ECON 834: Health Economics University of Saskatchewan Department of Economics Professor Nazmi Sari Phone: (306) 966-5216 Office: Arts 815 E-mail: Nazmi.Sari@usask.ca Office Hours: TBA. Web: http://homepage.usask.ca/~sari/ COURSE DESCRIPTION AND OBJECTIVES: This is a graduate health economics course. Before enrolling in this course, the students are expected to complete graduate level courses in microeconomic theory and econometrics. In this course, we examine health economic issues and the functioning of health care markets using the tools of microeconomic theory and econometrics.the purpose of the course is to provide a theoretical basis for understanding the practical issues in health care markets and to provide a better understanding of health care problems and issues so that appropriate health policies can be designed and implemented. We will cover the special features of health care as a commodity, health insurance and the demand for health, production of health, economic evaluations of health care projects, economic explanations for the behavior of health care providers, the functioning of insurance markets, cost efficiency, technology and regulation in health care markets. We will also be examining the role of and economic justification for government involvement in the health care system. TEXTBOOK & READING MATERIALS: Folland S, Goodman AC, Stano M. The Economics of Health and Health Care. Upper Saddle River, NJ: Prentice-Hall Inc. Assigned articles from Economics and Health Policy journals as listed in Course Schedule. OTHER USEFUL TEXTS: Feldstein PJ. 1999. Health Policy Issues: An Economic Perspective on Health Reform. Chicago, IL: AUPHA Press. Getzen TE. 1997. Health Economics: Fundamentals and Flow of Funds. John Wiley & Sons, Inc. Newhouse J. 1993. Free for All? Lessons from the RAND Health Insurance Experiment. Harvard University Press. Phelps CE. 1997. Health Economics. New York: Addison-Wesley Inc. Zweifel P, Breyer F. 1997. Health Economics. New York: Oxford University Press. 1
COURSE EVALUATIONS: Assignments: There will be total of 3 assignments. Each assignment will be graded out of 10 points. Assignments should be turned in on time. Late assignments, not more than one week late, will be graded out of 5 points. More than one week late assignments will not be accepted. One of the assignments (Assignment #2) will be empirical and requires background in econometrics and statistical software (i.e. Stata). Critical Reviews: Each student needs to write 2 critical reviews during the semester. Each review will be a 2-page long (double spaced, Times New Roman, 12 fonts) critical review of a paper from the course outline, or a choice of the students. In the latter case, students need to consult with the instructor to get approval. The grading policy for late assignments also applies for critical reviews. Research project & presentation: Students are responsible for completing 3 research project tasks during the term, and presenting (20 minutes long) their projects at the end of the term. The grading policy for late assignments also applies for research tasks. Final Exam: This is an in-class closed book exam. It will cover the required readings, class discussions and materials covered in lectures. Assignments/Exams Weights Tentative Date Critical Review #1 5% Assignment #1 5% Assignment #2 10% Critical Review #2 5% Assignment #3 5% Research Project Tasks 20% Research Project Presentations 5% Final Exam 45% ACADEMIC HONESTY: This course will conform to the academic requirements and standards for graduate courses, including the rules of Student Appeals in Academic Matters (see http://www.usask.ca/university_council/reports/12-06-99.shtml) and Academic Honesty (see http://www.usask.ca/honesty/). You should review the university's guidelines concerning academic dishonesty. You are expected to maintain complete honesty in all academic work, presenting only that which is your own work in tests, assignments, and paper. It is important for you to understand that I have zero tolerance rules for issues related to academic dishonesty. Please make sure that you understand and follow the University s guidelines on academic dishonesty. Always ask if you are not sure about the guidelines. 2
COURSE OUTLINE: 1. Background Reading on Basic Economic Concepts and Statistical Tools *Folland, Goodman, and Stano, Chapters 2 and 3 2. Introduction to Health Economics and Health Care Systems *Folland, Goodman, and Stano, Chapter 1 *Arrow K. 1963. Uncertainty and the Welfare Economics of Medical Care. American Economic Review 53: 941-973. Culyer AJ. The nature of the commodity health care and its efficient allocation. Oxford Economic Papers 1971; 23: 189-211 *Fuchs V. 1996. Economics, Values and Health Care Reform. American Economic Review 86(1): 1-24 Pauly M. 1988. Is Medical Care Different? Old Question, New Answers. Journal of Health Politics, Policy and Law 13:227-237. 3. Production of Health *Folland, Goodman, and Stano, Chapter 4 *Evans RG, Stoddart GL. 1990. Producing Health, Consuming Health Care. Social Science and Medicine 31 (12): 1347-1363. Grossman M. 1972. On the Concept of Health Capital and the Demand for Health. Journal of Political Economy 80(2): 223-225. 4. Theory of Health Insurance and the Demand for Health *Folland, Goodman, and Stano, Chapters 7 and 8 *Acton JP. 1975. Non-monetary Factors in the Demand for Medical Services: Some Empirical Evidence. Journal of Political Economy 83(3): 595-614. *Manning WG. et al. 1987. Health Insurance and the Demand for Medical Care. American Economic Review 77:251-277. Rothschild M and Stiglitz. Equilibrium in competitive insurance markets: an essay on the economics of imperfect information. Quarterly Journal of Economics 1976; 90(4): 629-649 Wagstaff A. The demand for health: theory and application. Journal of Epidemiology and Community Health 1986; 40: 1-11. 5. Economic Evaluation Methods for Health Care Projects *Folland, Goodman, and Stano, Chapter 24 Buxton MJ, Drummond MF, et al. Modelling in economic evaluation: an unavoidable fact of life. Health Economics 1997; 6: 217-227 3
Drummond MF, Torrance G and Mason J. Cost-effectiveness league tables: more harm than good? Social Science and Medicine 1993; 37: 33-40. Garber A, Phelps CE. 1994. Economic Foundations of Cost Effectiveness Analysis. NBER Working Paper No. 4164 Prest AR, Turvey R. 1965. Cost-Benefit Analysis: A Survey. Economic Journal 75: 685-705. *Shepard D, Thompson MS. 1979. First Principles of Cost-Effectiveness Analysis in Health. Public Health Reports 93:535-543 Torrance GW. Measurement of health state utilities for economic appraisal: a review. Journal of Health Economics 1986; 5: 1-30 Viscusi WK. 1993. The Value of Risks to Life and Health. Journal of Economic Literature 31: 1912-1946. 6. Economics of Health Behavior, Promotion and Prevention *Folland, Goodman, and Stano, Chapter 22 Becker G, Murphy K. 1988. A Theory of Rational Addiction. Journal of Political Economy 96(4): 675-700. Chaloupka FJ, Warner KE. 2000. The Economics of Smoking. In The Handbook of Health Economics, edited by J. P. Newhouse and A. J. Culyer. Amsterdam: North Holland. Neuhauser D and Lewicki AM. What do we gain from the sixth stool GUAIAC? New England Journal of Medicine 1975; 293: 226-228 *Sari N, de Castro S, Newman F, Mills G. 2008. Should We Invest in Suicide Prevention Programs? Journal of Socio-Economics 37(1): 262-275. *Sari N. 2009. Physical Inactivity and its Impact on Healthcare Utilization, Health Economics 18(8): 885-901 7. Asymmetric Information and Physician Agency *Folland, Goodman, and Stano, Chapters 9 and 10 Dranove D, Wehner P. Physician-induced demand for childbirths. Journal of Health Economics 1994; 13(1): 61-73. Evans RG. 1974. Supplier-Induced Demand: Some Empirical Evidence and Implications. In The Economics of Health and Medical Care, edited by Mark Perlman. Newyork: John Wiley $ Sons. Gruber J and Owings M. Physician financial incentives and caesarean section delivery. RAND Journal of Economics 1993; 27: 99-123. Labelle R, Stoddart G, Rice T. A re-examination of the meaning an importance of supplier induced demand. Journal of Health Economics 1994; 13: 347-368. 4
McGuire TG. 2000. Physician Agency. In The Handbook of Health Economics, edited by JP Newhouse & AJ Culyer. Amsterdam: North Holland. McGuire TG, Pauly M. 1991. Physician Response to Fees with Multiple Payers. Journal of Health Economics 10: 385-410. 8. Provider Reimbursements in healthcare markets *Folland, Goodman, and Stano, Chapter 19 Ellis RP, McGuire TG. 1993. Supply-Side and Demand-Side Cost Sharing in Health Care. Journal of Economic Perspectives 7 (4): 135-151. *Ellis RP, McGuire TG. 1986. Provider Behavior under Prospective Reimbursement. Journal of Health Economics 5:129-151. Newhouse JP. Reimbursing health plans and health providers: efficiency in production versus selection. Journal of Economic Literature 1996; 34(3): 1236-1263 9. Risk Adjustment methods in healthcare financing Ellis R. Risk adjustment in competitive health plan markets. In The Handbook of Health Economics, edited by JP Newhouse & AJ Culyer. Amsterdam: North Holland. 10. Market Structure and Efficiency *Folland, Goodman, and Stano, Chapters 5 and 14. *Sari N. 2003. Efficiency Outcomes of Market Concentration and Managed Care. International Journal of Industrial Organization 21(10): 1571-1589. *Zuckerman S, Hadley J, Iezzoni L. 1994. Measuring Hospital Efficiency with Frontier Functions. Journal of Health Economics 13: 255-280. 11. Health Care Cost, Quality and the Role of Managed Care *Folland, Goodman, and Stano, Chapter 12 *Feldman R. 2000. The Ability of Managed Care to Control Health Care Costs: How much is enough? Journal of Health Care Finance 26 (3):15-25. Glied SA. 2000. Managed Care. In The Handbook of Health Economics, edited by J. P. Newhouse and A. J. Culyer. Amsterdam: North Holland. Kessler DP, McClellan M. Is hospital competition socially wasteful? Quarterly Journal of Economics 2000; 115(2): 577-615. *Robinson R. 2000. Managed Care in the United States: A Dilemma for Evidencebased Policy? Health Economics 9:1-7. *Sari N. 2002. Do Managed Care and Competition Improve Quality? Health Economics 11(7): 571-584. Student Presentations (Last Week) (* Required readings) 5