Glossary
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Note: The numbers in parenthesis indicate the section and sub-section in which a term is first discussed.

Ability-to-pay: the economic capacity of an individual or organization to offer payment, usually in money, to obtain a good or service.  (S1)  chinese | russian

Actuarially fair premium: an insurance premium charged to an individual which equals the expected losses of the individual.  (S5, I)   chinese | russian

Adverse selection: a process that occurs when individuals with different expected losses are charged the same premium, whereby those with low expected losses drop out of the insurance pool, leaving only individuals with high expected losses. Adverse selection can make it difficult to sustain private insurance markets.  (S5, I)  chinese | russian

Allocative efficiency: allocative efficiency requires that an economy provide its members with the amounts and types of goods and services that they most prefer. In standard economic theory it occurs when resources are allocated in such a way that any change to the amounts or types of outputs currently being produced (which might make someone better off) would make someone worse off. This is sometimes also called "Pareto efficiency".  (S1)  chinese | russian

Beneficiaries: the individuals covered within a health care plan. In a publicly funded system, the beneficiaries are residents of a jurisdiction or members of a social insurance system; in a private plan, they are enrollees of the insurance plan.   (S7, III)  chinese | russian

Capitation: a payment mechanism whereby an organization receives a fixed, pre-specified amount of money per time period (e.g., month, year) for each individual for which it is responsible for meeting defined health needs (e.g., primary care, primary and secondary care).  (S7, I)  chinese | russian

Circular flow: the way in which funds move through the capital, labour and product markets between households, firms, the government and the foreign sector (Stiglitz and Boadway, 1994).  (S8, I.1)  chinese | russian

Community rating: a situation in which all members of an insurance pool are charged the same premium, regardless of their risk status.  (S5, I)  chinese | russian

Consumer price index: a price index in which the basket of goods is defined by what a typical consumer purchases (Stiglitz and Boadway, 1994). See also "price index".  (S8, II.3)  chinese | russian

Contingent valuation: a method for evaluation of benefit or value to individuals of therapy that uses survey methods to establish willingness-to-pay (Pharmacoeconomics, 1997).  (S3, I.1)  chinese | russian

Cost-benefit analysis (CBA): a type of analysis that measures costs and benefits in pecuniary units and computes a net monetary gain/ loss or a cost-benefit ratio (Pharmacoeconomics, 1997).  (S3, I.1)  chinese | russian

Cost-effectiveness analysis (CEA): a type of analysis that compares interventions or programmes having a common health outcome (e.g., reduction of blood pressure; life-years saved) in a situation where, for a given level of resources, the decision maker wishes to maximise the health benefits conferred to the population of concern (adaption of Pharmacoeconomics, 1997). This type of analysis can be used to assess cost-effectiveness efficiency.  (S3, I.1)  chinese | russian

Cost-effectiveness efficiency: cost-effectiveness efficiency occurs when inputs are combined so as to minimize the cost of any given output. The requirement may also be stated such that output is maximized for a given cost.  (S1)   chinese | russian

Cost-sharing: a provision of health insurance or third-party payment that requires the individual who is covered to pay part of the cost of medical care received. This is distinct from the payment of a health insurance premium, contribution, or tax, which is paid whether medical care is received or not. Cost-sharing may be in the form of deductibles, co-insurance or co-payments (World Bank, 1996).  (S5, I)  chinese | russian

Cost-utility analysis: a type of analysis that measures benefits in utility-weighted life-years (QALYs) and which computes a cost per utility-measure ratio for comparison between programmes (adapted from Pharmacoeconomics, 1997).  (S3, I.1)   chinese | russian

Cream-skimming: a process whereby an insurer tries to select the most favourable individuals with expected loses below the premium charged (or the capitation payment received) in order to increase profits. Cream-skimming can make it difficult or impossible for individuals with high expected losses to purchase private insurance.   (S5, I)  chinese | russian

Deficit financing: a planned excess of expenditure over income. Most governments often spend more than they raise in taxation, the difference being financed by borrowing. (Bannock et al., 1992).  (S6, II.1)  chinese | russian

Demand: the desire for a particular good or service supported by the possession of the necessary means of exchange to effect ownership (Bannock et al., 1992).   (S1)  chinese | russian

Demand schedule: the relationship between the quantity demanded of a good and the price, whether for an individual or for the market as a whole (adapted from Stiglitz and Boadway, 1994).  (S4, III.2)  chinese | russian

Depreciation: the decrease in the value of an asset; in particular, the amount that capital goods decrease in value as they are used and become old (Stiglitz and Boadway, 1994).  (S8, I.2)  chinese | russian

Derived demand: the demand for one commodity that depends on the demand for another good, such as when the first commodity is used as an input in producing the (i.e., derives from) second.  (S4, V.1)  chinese | russian

Diagnosis-based payment: diagnosis-based payment refers to a mechanism whereby the provider or health care organization receives a fixed, pre-specified payment for each instance in which they treat an individual with a specified diagnosis (e.g., myocardial infarction, pneumonia, compound fracture).  (S7, II)  chinese | russian

Discount rate: rate of discount used to convert future costs and benefits into equivalent present values; typically 2 to 6% per annum (Pharmacoeconomics, 1997).  (S3, I.4)  chinese | russian

Disability-adjusted life year (DALY): a unit used for measuring both the global burden of disease and the effectiveness of health interventions, as indicated by reductions in the disease burden. It is calculated as the present value of the future years of disability-free life that are lost as the result of the premature deaths or cases of disability occurring in a particular year (World Bank, 1996).  (S3, II.2.i)  chinese | russian

Economic incidence: refers to the final distribution of the economic burden under different financing schemes. See "statutory incidence". (S3, V.2)  chinese | russian

Economics: the study of how individuals and societies choose to allocate scarce productive resources among competing alternative uses and to distribute the products from these uses among the members of the society.  (S1)  chinese | russian

Economies of scale: situations in which the long-run average costs of a firm decline as output increases (Folland et al., 1997).  (S5, I)  chinese | russian

Efficiency: See "technical efficiency", "cost-effectiveness efficiency" and "allocative efficiency".   (S1)  chinese | russian

Equilibrium: a situation in which there are no inherent forces that produce change. Changes away from an equilibrium position occur only as a result of "outside events" that disturb the status quo (Baumol et al., 1988).   (S4, III.2)  chinese | russian

Equity: fairness in the allocation of resources or treatments among different individuals or groups (Pharmacoeconomics, 1997).  (S1)   chinese | russian

Expected loss: the probability of a loss occurring multiplied by the amount of the loss should it occur.  (S5, I)  chinese | russian

Externality: the result of an activity that causes incidental benefits or damages to others with no corresponding compensation provided to or paid by those who generate the externality (Baumol et al., 1988).  (S4, II)  chinese | russian

Factor markets: the labour market, the capital market and other markets in which the factors of production are bought and sold (Bannock et al., 1992).   (S8, I.1)  chinese | russian

Fair: implies a disposition in a person or group to achieve a fitting and right balance of claims or considerations that is free from undue favouritism even to oneself, or implies a quality or result in an action befitting such a disposition (Webster's, 1986).  (S2)  chinese | russian

Fee-for-service: fee-for-service refers to a payment mechanism whereby a provider or health care organization receives a payment each time a reimbursable service is provided (e.g., office visit, surgical procedure, diagnostic test).  (S7, I)  chinese | russian

Final output of goods and services: goods and services which are produced for consumption rather than as intermediate products used in the process of production (Bannock et al., 1994).  (S8, I)  chinese | russian

Fixed costs: costs which do not vary with output (Folland et al., 1997).   (S4,II)  chinese | russian

Financing: raising revenue to pay for a good or service.   (S6, I)  chinese | russian

Funding: providing health care organizations with the financial resources required to carry out a general range of health-related activities.  (S6, I)  chinese | russian

Global budget: refers to a payment mechanism whereby an organization, group of providers, or provider receives a total budget for a defined period of time.   (S7, III)  chinese | russian

Gross domestic product: the total money value of all final goods and services produced by the residents of a nation during a specified period (Stiglitz and Boadway, 1994).  (S8, I.2)  chinese | russian

Gross national product: a measure of the incomes of residents of a country, including income they receive from working abroad but subtracting similar payments made to those abroad (Stiglitz and Boadway, 1994).  (S8, I.2)  chinese | russian

Gross national product deflator: an index of prices which can be applied to the value estimates of the gross national product over a time period in order to remove the effects of changes in the general level of prices (Bannock et al., 1994).   (S8, II.3)  chinese | russian

Health economics: the study of how scarce resources are allocated among alternative uses for the care of sickness and the promotion, maintenance and improvement of health, including the study of how health care and health-related services, their costs and benefits, and health itself are distributed among individuals and groups in society.   (S1)   chinese | russian

Horizontal equity: the principle that says that those who are in identical or similar circumstances should pay similar amounts in taxes and should receive similar amounts in benefits (Stiglitz and Boadway, 1994).  (S2, II.3.ii)  chinese | russian

Human capital: the stock of accumulated skills and experience that make workers more productive (Stiglitz and Boadway, 1994).  (S2, II.4)  chinese | russian

Incidence analysis: determination of the redistributive effects of taxation (Hyman, 1983); fiscal incidence analysis: addresses the question of who pays a particular tax or, in the context of considering alternative methods for raising revenue, how the distribution of paying the tax differs under alternative methods; expenditure incidence analysis: addresses the question of how the distribution of benefits differs under alternative policies or programs; net (or budget) incidence analysis: addresses the question of how net benefits are distributed, taking into account both how the revenues are raised and how the benefits are distributed.  chinese | russian

Informational Asymmetry: a situation in which the parties on opposite sides of a transaction have differing amounts of information relevant to the transaction (adaption of Folland et al, 1997).  (S4.II)  chinese | russian

Intermediate goods: something that is used in the production of other goods (Bannock et al., 1992).  (S8,I.2)  chinese | russian

Load factor: administrative and other costs associated with underwriting insurance (Folland et al., 1997). The loading factor is the amount by which the actual premium charged exceeds an actuarially fair premium.  (S5, I)  chinese | russian

Marginal benefit: the additional benefit obtained by consuming the last (or next) unit of a commodity.  (S1)  chinese | russian

Marginal cost: the additional cost incurred in producing the last (or next) unit of output.  (S1)  chinese | russian

Marginal private cost: the share of marginal cost caused by an activity that is paid for by the persons who carry out the activity (Baumol et al., 1988).   (S4, III.3)  chinese | russian

Marginal social benefit: the benefits associated with producing one more unit of a good or service. When positive externalities are present, they must be added to marginal private benefits to obtain marginal social benefits. (Hyman, 1983).  (S1)  chinese | russian

Marginal social costs: costs that represent the total value of resources used to produce one more unit of output of a good or service (Hyman, 1983).  (S1)  chinese | russian

Market failure: the situation in which a market economy fails to attain economic efficiency (Stiglitz and Boadway, 1994).  (S4, IV)  chinese | russian

Monopoly: a situation in which a firm can influence the price at which it sells its output by varying the amount it produces and offers for sale (adapted from Hyman, 1983). In a pure monopoly, there is no other firm which produces a close substitute for the firm's product. Thus the demand curve facing the monopolist is the market demand curve (Folland et al., 1997).  (S4, IV)  chinese | russian

Moral hazard: a tendency for losses to be greater or more frequent when covered by insurance (Evans, 1984).  (S5, I)  chinese | russian

National income: the sum of the incomes of all individuals in the economy earned in the form of wages, interest, rents and profits. It includes transfer payments and is calculated before any deductions are taken for income taxes. (Baumol et al., 1988).   (S8, I)  chinese | russian

National income accounting: book-keeping and measurement system for national economic data (Baumol et al., 1988).  (S8, I)  chinese | russian

Need: a pre-requisite for need to exist is that an individual have an ability to benefit from receipt of a health care service at the individual level That is, there must exist a service that can effectively address the health defect in question. For societal level judgements, other factors such as resource constraints and cultural norms may influence judgements of what constitutes health care need, especially what needs can be met from the public purse.  (S2, II.2.ii)  chinese | russian

Net benefit: benefit (in pecuniary units) minus total cost (in pecuniary units): a basic decision criterion in CBA (Pharmacoeconomics, 1997).  (S3, I.1)  chinese | russian

Opportunity cost: the opportunity cost of a commodity is the value of the best alternative use to which those resources could have been put, the value of the productive opportunities foregone by the decision to use them in producing that commodity (Evans, 1984).  (S1)  chinese | russian

Payment: the allocation of resources (usually money) to health sector organizations and individuals in return for some activity (e.g., delivering services, managing organizations, etc.). Payment encompasses both funding and remuneration.  (S7, I)   chinese | russian

Pareto criterion: this criterion states that allocative efficiency has been attained when it is not possible to change the allocation of resources to make any one person better off without making at least one other person worse off (Boadway and Bruce, 1984).  (S1)  chinese | russian

Potential pareto criterion: a criterion which states that a change in resource allocation is viewed as resulting in an improvement in allocative efficiency if those who gain from the change value their gains enough to, in principle, be able to compensate the losers for the value of their losses, thereby leaving them as well off as before the change (adapted from Boadway and Bruce, 1984).  (S1)  chinese | russian

Price: what must be given in exchange for something (Bannock et al., 1992). (S4, I)  chinese | russian

Price elasticity: price elasticity of demand: a measure of the responsiveness of the quantity demanded of a good to changes in price. It equals the percentage change in quantity demanded divided by the percentage change in price; price elasticity of supply: a measure of the responsiveness of the quantity supplied of a good to changes in price. It equals the percentage change in quantity supplied divided by the percentage change in price (Stiglitz and Boadway, 1994).  (S4, III.2)   chinese | russian

Price index: a measure of the level of prices found by comparing the cost of a certain basket of goods in one year with the cost in a base year (Stiglitz and Boadway, 1994).  S8, II.3)  chinese | russian

Population-based funding schemes: a funding scheme whereby money is nominally attached to beneficiaries, so that in a sense, the funds flow only to wherever the beneficiaries are. Capitation is an example of a population-based funding scheme.   (S7, IV)  chinese | russian

Progressive tax: a tax in which the rich pay a larger fraction of their income than the poor (Stiglitz and Boadway, 1994).  (S6, II.3)  chinese | russian

Prospective payment: that element of a payment scheme whose level is fixed in advance of actually providing a service(s).  (S7, V)  chinese | russian

Provider-based funding schemes: a type of funding scheme whereby money flows directly to providers. Fee-for-service and global budget with salary are examples of provider-based schemes.   (S7, IV)  chinese | russian

Purchasing power parity approach to international comparisons: a method which uses a common set of prices to value the final output of goods and services in all countries in order to obtain estimates of national income. The Purchasing Power Parity (PPP) approach provides a more meaningful way to make international comparisons than do approaches based on exchange rate conversions.  (S8, II.4)  chinese | russian

Purchasing power parity theory: a theory that the exchange rate between any two national currencies adjusts to reflect differences in the price levels of the two nations (Baumol et al., 1988).  (S8, II.4)  chinese | russian

Quality-adjusted life year (QALY): a common measure of health improvement used in cost-utility analysis; combines mortality and quality of life gains (outcome of a treatment measured as the number of years of life saved, adjusted for quality) (Pharmacoeconomics, 1996).  (S3, I.1)  chinese | russian

Regressive tax: a tax in which the poor pay a larger fraction of their income than the rich (Stiglitz and Boadway, 1994).  (S6, II.3)  chinese | russian

Remuneration: refers to the activity of compensating health professionals for their time and effort in providing care.  (S6, I)  chinese | russian

Resources: the basic inputs to production - the time and abilities of individuals, raw materials such as land and natural resources (air, water, minerals, etc.), transformations and accumulations of these into capital (facilities, equipment, etc.), and knowledge of production processes (technologies).  (S1)  chinese | russian

Retrospective payment: that element of a payment scheme whose level is determined only after services have been provided.  (S7, V)  chinese | russian

Risk pooling: occurs when transactors each facing possible large losses agree to contribute a small premium payment to a common pool, to be used to compensate whichever of them actually suffers the loss. Contributions must cover losses plus administration costs (adapted from Evans, 1994).  (S5, I)  chinese | russian

Salary: a payment mechanism whereby a health professional receives a pre-specified sum of money to carry out specified responsibilities for an organization, usually being available to provide needed health care services at specified times (and places).  (S7, II)  chinese | russian

Scarcity: a situation in which the needs and wants of an individual or group of individuals exceed the resources available to satisfy them (Bannock et al., 1992).  (S1)  chinese | russian

Statutory incidence: refers to the initial distribution of liabilities under different financing schemes. See "economic incidence".    (S3, V.2)  chinese | russian

Supplier-induced demand: a phenomenon whereby a health care provider, usually a physician, influences the level of a person's demand for health care services. Supplier-induced demand arises from the existence of informational asymmetry between a patient and a provider. Professional ethics encourages supplier-induced demand in the interest of the patient, because the patient often has insufficient information to judge what services will improve their health. Providers exploiting their superior informational advantage to induce demand to further their own interest, however, is an important issue in the health sector.  (S4, V.2)  chinese | russian

Supply: refers to the amount of a commodity that present or potential sellers want to put on the market, in response to the price offered by (or on behalf of) buyers (Evans, 1984).  (S1)  chinese | russian

Supply schedule: the relationship between the quantity supplied of a good and the price, whether for an individual or for the market as a whole (adapted from Stiglitz and Boadway, 1994).  (S4, III.2)  chinese | russian

Technical efficiency: technical efficiency requires that for any given amount of output the amount of inputs used to produce it is minimized.  (S1)  chinese | russian

Uncertainty: a situation in which an individual has incomplete information as to what is going to happen in the future. Economists sometimes distinguish between risk and uncertainty. Risk refers to a situation in which an individual knows the possible outcomes that will occur and the probability of each outcome occurring. Uncertainty refers to a situation in which the individual is ignorant of all the possible outcomes, the probability associated with known outcomes, or both. Insurance is possible in the presence of risk; it may not be possible under more general uncertainty. The reader should be aware that, in many contexts outside technical discussion, the two terms are often used interchangeably (adapted from Evans, 1984).  (S4, V.1)  chinese | russian

Vertical equity: the principle that says that those who are in different circumstances with respect to a characteristic of concern for equity should, correspondingly, be treated differently, e.g., those with greater economic capacity to pay should pay more; those with greater need should receive more.  (S2, I.3.ii)  chinese | russian

Welfare economics: the branch of economics that investigates methods for comparing and ordering (from "better" to "worse") alternative allocations of resources (adapted from Boadway and Bruce, 1984).  (S1)  chinese | russian

Willingness-to-pay: the maximum amount of money that an individual is prepared to give up to ensure that a proposed health care measure is undertaken (Pharmacoeconomics,1997).  (S1)  chinese | russian

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