What Is Health Economics and Why Is It Important?

Written by Coursera Staff • Updated on

Health economics is the examination of how to make health care more equitable, accessible, and affordable for all. Here’s what exactly that means and why it matters.

[Featured Image]:  A female, with black hair, wearing a blue uniform, face covering, and a stethoscope around her neck is looking at a chart standing in a medical office.

Aside from retail, more Canadians work in health care than in any other industry. Over 1.9 million people worked in Canada's health care system in 2018 [1]. Even so, the industry remains understaffed. 

While Canada has a decentralized universal health care system that is funded by the government of each province or territory, an aging population is driving up costs, and post-pandemic burnout is driving health care workers away [1, 2]. All of this has a big impact on how citizens receive care.  

Health economics examines the factors that influence the industry’s costs and quality of care. How do patients, health care providers, and the government influence health care distribution—and how 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 health care more equitable, accessible, and affordable for all. Health economists seek to understand stakeholders' role in health care spending, such as providers, patients, government agencies, and public organizations.

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 health care?

  • What influences the supply and demand of health care? 

  • What are the behaviours of health care providers versus those seeking care?

  • What are some alternative approaches to health care production and delivery?

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

Example of health economics in the real world

The Institute of Health Economics in Alberta describes health economics as "a form of economics-based research that analyzes efficiency, effectiveness, value, and behaviour in the production and consumption of health and health care." [3

Take the concept of payment reform as an example. Doctors can be compensated in different ways than traditionally existed. Currently, doctors in Canada earn a fee per patient, and the rate depends on the patient's health issue and the doctor's specialization. The doctor then bills the province or territory they work in for their annual fees. 

Alternative payment options have recently become increasingly popular, especially in areas with fewer potential patients. 

The Canadian Medical Association reports that about 39 per cent of family physicians use alternative payment options like contract work [4]. This can benefit patients and health care workers.

Quality over quantity

Value-based care focuses on health care being delivered based on quality over quantity. Data drive it because providers report specific metrics like hospital or clinic readmissions, patient engagement, and more, to demonstrate health improvement [5].

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


Why is health economics important?

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 those payments are processed, and how to restructure and improve health systems worldwide. 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 health care.

For example, a health economist might research disparities in the quality of health and income in West Africa by evaluating the price of health care and insurance in the region. Potential solutions include employing digital technologies to provide health care 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 health care and well-being issues.

Who should study health economics?

Understanding how economic behaviour influences health and health care 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: Health care administrators manage financial metrics for health care providers. Learning the intricacies of health care economics can provide the necessary context as they liaise with insurance providers and use new technologies to process payments.

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

Learn health economics with Coursera

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

Article sources


Government of Canada. “Canadian Occupational Projection System (COPS), https://occupations.esdc.gc.ca/sppc-cops/l.3bd.2t.1ils@-eng.jsp?lid=85.” Accessed March 25, 2024. 

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