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What is health economics and why is it important?

At a glance

  • Healthcare economics refers to the many factors that influence the industry’s cost and spending.
  • Such factors as healthcare providers, patients, insurers, government agencies, and public and private organizations all impact this field.
  • Careers that incorporate health economics include health managers and health information management directors.
  • Start your career in healthcare at University of Phoenix, which offers several online healthcare programs, including a dual Master of Health Administration/Master of Business Administration!

Understanding healthcare economics

When you go to a doctor or a hospital emergency department, you know there’s more going on than meets the eye. From the triage attendants to the nurses who administer medication to the doctors who prescribe it, the American healthcare industry is very much a team effort influenced by a multitude of factors.

But who is deciding things like the cost and distribution of medical resources? What care a patient is eligible to receive? How a hospital or clinic should approach insurance?   

Enter health economics. Professionals in this space seek to address these questions and more by analyzing the factors that influence the industry and identifying new ways to make healthcare better and more accessible.

The economics of healthcare

Health economics is the discipline of economics applied to healthcare. It primarily focuses on how healthcare products and services are produced and distributed and how these processes can be improved. This can be done through economic evaluation.

Today, research in health economics is more important than ever, as major problems like rising healthcare costs and unequal access to care continue to harm public health and cause financial strain for Americans. Ideally through economic evaluation, financial solutions will be just one positive result.

What do health economists do?

The work of health economists revolves around applying different economic theories to various problems in the public and private sectors of healthcare to use cost-benefit analysis to develop cost-effective solutions that benefit patients and providers.

Health economics experts work in a wide range of settings, including hospitals, government agencies, universities, pharmaceutical companies and public health institutions. Methods used in this field include cost analyses, decision and transmission models, and impact assessments.

The work of health economists may involve helping healthcare institutions and agencies allocate their resources more efficiently, assessing the risks and benefits of public health initiatives, and studying how changes in health policy can affect the cost and accessibility of care. 

Examples of healthcare economics issues

One approach to healthcare economics is the Quintuple Aim philosophy, which has the goals of improving public health; optimizing the care experience; reducing the cost per capita of care; ensuring workforce well-being and safety; and advancing health equity. To accomplish these goals, decision-makers in the health sector must understand the most prominent issues in the industry.

Healthcare costs and value  

High costs are pressing issues in American healthcare. Despite the fact that, according to the American Medical Association, the United States allocates more resources to healthcare spending than any other country, Americans experience the worst overall patient outcomes of any high-income nation.

Health economics experts try to address this disparity between cost and quality long-term by examining the factors that contribute to high health-related costs, and identifying ways for institutions, agencies and insurers to reduce the costs influencing healthcare markets without compromising patient outcomes.

To achieve these goals, health economics experts help organizations streamline their operations and develop cost-efficient strategies for healthcare resource allocation, quality improvement, including policy changes and new applications for technology that enable them to deliver more cost-effective services.

Supply and demand for health services  

In healthcare, just as in any industry, supply and demand are major determinants of the cost and quality of goods and services. In areas where the demand for healthcare outpaces the supply, costs can increase and those who need it may have difficulty accessing the healthcare services they need, compromising public health.

Health economics experts work to ensure that providers have enough resources to provide adequate services. This may involve helping organizations develop more efficient supply chain management strategies.

Healthcare jobs and education markets

Another important focus of health economics is the market for healthcare jobs and education. Most of these institutions rely on a wide variety of specially trained employees to operate successfully, ranging from doctors to people in entry-level healthcare roles, like lab techs and nursing assistants.

A shortage of any type of skilled labor can put employers in a difficult position and potentially compromise the quality of care patients receive. As such, the availability of trained healthcare professionals may exert a major influence on operational decisions made by institutions and lead to quality-adjusted care.

By looking at potential indicators, like the number of students pursuing healthcare degrees and the rate of employees leaving and entering certain occupations, health economics professionals can help organizations anticipate employment trends across the healthcare system and predict how they will affect industry growth and public health.

Health technology and innovation

The development of new technology contintues to impact the healthcare industry. While innovation has been highly beneficial, it’s not always easy for healthcare or medical care organizations to determine the most effective applications for new technologies or predict the specific impacts they will have.

Health economists can identify new ways for healthcare institutions to use technology to reduce health expenditures and treat people more efficiently. They might explore how doctors can use artificial intelligence to analyze large volumes of patient data and obtain diagnoses more quickly or how institutions can optimize health information technology to streamline communication between patients and providers.  

Social determinants of health

The disparity in health outcomes between ethnic and racial groups is an important public health issue in the United States, and it has had some alarming consequences. Research has shown that marginalized racial and ethnic communities in America have higher rates of chronic disease and premature death.

Likewise, youth who identify as lesbian, gay, bisexual or transgender have higher rates of chronic conditions like cancer, heart disease, anxiety and depression than the general population.

Health economics experts work to determine the root causes of the observable disparities in health outcomes to identify ways for healthcare organizations to address them and improve outcomes for these marginalized groups.

Careers that intersect with health economics  

While “healthcare economist” is not an official job title at most organizations, there are several roles that deal with the field of health economics:

  • Health manager: People in this role track and monitor the operations of healthcare facilities, including doctors’ offices, clinics and nursing homes. They may be in charge of one particular department or oversee the entire facility. To become a health services manager, you’ll generally need a degree in healthcare administration or a related field. In most cases, you’ll also need prior experience in a clinical or administrative healthcare role.
  • Health information management director: People in this role are in charge of organizing and protecting patient data, including medical histories, test results and payment information. Healthcare management is different from healthcare administration as it focuses more on the big-picture aspects of running a healthcare facility as opposed to day-to-day operations.

While exact requirements vary by position, you’ll typically need a degree and a history of relevant experience to qualify for one of these healthcare leadership roles. Fortunately, there are several ways to build your credentials and gain valuable health economics expertise.

How to study health economics

While a variety of healthcare bachelor’s degree programs cover the fundamental aspects of health economics, preparing for a high-level management role will likely require more extensive training and possibly more education.

Many employers require candidates for these positions to have a more advanced degree with a management focus. Completing a master’s degree program in nursing administration or health administration will help you gain specialized skills and knowledge to pursue a career in arena.

For example, if you aim to pursue a leadership role you might consider roles such as health information management director, health manager and practice manager. Pursuing a master’s in health administration can help prepare individuals for this role and teaches skills such as overall health administration, business management, communication, strategic planning, professionalism and leadership.

You can include the skills learned in these programs on your resumé and ideally align with employers who are seeking a similar skill set in their employees.

Healthcare programs at University of Phoenix

Health economics plays an important role in today’s healthcare industry. You can learn more about this diverse area of study at University of Phoenix, which offers online healthcare programs.

  • Bachelor of Science in Health Administration — Learn aspects of health management including finance, healthcare information systems and marketing to healthcare consumers. With a unique storytelling approach from practitioner faculty, you’ll also learn how to nurture a culture of empathy in medical settings and how to improve patient outcomes.
  • Bachelor of Science in Health Management — This degree is designed specifically for allied health professionals, such as dental hygienists, medical assistants, and speech, physical or occupational therapists, who want to pursue an education in health management. Skills learned include management, technology, compliance and finance.
  • Master of Health Administration — Make an impact on the business side of patient care — and shape your healthcare facility from the top down. In this program, you’ll gain a wide range of skills and knowledge — from marketing and IT to policy and economics. Designed to fit into the lives of busy working adults, this degree can be completed online in manageable, 6-week courses.
  • Master of Health Administration/Master of Business Administration — This program focuses on the administrative side of healthcare, and our MBA offers a foundation in business practices such as accounting, marketing and strategies for growth. Together, they combine in a curriculum tailored to the needs of business healthcare leaders.
  • Master of Public Health with a concentration in Community Health Leadership — Develop skills to lead programs and initiatives that positively affect people’s health and reduce community health disparities.
Michael Feder


Michael Feder is a content marketing specialist at University of Phoenix, where he researches and writes on a variety of topics, ranging from healthcare to IT. He is a graduate of the Johns Hopkins University Writing Seminars program and a New Jersey native!


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