What Is Health Economics and Why Is It Important?

Healthcare is one of the most critical aspects of human life and well-being. The healthcare sector is one of the biggest employers in India, employing 7.5 million people as of 2024, according to reports from the India Brand Equity Foundation [1]. The healthcare sector in India is gaining key government support, with 11.50 billion USD of the 2025 to 2026 budget being allocated to the healthcare industry [1]. 

Health economics examines the factors that influence the industry’s costs and quality of care. How do patients, healthcare providers, public healthcare facilities, private insurance companies, and the government influence how healthcare is distributed—and in what ways can it be improved?

What is health economics?

Health economics is an applied field of study that examines and finds systems-based solutions to make healthcare more equitable, accessible, and affordable for all. Health economists seek to understand the role that stakeholders (such as healthcare providers, patients, private insurance companies, government agencies, corporations, and public organisations) play in healthcare spending.

Health economists are curious about what affects health outcomes. In their research, they’ll ask questions like:

• How do we put a value on health?

• What factors influence health besides healthcare?

• What influences the supply and demand of healthcare? 

• What are the behaviours of healthcare providers versus those seeking care

• What are some alternative approaches to healthcare production and delivery?

• How can we improve our plan, budget, and monitor healthcare?

Example of health economics in the real world

Healthcare economics can be used to solve real-world problems and model the outcomes of potential solutions. Take the concept of resource allocation. In times of high demand, such as COVID-19, the resources of the public health sector in India become stretched thinly, and funding often cannot cover the total expenses needed to keep up with patient needs. In such cases, health economists will look at data, evaluate ongoing needs, and develop solutions that can be used to help the Indian government allocate healthcare resources and funding.

Health economics and outcomes research: Quality over quantity

Value-based care focuses on healthcare being delivered based on quality over quantity. Data drives it because providers report specific metrics like hospital or clinic readmissions, patient engagement, and more to demonstrate health improvement [2].

The Value-Based Care Specialisation from the University of Houston provides an applied learning experience to understand this health economics area deeply.

Health economics importance

Health economics is important because it focuses on how the economic behaviour of stakeholders and recipients affects the quality and cost of medical care. It includes how people pay for care, how they are processed, and how health systems worldwide can be restructured and improved. Tackling any systemic issue at the root cause can prevent the same problems from arising again.

In examining the questions above, health economists address global issues such as migration and displacement, climate change, pandemics and vaccine access, disorders, obesity, and more. They apply economic theories to inform the public and private sectors on cost-effective solutions to improve equity in healthcare.

For example, a health economist might research disparities in the quality of health and income in West Africa by evaluating the price of healthcare and insurance in the region. Potential solutions include employing digital technologies to provide healthcare through mobile phones or laptops. 

Similar to public health and population health, approaching society’s health and well-being from a bird’s-eye macro perspective and drilling down to research specific populations can have a positive impact. Health economics can deliver insights that inform solutions to some of the world’s most pressing healthcare and well-being issues.

What is the scope of health economics?

Understanding how economic behaviour influences health and healthcare decisions can benefit anyone interested in this field. However, the following groups of individuals may benefit most from the study of health economics:

• Medical providers: Doctors, nurses, and assistants can evaluate new treatments, technologies, and services to determine ways to deliver value-based care. Medical providers benefit from understanding the economics behind these developments.

• Administrators: Healthcare administrators process payments and manage financial metrics for healthcare providers. Learning the intricacies of health economics can provide the necessary context as they liaise with public and private healthcare sectors and use new technologies to process payments.

• Policymakers or public health officials: Those in charge of local, federal, or international policy decisions benefit from understanding the economic relationship between stakeholders and the general public.

• Business leaders: Business leaders can measure employee well-being and use health economics to maximise workplace comfort. Business leaders must understand the outlook of health economics to appease their employees, shareholders, and even their customers.

Discover health economics courses on Coursera

Dive into the exciting field of health economics and contribute to the future of healthcare. Consider enrolling in The Economics of Health Care Delivery from the University of Pennsylvania as part of The Business of Health Care Specialisation offered in partnership with Wharton and Penn Medicine on Coursera. You’ll learn from experts in business acumen, healthcare management, and healthcare policy to develop the skills you’ll need to navigate the quickly evolving landscape of this fast-growing field successfully.