The Economics of Health

Securing good health is vitally important for each of us individually, as well as for our society as a whole. In fact, maintaining an acceptable level of health is necessary to adequately function in our daily lives. Health brings us happiness with the ability to feel good, to be pain-free, and to enjoy life. We yearn to have a rich, fulfilling life, and good health is the vehicle for being able to do so; it allows us to function productively in our jobs and reduces our number of sick days, which results in additional income and a higher standard of living.

When addressing or modeling health, economists typically posit a utility function U(C,H), where consumers derive utility from consuming various goods and services (C), as well as from the level of health (H) they possess. Health can be thought of as an economic good that consumers work to acquire, similar to a stock or consumer durable, such as an automobile or a refrigerator. We need to model utility over time and consider investments made to our health stock over our lifetimes. Utility maximization requires a trade-off between investing our scarce time and money into the acquisition of health or the consumption of other goods and services.

Donald J. Meyer leads a group of notable health economists who explore critical issues—and their economic impacts—facing the nation's healthcare system today. These include lifestyle choices and their health impacts, decisions on medical care and self-care, the fee-for-service payment model, disability and workers' compensation insurance claims, long-term care, and how various aspects of the Patient Protection and Affordable Care Act (ACA) impact the nation's healthcare system.