Health economics: principles and financing models

Health as a superior good

Kenneth Arrow’s foundational insight: the belief that individual health is priceless should be considered in the harsh light of economics. Income elasticity of demand confirms health as a superior good.

Two historical models

Bismarck (social insurance, 1883) and Beveridge (national health system, 1942), declined into Esping-Andersen’s three welfare state regimes.

The American model

18% of GDP, private administration costs 5-6× higher than federal programmes, 15% of the population left behind. A cautionary model for European systems under cost pressure.

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Key takeaways

Health as a superior good: the richer you are, the greater its share in your budget. Income elasticity of demand confirms this.
Kenneth Arrow (Nobel 1951) argued that the belief that individual health is priceless should be considered in the harsh light of economics.
Two historical models: Bismarck (social insurance, 1883) and Beveridge (national system, 1942), declined into Esping-Andersen's 3 welfare regimes.
The American model: 18% of GDP, private administration costs 5-6× higher than federal programmes, 15% of population left behind.
The welfare state crisis is potentiated by the status of health in the collective unconscious and cost growth exceeding GDP.