Kenneth Arrow published “Uncertainty and the welfare economics of medical care” in The American Economic Review in 1963. This is a masterpiece in the area of health economics which became not only one of the most widely cited articles in the field of health economics but also a source of reference in other fields especially economics of the social sector.
According to Arrow, “the operation of the medical-care industry and the efficacy with which it satisfies the needs of society differs from… a competitive model… If a competitive equilibrium exists at all, and if all commodities relevant to costs or utilities are in fact priced in the market, then the equilibrium is necessarily Pareto optimal.”
Medical services, apart from preventive services, give satisfaction only in the happening of illness, an exit from the normal state of affairs… Demand for healthcare, unlike food or clothing, is not as predictable.
We only purchase them when we are ill, and illness is hard to predict. That is to say that demand is not motivated by one’s own planning but by exogenous shocks. Poor health can cause death, everlasting injuries, and loss of the capacity to earn a living.
Given that our targets in life make us work hard and need us to survive no matter what, and somewhat healthy, it is very important for us to be healthy.
The same holds true for food, but we can avoid the deficiency of food if we have sufficient income. COVID-19 which seems a prolonged illness in itself is, therefore, not only risky but a costly risk in itself, apart from the cost of medical care. It has affected the health care markets thereby affecting the entire health care ecosystem.
Overnight, the pandemic has badly affected our health and the customers it serves facing an unusual world of distant working. Moreover, it has created an unhealthy supply chain marked by shortages of medical supplies, personnel, and services. It has rapidly devastated almost all areas of health which need transformations to meet the new challenges.
COVID-19 has overshadowed welfare or developmental activities across the world. We have witnessed mobilization of global resources to contain this deadly virus. Consequences of this pandemic shall be long-term, affecting all walks of human lives.
They reduce all welfare activities together with striving and ambitious Sustainable Development Goals (SDGs) which greatly affects our quality of life. SDGs were basically adopted to improve the quality of life of all citizens and to promote the ongoing Millennium Development Goals (MDGs) agenda.
There are 17 Sustainable Development Goals (SDGs). Third SDG is regarding good health and wellbeing (Ensure Healthy Lives and Promote Well-being for All at All Ages). At present, fighting COVID-19 pandemic is highest on the global agenda and attainment of SDGs within the 2030 stipulated time frame has become less important.
The length of the enduring pandemic is unpredicted. The result and end point of the pandemic remain uncertain which is why health care is at high risk. COVID-19 has a great bearing upon almost all SDGs. Keeping in view the complementarities among all SDGs, health-related SDG is also rigorously hit.
The unexpected arrival of COVID-19 has created many stumbling blocks in the realization of SDGs. Since, health care is the only possible critical good that has an unpredictable demand; COVID-19 seems to hamper the health care system.
COVID-19 seems the biggest uncertainty now-a-days, and under uncertain conditions accurate information becomes a very valuable commodity. In many ways, health care and medical markets are really markets for information. As Arrow rightly says that when there is uncertainty, information or knowledge becomes a commodity.
But information, in the form of skilled care, is precisely what is being bought from most physicians. Since, there is a high level of market asymmetry in health care markets, COVID-19 seems very much frightening. It is therefore very important to obtain accurate information about the nature and causes of COVID-19.
One of the largest sectors of the Indian economy, in terms of both income and employment is none other than Healthcare. Since 2016, we find it growing at a Compound Annual Growth Rate of 22%, providing direct employment to 4.7 Million. Between 2017-22, the Healthcare sector has the potential to generate 2.7 million additional jobs in India.
There are many determinants promoting the growth of the healthcare sector including the increasing proportion of everyday life diseases, an aging population, a rising middle class, rapidly adopted digital technologies, growing FDI inflows, growing globalization, and ongoing COVID-19.
All these determinants are to be examined properly. There should be proper deployment of technology and safety protocols to support newly virtual health care workers.
Dr. Binish Qadri, Assistant Professor,Cluster University, Srinagar.
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author.
The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.