Economics of Health Behavior

Health care represents a collection of services, products, institutions and regulations and people that can improve the health of individuals. The markets for health care are marked by a number of important, if not unique, economic features.

Uncertainty prevails at all levels of health care, from the irregularity and uncertainty of individuals’ illnesses to an incomplete understanding of how well medical treatment works and for whom.  Asymmetric information, which occurs when one party does not have complete information about the other party in a relationship, is also common.  Externalities are external benefits and costs that arise when one person’s actions create benefits for or impose costs on others, and when those benefits and costs are not privately accounted for in individuals’ decisions.

Another important feature of health care is the extent of government intervention.  In Singapore and almost everywhere else in the world, healthcare professionals have to pass a formal certification process before practicing.  New drugs and medical devices must be approved before they reach the market.  The Singapore government provides and regulates health care services, as well as carries out or sponsors health care research.   It is compulsory for citizens and permanent residents in Singapore to contribute to the Medisave Scheme, which is a national healthcare savings scheme designed to help members pay for hospitalization expenses and selected outpatient treatments.  They can also sign up to MediShield, which is a low cost catastrophic illness insurance scheme help members meet medical expenses from major illnesses, which could not be sufficiently covered by their Medisave balance.

The Economics of Health Behavior Team, headed by the Deputy Head of HSSR Dr. Eric Finkelstein, aim to help tackle health care issues in Singapore and beyond through the application of their knowledge in health economics.  They address the economic and financing aspects of the production, distribution, and organization of health care services and delivery. This includes the structure of health care delivery and insurance markets, demand for and supply of health services, pricing of services, cost of care, financing mechanisms, and their impact on the relevant markets.   Below is a list of their current projects.