The health economy is not only of considerable economic importance to Germany. Health services are also an essential part of the provision of public services for its citizens. At the start of 2021, ZEW set up the Project Group “Health Care Markets and Health Policy”. ZEW economist Dr. Simon Reif explains in the following interview what exactly health economics is, where we encounter it in our day-to-day lives and what research questions the project group is pursuing.

Questions & Answers by Dr. Simon Reif about broad-based care and limited resources.
Dr. Simon Reif has been head of the ZEW Project Group “Health Care Markets and Health Policy” since January 2021.

Simon Reif is a health economist and has headed the Project Group “Health Care Markets and Health Policy” at ZEW Mannheim since January 2021. His research interests are behavioural economic and institutional factors influencing the provision of medical services as well as determinants of individual health.

One of the research topics the project group deals with is the reimbursement of hospital care. What does this research topic entail?

Basically, this research topic aims to shine a light on the incentives in reimbursement systems. What impact does a certain type of reimbursement have on the actual service that is provided? We often come across this issue in strongly regulated markets, also with regard to the financing of hospitals. In the reimbursement system in Germany for example, operations are more likely to be paid compared to conservative alternatives. Our research aims to identify existing problems. Is the high rate of surgeries in Germany actually a result of the reimbursement system? Or could it be due to the fact that patients simply prefer to undergo surgery? These are the research questions that we pursue and to which we would like to provide answers for. Depending on how our findings turn out, appropriate political measures will be necessary.

Let’s talk about digitalisation in the health care system. What still needs to be done?

The market for digital health is relatively new and very dynamic. A key question is: what is generally on offer and how can treatments be supported by digital methods? Germany is often criticised for lagging behind in terms of digitalisation in its health care system. However, there are success stories such as patient-centred health care services. Germany is the first country that has paved the way for health app providers to be included in mainstream health care through the Digital Healthcare Act (DVG). Since the end of 2020, the first health apps have been released which may be prescribed by doctors. This is pioneering work, since there is also a completely new approval process of such apps in Germany. It is not that easy to provide proof of the benefit of a digital service so that the health insurance companies cover the corresponding costs. How can it be empirically shown, for example, that the burden of illness for the patient or relatives is lowered through the use of an app? As part of our research, we are working with start-ups as well as health insurances to understand how these apps can function better in the health care system and how resulting benefits can be empirically tested. Our research aims to show how new digital treatment methods support holistic health care models. In case of doubt, it also aims to show where the same effect can be achieved more effectively with pen and paper. We are also working on a project which deals with the pricing of such apps. Traditional pricing models fall short when it comes to digital apps. We are in the process of developing a concept on how to achieve optimal pricing for a product that is dynamically evolving.

What exactly does health economics deal with?

Health economics is a fairly new discipline which explores the economic constraints that the health care sector is faced with. These include issues regarding the access to health care facilities, the procurement of health care products and the design of health care markets. We examine the conflict between broad-based health care and limited resources. Supply and demand do not follow the rules of traditional markets, where price determines whether a good is consumed or not. Health insurance often means that there are virtually no utilisation costs for the insured. The question then is why some services, such as medical screenings, are underused. Patients are very free in deciding which type of treatment they receive. So a way must be found to distribute the scarce resource of ‘health services’ sensibly. The need for such measures means that the health care market is highly regulated. From a health economic perspective, we therefore examine how such regulations affect supply structures and costs.