Health Economics (Part 1): What Is Value In Health Care?

The objective of public policy is to produce or gain maximum health for all Malaysians so that the country’s health and wellbeing will improve and reduce health inequalities.

Better Health Care Is Not Cheaper Health Care

What does the phrase “spending money wisely in health care” mean? Spending is an expense, and upon buying something, the buyer would hope that they have made a “good buy”, one with value. 

Usually, “value for money assessments” are used to determine value. These assessments have gained traction in many countries regarding medicines and allocations that relate to medical devices, diagnostic tools, and public health programmes, and they try to make sense of spending through value. 

Yet, the first step toward understanding value is to recognise that better health care is not cheaper health care. “Value for money” or “spending wisely” is not about cost savings. 

The government must ensure that public capital investments in the Malaysian health care system make the best use of limited resources. Health care spending should result in the production of maximum health gains.

Savings to public sector budgets may be viable, but it is not the main objective that ensures Malaysians continue to receive the best health care possible. 

Cost-Effectiveness And Cost-Saving

Heated debates on “value” are ongoing between top health economists; and patients, hospitals, governments, and health insurers, (people who pay). However, with the advent of the Covid-19 pandemic, these discussions have highlighted an urgent need to clarify the existing paradigm of “value”: exchanges of opinions shift from that of the quotidian, to a grave one where the value of health care is determined by serious post-pandemic conditions. 

Presently, there are likely more divergent opportunities for value assessment in health economics: This includes de-mystifying ‘cost-effectiveness’ and ‘cost-saving’ for a broad audience, especially when it concerns the whys and wherefores of health funding.

While everyone loves a bargain, prudent spending is preferred. New medicines on the market generate interest from potential buyers: Who may or may not be willing to pay for the medicine, so to buy.

Regardless, it is reasonable to assume that buyers paying for new medicine would want to know if it is worth paying for. Most people want confidence in the efficacy of the medicine, so to know that their ‘buy’ is a wise spend: that they have spent their money wisely. 

“Health Is A Value In Itself. It is Also A Precondition For Economic Prosperity”

15 years ago, it was globally acknowledged that: 

Health is a value in itself. It is also a precondition for economic prosperity. People’s health influences economic outcomes in terms of productivity, labour supply, human capital and public spending. Health expenditure is recognised as a growth-friendly expenditure. Cost-effective and efficient health expenditure can increase the quantity and the productivity of labour by increasing healthy life expectancy. – The European Commission (2006, 2012)

Fifteen years on in 2021, Health Minister Khairy Jamaluddin has called for health budgets to be viewed as investment, and not expenditures, especially in the prevention and treatment of cancer.

He said, “People who are healthier and able to survive cancer can carry on working to help rebuild their lives, the economy, and the country”.

Ultimately, the primary goal of health spending is to achieve maximum health gains. Of course, these gains come with price tags, with the realisation that financial resources are finite.

It is no longer possible to meet all growing demands in health care, again because of limited resources. On this occasion, due to Malaysia’s ageing population, medical advances, high prevalence of non-communicable diseases, and the recent Covid-19 crisis.

Scarcity and Choice: The Best Possible Investment For Maximum Health Gains

How does the country ensure the best possible use of limited resources in health care? Public capital investment, the money that society invests in health care should be spent to result in the best possible return: the production of maximum health gains.

Savings in the health sector are beneficial, provided they do not cause any loss of quality that would lead to any loss of health.

Cost Effectiveness And Economic Evaluations Of Health Care

The desire to achieve “cost-effectiveness” becomes apparent when the budget for health care is limited. Spending on health care is minimal at best.

In an ideal world with unlimited resources, society would be willing to pay for any treatment available, with the condition that there is a health gain.

In reality, available budgets do not allow the public health care sector to invest in every desired health investment item, even if the production of maximum health gains is promised.

Increased fiscal budgets only highlight a modest increment for health care, and limitations remain. Policymakers face challenging decisions over which medicines or public health programmes to invest in.

Decisions are often made based on past spending trends, and salami slicing of budgets.

Of course, there are also factors such as political pressures and perceived barriers to getting involved in health economics, which continue to push policy makers to make decisions that are not necessarily the most beneficial for population health.

The Perfect Equilibrium? Is There One In Health Care?

The World Health Organization (WHO), and the Organisation for Economic Cooperation and Development (OECD) emphasise that health policies need to factor in more economic evaluations on health care.

This is because good health policies help the country be efficient and spend limited budgets wisely. Without well-thought-out policies and a strong, equitable leadership, health systems do not automatically make efficient use of their resources, or provide balanced responses to the challenges facing a population’s needs and expectations.

As Malaysia continues through the Covid-19 crisis, Malaysians struggle with the enormous strain on humanity and the health system. The country is presented with the challenge and opportunity of asking: How can health care adapt in order to deliver more efficient methods of addressing: (i) the patients’ needs; (ii) developing resilience and readiness for the future; and (iii) provisions for higher-value care.

For decades, the field of health economics and outcomes research (HEOR) has grown and utilised various methodologies to perform clinical and economic evaluation of health interventions. These tools continue to provide a reliable foundation from which to draw information on value and efficiency across the health care system. 

June W.Y. Choon, PhD, writes for Health Economics Today. Her next article will illustrate the importance of health economics evaluations in the health sector, and how health economics can be applied to make the most out of budget constraints to provide the best value for money (or even saving public money). 

June Choon was a former academic and health economics researcher from Monash University. She is now the Principal Science Officer at Health Economics and Outcomes Research (hEOR) – an HEOR unit of the Galen Centre for Health and Social Policy.

  • This is the personal opinion of the writer or publication and does not necessarily represent the views of CodeBlue.

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