1 New York University Robert F. Wagner Graduate School of Public HEALTH ECONOMICS AND PAYMENT SYSTEMS P Fall 2010, Monday, 6:45-8:25 Silver 705 Instructor Information: Professor Shirley Johnson-Lans, PhD or Office Hours: Mondays 4:30-6:00 and by appointment (Puck 3045): Administrative Assistant: Rafael Hernandez: Prerequisites: P Microeconomics for Public Management, Planning and Policy Analysis P Statistics for Public, Nonprofit and Health Management Course Objectives We will use the tools of microeconomics to study the economics of health and health care. The goal is to understand how economic incentives are reflected in the behavior of the main actors in health care markets: individual consumers and households, firms supplying health care goods and services (physicians, nurses, hospitals and clinics, pharmaceutical companies), and third-party payers (insurers, both public and private). We will examine the effects of various kinds of market imperfections, including imperfect information, externalities, failure of competition, and look at the role of government regulation and support (subsidies) for health care. Although the course will be focused on the evolving health care system in the United States, we will make a brief comparative study of several other health care systems and will examine the effects of globalization on health and health care markets. I will aim to have the classes as interactive as possible. My lecture presentation style is informal and is meant to stimulate questions and discussion. I will expect that after the initial class meeting, you will complete the assigned reading before each class. All assigned readings other than the required textbook will be posted on the Blackboard site. You can access the Blackboard at using your NYU net ID and password.
2 Course Requirements and Grading: Readings: Before each class, students should complete the readings for that week and be prepared to discuss them in class. Class participation: approximately 10% of grade. Three take home assignments, consisting of problems and essays: Approximately 30% of grade. Two in-class exams (closed book): A one-hour midterm quiz (20%) and a final exam (40%). Academic Integrity: As members of the NYU Wagner Community, we are all expected to adhere to the highest standards of intellectual and academic integrity. Wagner has adopted a disciplinary process, which is described at It is important that all Wagner students are aware of types of activities that qualify as infractions and the consequences of academic dishonesty. You are encouraged to review the academic code and to use it as a resource to guide you academically and professionally. Textbook: Shirley Johnson-Lans, A Health Economics Primer (Pearson Addison/Wesley, 2006) As there is only one edition, used copies should be fine. Other assigned readings will generally be available on Blackboard. These will consist of both classic articles in the field and some more current empirical studies. Suggested additional references that may be helpful as background material: Microeconomics Text: N Gregory Mankiw, Principles of Microeconomics, any edition, (Harcourt). A. J. Culyer and J. P. Newhart, eds., The Handbook of Health Economics, vols. 1A and 1B (Elsevier, 2000). David Cutler and E.R. Berndt, Medical Care Output and Productivity (Chicago U. Press, 2000). David Dranove, The Economic Evolution of American Health Care (Princeton, 2000). Sherman Folland, et al., The Economics of Health and Health Care, any edition (Prentice Hall). Jason Furman, ed., Who Has the Cure? Hamilton Project Ideas on Health Care (Brookings, 2008). Linda Kohn, et al., To Err is Human: Building a Safer Health System (National Academy Press, 2000). Charles E. Phelps, Health Economics, any edition, (Pearson Addison/Wesley)
3 Weekly Topics and Readings: Date Topic Readings Assignments Sept. 13 Introduction to Health Economics and the Demand for Health Textbook, Ch. 1; Textbook, Ch. 2, pp Recommended: Harrington, S. E., U.S. Health- Care Reform: The Patient Protection and Affordable Care Act, Journal of Risk and Insurance, 77 (2010): [Handout in class]; Preston, S.H. and J.Y. Ho, Low Life Expectancy in the United States. Is the Health Care System at Fault? NBER Working Paper # Sept. 20 The Investment Model of Heath and the Demand for Health Care. Textbook, Ch. 2, pp ; Triplett, Jack E., What s Different about Health? Human Repair and Car Repair in National Accounts and National Health Accounts, pp , in Cutler, and Berndt (eds), Medical Care Output and Productivity, NBER Studies in Income and Wealth, vol. 62. Recommended: Grossman, M., On the Concept of Health Capital and the Demand for Health, Journal of Political Economy, 80 (1972) Sept. 27 Fundamentals of Health Care Insurance Textbook, Ch. 3; Arrow, K., Uncertainty and the Welfare Economics of Medical Care, American Economic Review, 53 (1963): Take Home Assignment # 1 handed out. Due in Class, October 4. Recommended: Gruber, J., Health Insurance and the Labor Market, in Handbook of Health Economics, Vol.1 (Elsevier, 2000).
4 Oct. 4* The Evolution in the Private Insurance Market; Programs of Social Health Insurance in the U.S. Textbook, Chapters 4-5; Altman, D., et al., Enrollee Mix, Treatment Intensity, and Cost in Competing Indemnity and HMO Plans, Journal of Health Economics, 22 (2003): 23-45; Currie, J., and J. Fahr, Medicaid Managed Care: Effects on Children s Medicaid Coverage and Utilization, Journal of Public Economics, 89 (Special Issue, January 2005):85-108; Glied, S., Health Insurance and Market Failure Since Arrow, Journal of Politics, Policy, and Law, 26 (2001): *Since we have no class on Oct. 11, this reading assignment can be spread over the two weeks. Please, however, read both chapters in for the Oct.4 class. Recommended: Meltzer, D. et al., Does Competition under Medicare Prospective Payment Selectively Reduce Expenditures on High Cost Patients? RAND Journal of Economics, 33 (2002): Oct. 18* Review and Summary of Characteristics of U.S. Health Insurance Midterm Quiz: Last 55 minutes of class Oct. 25 Tools for Evaluating the Effectiveness of Health Care: Cost-Benefit and Cost-Effectiveness Analysis Textbook, Ch. 9; Cutler, D., What has Increased Medical Care Spending Bought? American Economic Review, 88 (1998): Recommended: Ashenfelter, O., and M. Greenstone, Using Mandated Speed Limits to Measure the Value of a Statistical Life, Journal of Political Economy, 112, 1, Part 2 Supplement (2004): s226-s267.
5 Nov. 1 The Demand and Supply of Medical Services 1. Health Care Professionals as Inputs and as Entrepreneurs Text, Chapters 6-7; Kessler, D. and M. McClellan, Do Doctors Practice Defensive Medicine? Quarterly Journal of Economics, 111 (1996): Recommended: Lane, J. and S. Gohmann, Shortage or Surplus: Economic and Noneconomic Approaches to the Analysis of Nursing Labor Markets, Southern Economic Journal, 61 (1995): ; Danzon, P., Liability for Medical Malpractice, Journal of Economic Perspectives, 5 (1991): 51-69; Gruber, J. and M. Owings, Physician Financial Incentives and Cesarean Section Delivery, RAND Journal of Economics, 27 (1996): ; and McGuire, T.G., Physician Agency, in Handbook of Health Economics, Vol. 1A, Culyer and Newhouse, eds., (Elsevier, 2000). Assignment # 2 handed out. Due in Class November 15. Nov. 8 Demand and Supply of Medical Services. 2. Hospitals: The Role of the Not-for- Profit Firm Textbook, Ch. 8; Dranove, D. et al., Price and Competition in Hospital Markets: The Switch from Patient- Driven to Payer-Driven Competition, Journal of Law and Economics, 36 (1993): Recommended: Morrisey, M., Movies and Myths: Hospital Cost Shifting, Business Economics, 30 (1995): 22-25; Sloan, F., et al., Hospital Ownership and Cost and Quality of Care: Is There a Dime s Worth of Difference? Journal of Health Economics, 20 (2001): Nov. 15 The Role of Technological Change: The Economics of the Pharmaceutical Industry Textbook, Chapters 10 and 11; Berndt, E., Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price, Journal of Economics Perspectives (JEP) 16 (2002): Assignment # 3 handed out. Due in class, Nov. 29
6 Nov. 22 Nov. 29 Dec. 6 Comparative Health Care Systems Global Public Health Issues; Is Health a Public Good? Health Care Reform: The Unsettled Debate Recommended: Kremer, M., Pharmaceuticals and the Developing World, JEP, op. cit., Text, Ch. 12. Recommended: Comparative Health Care Systems in Folland, S., et al, The Economics of Health and Health Care. Textbook, Ch. 13; Philipson, Tomas, Economic Epidemiology and Infectious Diseases, in Handbook of Health Economics, op. cit., vol. 1B. Cutler, D., Equality, Efficiency and Market Fundamentals: the Dynamics of International Medical Care Reform, Journal of Economic Literature, XL (2002): ; Enthoven, A., et al., Competition in Health Care: It Takes Systems to Pursue Quality and Efficiency, Health Systems, 7 (2005): ; In Healthy Markets? The New Competition in Health Care, ed. M Peterson (Duke University Press, 1998): Pauly, M, What Does Economics Have to Say about Health Care Anyway? ; Rice, T., Can Markets Give Us the System We Want? Recommended: Textbook, Ch. 14; Barabas, J., Not the Next IRA; How Health Savings Accounts Shape Public Opinion, Journal of Health Politics, Policy, and Law, 34 (2009): Dec. 13 Summary and Review for Final Date and Place TBA