POLICY IS WORTH DOING, OR TO CHOOSE BETWEEN SEVERAL ALTERNATIVE ONES. COST-BENFIT ANALYSIS IN HEALTH CARE IS THE ANALYSIS OF HEALTH CARE RESOURCE EXPENDITURES RELATIVE TO POSSIBLE MEDICAL BENEFIT. THIS ANALYSIS MAY BE HELPFUL AND NECESSARY IN SETTING PRIORITIES WHEN CHOICES MUST BE MADE IN THE FACE OF LIMITED RESOURCES. THIS ANALYSIS IS USED IN DETERMINING THE DEGREE OF ACCESS TO, OR BENEFITS OF, HEALTH CARE TO BE PROVIDED.

DEMAND AND SUPPLY IN HEALTH CARE

DEMAND An economic principle that describes a consumers desire and willingness to pay a price for a specific good or service. Investopedia.

LAW OF DEMAND

THE LAW OF DEMAND STATES THAT OTHER THINGS BEING EQUAL, AS THE PRICE OF A GOOD INCREASES, THE QUANTITY DEMANDED OF THAT GOOD DECREASES.

DEMAND CURVE

CHANGING IN DEMAND
INCREASE IN DEMAND MORE DEMAND AT THE SAME PRICE OR SAME QUANTITYOF DEMAND AT HIGHER PRICE

DECREASE IN DEMAND LESS DEMAND AT THE SAME PRICE OR SAME QUANTITY AT A LOWER PRICE

HEALTH CARE DEMAND

HEALTH CARE IS DEMANDED AS A MEANS FOR CONSUMERS TO ACHIEVE A LARGER STOCK OF HEALTH CAPITAL. THE DEMAND OF HEALTH IS UNLIKE MOST OTHER GOODS BECAUSE, INDIVIDUALS ALLOCATE RESOURCES IN ORDER TO CONSUME AND PRODUCE HEALTH

MICHAEL GROSSMANS 1972 MODEL OF HEALTH PRODUCTION

IT VIEWS EACH INDIVIDUAL AS BOTH A PRODUCER AND CONSUMER OF HEALTH. HEALTH IS TREATED AS A STOCKWHICH DEGRADES OVER TIME IN THE ABSENCE OF INVESTMENTS IN HEALTH., SO THAT HEALTH IS VIEWED AS A SORT OF CAPITAL.

SUPPLY

A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. (Investopedia. )

DETERMINANTS OF SUPPLY
COST OF PRODUCTION THE LEVEL OF TECHNOLOGY NON ECONOMIC FACTORS-WEATHER GOVERNMENT POLICY- TAX

LAW OF SUPPLY

STATES THAT BY KEEPING OTHER FACTORS CONSTANT THE SUPPLY INCREASES AS PRICES INCREASE AND DECREASES AS PRICES DECREASE

SUPPLY CURVE

SUPPLY OF HEALTH CARE

THE SUPPLY OF HEALTH CARE FACILITIES DEPENDS ON 1, INTERNAL FACTORS-FUNDS,GOVT. SUBSIDY AND ENCOURAGEMENT, EXISTANCE OF MEDICAL PERSONNEL AND DRUGS. 2. EXTERNAL FACTORS- DEMAND FOR HEALTH CARE , EXISTANCE OF PHARMACEUTICAL COMPANIES, LAB, BLOOD BANK ETC.

PRODUCTION

THE PROCESSES AND METHODS EMPLOYED TO TRANSFORM TANGIBLE INPUTS (RAW MATERIALS, SEMIFINISHED GOODS, ORSUBASSEMBLIES) AND INTANGIBLE INPUTS (IDEAS, INFORMATION,KNOWLEDGE) INTO GOODS OR SERVICES.

FACTORS OF PRODUCTION
LAND- NATURAL RESOURCE LABOUR-PHYSICAL AND MENTAL WORK CAPITAL-WHOLE STOCK OF MACHINES, TOOLS, IMPLEMENTS, RAW MATERIALS ETC. ORGANIZATION-BRINGS TOGETHER OTHER FACTORS AND ASSIGN THEM WORK AND BEAR THE RISK AND UNCERTAINITY OF PRODUCTION

STRUCTURE OF HEALTHCARE INDUSTRY

INDUSTRY A GROUP OF FIRMS. CONSISTS OF ALL THOSE INDIVIDUAL UNITS OF PRODUCTION WHICH ARE PRODUCING DIFFERENTIATED GOODS THOUGH THEY BELONG TO SAME PRODUCT LINE

INDUSTRY-TYPES
1.

2.

MANUFACTURING-CONVERTS RAW MATERIALS INTOFINISHED GOODS SERVICE-PROVISION OF CERTAIN SPECIALIZED SERVICES-TRANSPORTATION, COMMUNICATION,HEALTH CARE

HEALTH CARE INDUSTRY

PUBLIC SECTOR HEALTH CARE INDUSTRY PRIVATE SECTOR

GOVT. HOSPITAL GOVT.MEDI. CLG BLOOD BANKS AMBULENCE SERVICES

MED.CLG &HOSPITALS

PHARMACEUTICAL COMPANIES LAB AMBULENCE SERVICES

NSG HOMES

CHARECTERISTICS OF HEALTH SERVICE MARKET

THE HEALTH CARE MARKET HAS IN ELASTIC DEMAND SUPPLY IS INDEPENDENT OF DEMAND IMPERFECT COMPETETION NEGLIGIBLE SELLING COSTS DEMAND IS MORE THAN SUPPLY NO PERFECT KNOWLEDGE INTERVENTION OF GOVERNMENT PROFIT

DEMAND AND SUPPLY SIDES OF HEALTHCARE MARKET DEMAND SIDE INELASTIC CONSTANT DEMAND

SUPPLY SIDE NEEDS TOBE ADJUSTED WITH EXISTING DEMAND SHORTAGE IN RURAL AREAS

FINANCING OF HEALTH CARE

FINANCIAL SYSTEM

CAPITAL MARKET MONEY MARKET

BILL MARKET

DISCOUNT MARKET

CALL MONEY MARKET PRIMARY MARKET SECONDARY MARKET

MONEY MARKET
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames BILLMARKET-PURCHASE AND SALE OF TREASURY BILLS DISCOUNT-BILL OF EXCHANGE

CAPITAL MARKET
A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, PRIMARY-RAISING NEW CAPITAL BY SELLING NEW SHARES SECONDARY-RESELLING SHARES

SOURCES OF HEALTH FINANCE

COMMERCIAL BANKS CO-OPERATIVE SECTOR RESERVE BANK OF INDIA

COMMERCIAL BANKS
SCHEDULED-PAID CAPITAL AND RESERVE TOGETHER UP TO FIVE LAKHS AND ABOVE-286 BANKS NON SCHEDULED-LESS THAN 5 LAKHS PUBLIC SECTOR BANK-14 NATIONALIZED BANKS EG.SBI,CBI PRIVATE

CO-OPERATIVE SECTOR
PERSONS JOIN VOULANTARLY ON THE BASIS OF EQUALITY AND TO PROMOTE ECONOMIC INTEREST OF ALL PERSONS TYPES AGRICULTURAL CO-OPERATIVE SOCIETIES NON AGRICULTURAL CO OPERATIVE SOCIETIES(URBAN CO-OP BANKS,EMPLOYEES CO-OP BANK)

RESERVE BANK OF INDIA

APEX BANK OF COUNTRY 1ST APRIL 1935 FUNCTIONS PRINTING AND ISSUING CURRENCY NOTES BANKER TO GOVT CONTROLS CREDIT OF COMMERCIAL BANKS CONTROLS MONEY MARKET FOREGIN EXCHANGE INCHARGE LENDER TO ALL COMMERCIAL BANKS FINANCE TO AGRICULTURE AND INDUSTRIES RESEARCH FUNCTIONS

HEALTH PLANS IN INDIA

FIVE YEAR PLANS-11

ROLE OF STATE AND CENTRAL GOVERNMENT IN FINANCING HEALTH CARE INSTRUCTED TO START HOSPITALS ,DISPENSARIES IN ALL TALUK AND DISTRICTS PRIMARY HEALTH CARE UNITS ARE ENCOURAGED TO OPEN PRIVATE NURSING HOMES AND LABORATORIES ARE ENCOURAGED. PERMISSION IS GRANTED TO OPEN NURSING AND MEDICAL COLLEGES THROUGOUT THE COUNTRY

AT LEAST ONE YEAR RURAL POSTINGS FOR GOVT. DOCTORS RURAL HEALTH EDUCATION AT SCHOOL AND COLLEGE LEVELS SAFE DRINKING WATER AND SANITATION TO ALL PEOPLE FINANCIAL ASSISTANCE THROUGH NATIONALIZED BANKS TO PRIVATE SECTORS UNIVERSAL HEALTH PROGRAMMES VOLUNTARY COUNSELLING CENTRES FOR HIV POSITIVE PATIENTS FAMILY WELFARE PROGRAMME ENVIRONMENTAL PROTECTION PROGRAMME

FACTORS INFLUENCING THE STATES ABILITY TO FINANCE HEALTH CARE SERVICES

FINANCIAL SOUNDNESS OF THE GOVERNMENT TAX STRUCTURE TAXABLE CAPACITY OF PEOPLE AREAS OF HEALTH CARE SERVICES FINANCIAL AID FROM CENTRAL GOVERNMENT GRANTS FROM INTERNATIONAL MONETARY FUND(IMF) CO-OPERATION FROM LOCAL NONGOVERNMENT ORGANIZATION STABLE GOVERNMENT WITH STABILIZED PRICES WITH STRONG MONETARY AND FISCAL POLICY