| Summary: | Application of economic principles can bring about a significant change in the performance of health system. An in-depth understanding of how to generate resources, how to pool funds, how to purchase health services and pay providers of health care, will affect how the health system delivers on its two important objectives, i.e. efficiency and equity. The economic underpinnings of health system are important structural and functional factors to aid in planning and delivery of health care services. Health economics can help in making informed decisions by explaining the factors that affect consumption and utilization of health services both from the demand and supply side using the principles of microeconomics. This is vital for improving the ‘coverage’ of all desired preventive and curative health care services. Most of the recent health system interventions such as increased public health subsidy, creating demand side financing mechanisms like conditional cash transfers schemes such as Janani Suraksha Yojana, performance based payments to Accredited Social Health Activist (ASHAs), incentivizing health workforce in rural and difficult areas, are all grounded in economic theories. Despite years of advocacy, resources have been and will continue to be scarce in health sector. On the contrary, demands for increasing the coverage of existing programs and introduction of newer interventions and technology are increasing. As a result hard choices need to be made for rational allocation of resources for maximizing the value of money spent. Despite a strong felt need among policy makers and program managers for health economists, there is an acute shortage of professionals who have requisite knowledge of health economics. This calls for introduction of health economics in the curriculum of medical and public health courses. Health professionals should also be encouraged to undertake research in this field of health economics and health financing.
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