+1 (417) 242-6748    support@nursingessaygurus.com

RELIABLE PARTNER IN
NURSING ESSAY WRITING

Get your project completed by MDs and PhDs

Economic Elements in Healthcare Paper

Economic Elements in Healthcare Paper

ORDER CUSTOM, PLAGIARISM-FREE PAPERS ON Economic Elements in Healthcare Paper

Economic Elements in Healthcare

Determining the Allocation of Resources for Two Programs Using the Health Production Function

The purpose of a production function is to analyze inputs (i.e., funding and resources) and outputs (i.e., improved health) to identify the least costly combination of inputs to achieve the desired output.

This media piece shows how the health production function can help healthcare leaders make resource allocation decisions to help achieve economically efficient objectives of healthcare services programs.

In Detroit, there are two state-funded healthcare services programs with the goal of reducing diabetes prevalence rates in obese individuals with low income living in impoverished areas within the city. The State of Michigan has funding available to make two payments one month apart, and would like to choose only one of these programs in which to invest funding for the program’s expansion. The state wishes to make the most economically efficient decision to improve the health of the most people in need.

Program 1: “Bariatricity Detroit” is a large program with a strategic objective to establish additional Bariatric Surgery Centers in selected hospitals for obese patients with diabetes to undergo bariatric weight loss surgeries. Economic Elements in Healthcare Paper

Program 2: “Healthy Lifestyles Detroit” is a small program with a strategic objective to increase education and coaching focused on healthy eating, lifestyle and behavioral change and increased physical activities for low-income, obese individuals with diabetes.

The first step in using a Health Production Function is to define inputs and outputs:

What are the desired outputs (or objective) to be achieved for each program? For the state?

This question has not yet been answered.

Outputs (or objectives) are the results, or goals, you are trying to achieve. Looking at the case study, the following are generally what each program and the state of Michigan are trying to achieve.

  • Program 1 objective = Establish additional Bariatric Surgery Centers in selected hospitals to provide weight loss surgery to obese individuals with diabetes.
  • Program 2 = Increase education and coaching focused on healthy eating, lifestyle and behavioral change and increased physical activities for low-income, obese individuals with diabetes.
  • State program goals = Reduce diabetes rates in obese individuals with low income living in impoverished areas within the city. Make the most economically efficient decision to help the most people in need.

What are the possible inputs needed for establishing Bariatric Surgery Centers?

This question has not yet been answered.

Inputs are the resources that are needed to operate a given program or service. Some example of inputs that would be required to establish and operate the Bariatric Surgery Center for Program 1 would be:

  • Funding
  • Hospital Staffing
  • Licensing of the added facilities
  • Surgical suite costs
  • Bariatric surgeon costs

What are the possible inputs needed for establishing Bariatric Surgery Centers?

This question has not yet been answered.

Again, inputs are the resources needed to operate a program or service. Some of the resources needed to increase the capacity of Program 2 are:

  • Funding
  • Education materials
  • Behavioral coaches

The second step in using a Health Production Function is to define the relationship between the output (goal or objective) to be achieved and the inputs (i.e., funding and resources) are available to work towards achieving each program’s defined objectives. Economic Elements in Healthcare Paper

This diagram shows that the relationship between a program’s inputs and outputs is curvilinear. When a program is relatively small, additional inputs devoted to that program (A1 and A2) are likely to result in relatively large increases in the program’s output. As additional resources are allocated to that program, the total output will continue to increase, but at a more gradual rate. If a program is relatively large, additional inputs devoted to that program (A3 and A4) are likely to result in small increases in the program’s output (Q3 and Q4). Finally, increases in output for both programs will become negligible even though the program’s inputs may continue to increase.

According to the Health Production Function, there is a law of diminishing returns to consider when making funding allocation decisions. Funding is referred to as a fixed input, because the state can only provide funding of the same amount two times.

In the example health production curve, consider A1/Q1 and A2/Q2 to be the Healthy Lifestyle Detroit Program and A3/Q3 and A4/Q4 to be Bariatricity Detroit. For the two programs in Detroit, how does the Health Production Function and the law of diminishing returns work?

This question has not yet been answered.

There is no single right answer for this, but below are a number of points to consider when analyzing the graph, the health production function, and law of diminishing returns.

If the state allocated funding amounts A1 and A2 to the smaller program 2, “Healthy Lifestyles Detroit,” this would result in large changes to health outputs Q1 and Q2, specifically, larger decreases in the rates of diabetes in low income, obese individuals.

If the state allocated funding amounts A3 and A4 to the larger program 1, “Bariatricity Detroit,” this would result in small changes to health outputs Q3 and Q4, specifically, smaller decreases in the rates of diabetes in obese individuals. Of note, Bariatricity Detroit is not designed for low-income, obese individuals, but rather, for individuals with insurance that will provide coverage for weight loss surgeries.

At this point, the health production function shows that the most economically efficient decision for the state would be to provide funding to the smaller program which would have larger health outputs; that is, a larger decrease in diabetes rates in low-income, obese individuals.

The final step in using a Health Production Function is to consider variable inputs (inputs that change depending on the level of production) and marginal outputs (the additional outputs produced by adding a unit of input) for each of the programs.

Of your previously defined inputs, which would be considered variable inputs for each of the two programs and why?

This question has not yet been answered.

Variable Inputs
The two programs that the state can choose to provide funding for are very different in terms of their approaches and the costs associated with program expansion. Aside from funding, which is a fixed input, there are variable inputs for each program. Variable inputs must be considered because they add to the total inputs needed to achieve desired program objectives.

For Bariatricity Detroit, the larger program, aside from funding which is a fixed input, the possible inputs that were defined – hospital staffing, licensing of the added facilities, surgical suite costs, bariatric surgeon costs – are variable. For example, costs related to hospital staffing of a bariatric surgery center depend on how many staff are already available in the hospital and how many new staff need to be hired.

For Healthy Lifestyles Detroit, the smaller program, aside from funding which is a fixed input, the variable inputs defined were educational materials and behavioral coaches.

When the costs of increasing a program’s size are not equal, the comparison cannot simply be made between the changes in output of the two programs. The relevant criterion for allocating resources to programs having different benefits and costs is to select those programs whose marginal benefit per dollar spent is greatest (Feldstein, 2012).

How might marginal outputs be important in your comparison of Bariatricity Detroit and Healthy Lifestyles Detroit from an economic and output efficiency point of view? Consider the health production curve from the previous question to help give some more context to your response.

This question has not yet been answered.

Marginal Outputs
For Bariatricity Detroit, assume that an expansion of this program would result in a decrease in diabetes prevalence by 30 obese individuals. The marginal cost of achieving that increased benefit is $300,000.

In comparison, an expansion in Healthy Lifestyles Detroit yields, as a marginal benefit, a decrease in diabetes prevalence by 20 low income, obese individuals at a marginal cost of $100,000.

Dividing the marginal cost by the marginal benefit (MC/MB) yields a cost of $10,000 per individual patient the Bariatricity Detroit program and $5,000 per individual patient in Healthy Lifestyles Detroit.

It is clear from such an analysis that the state should allocate funding to expand Healthy Lifestyles Detroit. Economic Elements in Healthcare Paper

Conclusion

When making a decision about allocating funding and resources, what are the steps you should be taking and the types of information you should be considering to drive and justify your choices?

This question has not yet been answered.

There is no single correct answer to this question, however, one process for making these types of economic and programmatic decisions could be outlined as follows:

First, define and consider important aspects of the outputs and the inputs. These might include:

  • specific population group whose health is to be affected
  • goals of stakeholders
  • objectives of programs
  • desired outcomes and/or results
  • costs associated with each program
  • variable and fixed inputs needed to expand each program

Next, define the relationship between inputs and outputs for each program. Keep in mind that:

  • the relationship is curvilinear
  • there is a law of diminishing returns
  • the smaller program will have larger outputs initially
  • the larger program will have smaller outputs initially

Third, marginal effect on health of each of the programs should be empirically estimated.

And last, to use the decision rule that resources should be allocated to those programs whose marginal benefit per dollar spent is greatest. Economic Elements in Healthcare Paper