Dr. David Tataw
Healthcare Economics
February 2, 2015

The economics of health care field studies demand and supply of health care resources, that is, allocation of the resources, within a given health care system. The health care system is defined as “the organizational arrangements and processes through which a society makes choices concerning the production, consumption, and distribution of health care services.”6 Because health care resources are limited, each society has to make decisions in terms of the distribution, consumption, and production of these services. A key factor that shapes the delivery of health care in any health care system is the evolving system for financing and reimbursement for health care services. The types of services delivered and the organizational approaches to delivering services are heavily influenced by how health care is paid for. In this paper I will discuss some values of healthcare professionals understand the discipline of health economics, the importance of considering the complex nature of health and healthcare when examining the economic principles, and the main potential benefits of learning about health economics.
In the health care market, patients or consumers, health care providers or producers, and third-party payers are three major players. According to the principles of economic theory, consumers or patients on the demand side seek to maximize their utility or satisfaction, which is largely determined by the consumption of medical services and quality of care. On the supply side, producers or health care providers seek to maximize profit. The prevalence of uncertainty on the demand side and on the supply side is a unique feature in health care. Because the incidence of illness and the cost of treatment are uncertain from an individual consumer's perspective, the third-party payers, including