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Advanced Health EconomicsEcon 555 & HPA 543

Monday, 6:00-8:30

Lecture Center A, Room A003

Frank J. Chaloupka

Economics Department: 2118 University Hall, 312-413-2367IHRP: 4th floor, NW corner, Westside Research Office Building, 312-413-2287

Office Hours: Monday, 4:00-5:45, and by appointmentwebsite: www.uic.edu/~fjc(link to course materials under teaching)e-mail: fjc@uic.edu

Description:

This is a course in applied microeconomics that covers a variety of topics concerning the

determinants of health, the supply and demand for health care services, the impact of insuranceon the demand for health care services, the role of government in health care markets and inpromoting healthy behavior, and related topics.

Suggested Texts:

Handbook of Health Economics, Volumes 1A and 1B, edited by Anthony J. Cuyler and Joseph P.Newhouse, North-Holland, Elsevier Science, 2000. Comprehensive, relatively recent overviews

of most topics in health economics by leading researchers in each area.

The Economics of Health and Health Care, 4thEdition, Sherman Folland, Allen C. Goodman,

and Miron Stano, Prentice Hall, 2004. Strong undergraduate health economics text coveringmost key topics. See web-site for additional information:

http://myphlip.pearsoncmg.com/cw/mpbookhome.cfm?vbookid=553

Health Care Economics, 6thEdition, Paul J. Feldstein, Thompson, Delmar Learning, 2005.

Good introductory undergraduate health economics text, particularly for those with less of abackground in economics.

Grading:

Grades will be based on a midterm examination (30%), a final examination (30%), a researchpaper (30%) and class participation (10%). Both exams will be take home exams; the midterm

will be distributed March 7 and due on March 17; the final will be distributed April 25 and dueon May 2. Proposed topics for the research paper are due on February 7; the final draft of thepaper is due on April 29.

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Course Schedule/Reading List

Week 1: Introduction and Overview

Texts: Handbook (HB), Introduction, chapters 1, 2; Folland, Goodman and Stano (FGS),

chapters 1-3; Feldstein, chapter 1

Arrow K (1963). Uncertainty and the welfare economics of medical care. AmericanEconomic Review, 53(5):941-973.

Hammer PJ, Haas-Wilson D, Sage WM (2001). Kenneth Arrow and the chaing

economics of health care: Why Arrow? Why now?Journal of Health Politics, Policyand Law, 26(5):835-849. (in addition to this paper, this issue contains a variety of otherpapers focused on Arrows seminalAERpaper)

Arrow K (2001). Reflections on the reflections.Journal of Health Politics, Policy andLaw 26(5):1197-1203.

Pauly MV (1988). Is medical care different? Old questions, new answers.Journal ofHealth Politics, Policy, and Law,13(2):227-237.

Fuchs V (1996). Economics, values, and health care reform. American Economic

Review86(1):1-24. Strunk BC, Ginsburg PB (2004). Tracking health care costs: Trends turn downward

in 2003. Health Affairs. Web exclusive:

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.354

Mokdad AH, Marks JS, Stroup DF, Gerberding JL (2004). Actual causes of death in the

United States, 2000.Journal of the American Medical Association,291(10):1238-1245.

Murphy KM, Topel RH (2003). The economic value of medical research. In Measuring

the Gains from Medical Research: An Economic Approach, Murphy KM, Topel RH eds.Chicago: University of Chicago Press.

Nordhaus WD (2003). The health of nations: The contribution of improved health to

living standards. InMeasuring the Gains from Medical Research: An Economic

Approach, Murphy KM, Topel RH eds. Chicago: University of Chicago Press.

Weeks 2-3: The Demand for Health and Demand for Medical Care

Texts: HB, chapter 7; FGS, chapters 4, 6, 8; Feldstein, chapters 2, 3, 4, 5

Grossman M (1972). The Demand for Health: A Theoretical and Empirical Investigation.

New York: Columbia University Press, for the National Bureau of Economic Research.

Grossman M (1972). On the concept of health capital and the demand for health.Journal of Political Economy82:223-255.

Grossman M (2004). The demand for health, 30 years later: a very personal retrospectiveand prospective reflection.Journal of Health Economics23(4):629-636.

Leibowitz AA (2004). The demand for health and health concerns after 30 years.Journalof Health Economics23(4):663-672.

Wagstaff A (1986). The demand for health: some new empirical evidence. Journal ofHealth Economics5(3):195-233.

Ehrlich I, Churma H (1990). A model of the demand for longevity and the value of

life extension. Journal of Poli tical Economy98(4):761-782.

Ried W (1998). Comparative dynamic analysis of the full Grossman model. Journal ofHealth Economics17(4):383-425.

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Goodman AC, Stano M, Tilford JM (1999). Applications and extensions of the Grossman

health care model. Southern Economic Journal65:791-806.

Grossman M (1975). The correlation between health and schooling. In Household

Production and Consumption, N Terlckyj, ed. New York: Columbia University

Press for the National Bureau of Economic Research.

Fuchs V (1982). Time preference and health: an exploratory study. In EconomicAspects of H ealth, V Fuchs, ed. Chicago: University of Chicago Press.

Kenkel D (1991). Health behavior, health knowledge, and schooling.Journal of Political

Economy99(2):287-305.

Deaton A (2002). Policy implications of the gradient of health and wealth. Health Affairs

21(2):13-30.

Mechanic D (2002). Disadvantage, inequality, and social policy. Health Affairs21(2):48-

59.

Acton JP (1975). Nonmonetary factors in the demand for medical services. Journal

of Politi cal Economy83(3):595-614.

Meara E, White C, Cutler DM (2004). Trends in medical spending by age. Health Affairs

23(4):176-183. Ruhm CJ (2004). Macroeconomic conditions, health, and mortality. National Bureau of

Economic Research Working Paper 11007.

Week 4: Health Care Insurance, Moral Hazard, and Adverse Selection

Texts: HB, chapters 8, 10, 11, 14; FGS, chapters 7, 8, 11; Feldstein, chapters 6, 9

Manning WG, Newhouse JP, Duan N, Keeler EB, Leibowitz, A, Marquis MS (1987).

Health insurance and the demand for medical care: evidence from a randomized

experiment. Ameri can Economic Review77(3): 251-277.

Newhouse JP, et al. (1993).Free for All? Lessons from the RAND Health InsuranceExperiment. Cambridge (MA): Harvard University Press.

Newhouse JP (2004). Consumer-directed health plans and the RAND Health InsuranceExperiment.Health Affairs 23(6):107-113.

Pauly M (1968). The economics of moral hazard: a comment. Ameri can Economic

Review58(3):533-539.

Marquis MS, Long SH (1995). Worker demand for health insurance in the non-group

market.Journal of Health Economics14(1):47-63.

Cawley J, Simon KI (2003). Health insurance coverage and the macroeconomy. National

Bureau of Economic Research Working Paper 10092.

Glied S, Jack K (2003). Macroeconomic conditions, health care costs and the distribution

of health insurance. National Bureau of Economic Research Working Paper 10029.

Levy H, DeLeire T (2003). What do people buy when they dont buy health

insurance and what does that say about why they are uninsured? National Bureauof Economic Research Working Paper 9826.

Doyle JJ (2005). Health insurance, treatment and outcomes: using auto accidents ashealth shocks. National Bureau of Economic Research Working Paper 11099.

Cutler DM, Reber SJ (1998). Paying for health insurance: the trade-off betweencompetition and adverse selection.

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Grossman JM, Ginsburg PB (2004). As the health insurance underwriting cycle turns:

what next?Health Affairs23(6):91-102.

Chollet D, Smieliauskas F, Konig M (2003).Mapping State Health Insurance Markets,2001: Structure and Change. Washington DC: Academy Health.

Robinson JC (2004). Consolidation and the transformation of competition in health

insurance. Health Affairs23(6):11-24.

Week 5: Supply of Insurance, Managed Care

Texts: HB, chapter 13; FGS, chapter 12; Feldstein, chapter 8

Miller RH, Luft HS (2002). HMO plan performance update: an analysis of the

literature, 1997-2001. Health Affairs21(4):63-86.

The Kaiser Family Foundation and Health Research and Educational Trust.Employer

Health Benefits, 2004 Annual Survey.

The Kaiser Commission on Medicaid and the Uninsured (2004). Health Insurance

Coverage in American: 2003 Data Update.

Grossman JM, Ginsburg PB (2004). As the health insurance underwriting cycle turns:

what next?Health Affairs23(6):91-102. Chollet D, Smieliauskas F, Konig M (2003).Mapping State Health Insurance Markets,

2001: Structure and Change. Washington DC: Academy Health.

Robinson JC (2004). Consolidation and the transformation of competition in healthinsurance. Health Affairs23(6):11-24.

Foreman SE, Wilson JA, Scheffler RM (1996). Monopoly, monopsony, andconstestability in health insurance: a study of Blue Cross plans. Economic Inquiry

34(4):662-677.

Robinson JC (2004). Reinvention of health insurance in the consumer era. Journal

of the Ameri can Medical Association291(15):1880-1886.

Royalty AB, Solomon N (2000). Health plan choice: price elasticities in a managed

competition setting.Journal of Human Resources34(1): 1-41.

Clancy CM, Gauthier AK, editors (2004). Consumer Driven Health Care: Beyond

Rhetoric with Research and Experience; Supplement to Health Services Research.

Week 6: Health Insurance and the Labor Market

Texts: HB, chapter 12; Feldstein, chapter 1

Sheils J, Haught R (2004). The cost of tax-exempt health benefits in 2004. Health Affairs

web exclusive.

Gruber J, Washington E (2003). Subsidies to employee health insurance premiums and

the health insurance market. National Bureau of Economic Research Working Paper9567.

Gruber J, Madrian BC (2002). Health insurance, labor supply, and job mobility: acritical review of the literature. National Bureau of Economic Research Working

Paper Number 8817.

Baicker K, Chandra A (2005). The labor market effects of rising health insurance

premiums. National Bureau of Economic Research Working Paper Number 11160.

Buchmueller TC (1999). Fringe benefits and the demand for part-time workers.Applied

Economics31:551-563.

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Miller RD (2004). Estimating the compensating differential for employer provided health

insurance. International Journal of Health Care Finance and Economics4:27-41.

Goldman D, Sood N, Leibowitz A (2005). Wage and benefit changes in response torising health insurance costs. National Bureau of Economic Research Working Paper

11063.

Gabel J, et al. (2004). Health benefits in 2004: Four years of double-digit premiumincreases take their toll on coverage.Health Affairs23(5):200-209.

Buntin MB, Marquis MS, Yegian JM (2004). The role of the individual health insurance

market and prospects for change. Health Affairs23((6):79-90.

Ziller EC, Coburn AF, McBride TD, Andrews C (2004). Patterns of individual health

insurance coverage, 1996-2000.Health Affairs23(6):210-221.

Gruber J (2004). Tax policy for health insurance. National Bureau of Economic

Research Working Paper Number 10977.

Reschovsky JD, Hadley J (2004). The effect of tax credits for nongroup insurance on

health spending by the uninsured.Health Affairsweb exclusive.

Employee Benefit Research Insitute (2004). Sources of health insurance and

characteristics of the uninsured: analysis of the March 2004 Current Population Survey.Issue Brief Number 276.

Weeks 7-8: Public Health Insurance Programs

Texts: HB, chapters 15, 23; FGS, chapters 17, 18, 19, 20, 21; Feldstein, chapters 17, 19

Cutler D, Gruber J (2001). Health Policy in the Clinton Era: Once Bitten, Twice

Shy. National Bureau of Economic Research Working Paper Number 8455.

Gresenz CR, Rogowski JA, Escarce JJ (2004). Health care markets, the safety net, andaccess to care among the uninsured. National Bureau of Economic Research Working

Paper 10799.

Institute of Medicine (2004).Insuring Americas Health: Principles and

Recommendations. Washington DC: Institute of Medicine. Aizer A, Grogger J (2003). Parental Medicaid expansions and health insurance coverage.

National Bureau of Economic Research Working Paper Number 9907.

Dubay L, Kenney G (2003). Expanding public health insurance to parents: effects onchildrens coverage under Medicaid.Health Services Research38(5):1283-1301.

Shore-Sheppard LD (2005). Stemming the tide? The effect of expanding Medicaideligibility on health insurance. National Bureau of Economic Research Working

Paper Number 11091.

Currie J, Gruber J (1996). Saving Babies: The efficacy and cost of recent changes in

the Medicaid eligibility of pregnant women. Journal of Political Economy

104(6):1263-1296.

Cutler D, Gruber J (1996). Does public insurance crowd out private insurance?Quarterly Journal of Economics111:391-430.

Yang Z, Gilleskie DB, Norton EC (2004). Prescription drugs, medical care, and health

outcomes: a model of elderly health dynamics. National Bureau of Economic ResearchWorking Paper 10964.

Huber M, Orosz E (2003). Health expenditure trends in OECD countries, 1990-2001.Health Care Financing Review25(1):1-22.

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Zuckerman S, McFeeters J, Cunningham P, Nichols L (2004). Changes in Medicaid

physician feeds, 1998-2003: Implications for physician participation.Health Affairswebexclusive, 23 June, 2004.

Newhouse J, et al. (1994). Symposia on Health Care Reform.Journal of Economic

Perspectives, 8(3):3-73.

Cubanski J (2004). Is incremental change working? Or is it time to reconsider universalcoverage? The Commonwealth Fund, Issue Brief. Available on- line at:http://www.ksg.harvard.edu/socpol/711_Cubanski_is_incremental_change_working.pdf

Joyce T, Racine A (2003). Chip shots: association between the state childrens healthinsurance programs and immunization coverage and delivery. National Bureau of

Economic Research Working Paper 9831.

Kaestner R, Joyce T, Racine A (1999). Does publicly provided health insurance improve

the health of low-income children in the United States? National Bureau of EconomicResearch Working Paper 6887.

Reinhardt UE, Hussey PS, Anderson GF (2004). US health care spending in an

international context: why is US spending so high and can we afford it?Health Affairs

23(3):10-25. Anderson GF, Reinhardt UE, Hussey PS, Petrosyan V (2003). Its the prices stupid: why

the United States is so different from other countries. Health Affairs22(3):89-105.

Starfield B (2000). Is US health really the best in the world? Journal of the AmericanMedical Association284:483-485.

Feldstein M (2005). Rethinking Social Insurance. National Bureau of Economic ResearchWorking Paper 11250.

Week 9: The Market for Hospital Services

Texts: HB, chapters 20, 21, 27, 28; FGS, chapters 13, 14; Feldstein, chapter 11

Newhouse J (1970). Toward a theory of nonprofit institutions: an economic model of

a hospital. Ameri can Economic Review60(1):64-74. Pauly MV, Redisch M (1973). The non-for-profit hospital as a physicians

cooperative. Ameri can Economic Review63(1):87-99.

Keeler E, Rubinstein L, Kahn K, Draper D, Harrison E, McGinty M, Rogers W, Brook R(1992). Hospital characteristics and quality of care.Journal of the American Medical

Association268(13):1709-1714.

Sloan FA, Piccone GA, Taylor DH, Chou SY (2001). Hospital ownership and costs

and quality of care: is there a dimes worth of difference? Journal of Health

Economics20(1):1-21.

Keeler E, Melnick G, Zwanziger J (1999). The changing effects of competition on

non-profit and for-profit hospital pricing behavior. Journal of Health Economics

18(1):69-86.

Dranove D (1988). Pricing by non-profit institutions: the case of hospital cost-shifting.Journal of Health Economics7(1):47-58.

Morrisey M (1994). Cost-Shifting in Health Care: Separating Evidence from Rhetoric.Washington DC: The American Enterprise Institute Press.

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Dranove D, Shanley M, White W (1993) Price and concentration in hospital markets: the

switch from patient-driven to payer-driven competition.Journal of Law and Economics36:179-204.

Desai KR, VanDeusen Lukas C, Young GJ (2000). Public hospitals: privatization and

uncompensated care.Health Affairs19(2):31-36.

Santerre RE, Vernon JA (2005). Hospital ownership mix efficiency in the US: anexploratory study. National Bureau of Economic Research Working Paper Number11192.

Week 10: Economic Evaluation: Application in Health Economics (Sherry Emery)

Texts: HB, chapter 4; FGS, chapter 24

Week 11: The Market for Physician Services; The Pharmaceutical Industry

Texts: HB, chapters 9, 20, 22, 25, 26; FGS, chapters 9, 10, 15, 16; Feldstein, chapters 10,12, 13, 14, 15

Casalino LP, Devers KJ, Lake TK, Reed M, Stoddard JJ (2003). Benefits and barriers to

large medical group practices in the United States.Archives of Internal Medicine163:1958-1964.

Escarce JJ, Pauly MV (1998). Physician opportunity costs in physician practice cost

functions.Journal of Health Economics17(2):129-151.

Fuchs VR (1978). The supply of surgeons and the demand for operations. Journal of

Human Resources13(Supplement):35-56.

Rossiter LF, Wilensky GR (1984). Identification of physician induced demand.

Journal of H uman Resources19(2):232-244.

Mitchell JM, Sass TR (1995). Physician ownership of ancillary services: indirect demandinducement or quality assurance?Journal of Health Economics14(3):263-289.

McCarthy TR (1985). The competitive nature of the primary-care physician services

market.Journal of Health Economics4:93-117. Yip WC (1998). Physician responses to medical fee reductions: changes in the volume of

coronary artery bypass graft (CABG) surgeries in the Medicare and private sectors.Journal

of Health Economics17(6):675-99.

Rizzo JA, Zeckhauser RJ. Advertising and the price, quantity, and quality of

primary care services. Journal of Human Resources27(3):381-421.

Haas-Wilson D (1986). The effect of commercial practice restrictions: the case of

optometry.Journal of Law and Economics 29(1):165-186.

Dubay L, Kaestner R, Waidman T (1999). The impact of malpractice fears on cesarean

section rates. Journal of Health Economics18(4):491-522.

Phelps CE, Parente ST (1990). Priority setting for medical technology and medical

practice assessment. Medical Care28(8):703-723.

Brennan TA, et al. (1991). Incidence of adverse events and negligence in hospitalizedpatients.New England Journal of Medicine324:370-376.

Thorpe KE (2004). The medical malpractice crisis: recent trends and the impact ofstate tort reforms. Health Aff airsweb exclusive.

Baicker K, Chandra A (2004). The effect of malpractice liability on the delivery ofhealth care. National Bureau of Economic Research Working Paper Number 10709.

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Kessler DP, McClellan MB (1996). Do doctors practice defensive medicine?

Quarterly Journal of Economics111(2):353-390.

Congressional Budget Office (2003). The Economics of U.S. Tort Liability: A Primer.Washington DC: Congressional Budget Office.

Congressional Budget Office (2004). The Effects of Tort Reform: Evidence from the

States. Washington DC: Congressional Budget Office. Congressional Budget Office (2004).Limiting Tort Liability for Medical Malpractice.

Washington DC: Congressional Budget Office.

U.S. Department of Health and Human Services (2003).Addressing the New Health CareCrisis: Reforming the Medical Litigation System to Improve the Quality of Health Care.

Washington DC: U.S. Department of Health and Human Services.

General Accounting Office (2003).Medical Malpractice Insurance: Multiple Factors

Have Contributed to Increased Premium Rates. Washington DC: General AccountingOffice.

General Accounting Office (2003).Medical Malpractice: Implications of Rising

Premiums on Access to Health Care. Washington DC: General Accounting Office.

Rizzo JA (1999). Advertising and competition in the ethical pharmaceutical industry: thecase of anti-hypertensive drugs.Journal of Law and Economics42:89-116.

Peltzman S (1974).Regulation of Pharmaceutical Innovation: The 1962 Amendments.

Washington DC: American Enterprise Institute.

Dranove D, Meltzer D (1994). Do important drugs reach the market sooner? RAND

Journal of Economics25:40-2-423.

Clarkson KW (1996). The effects of research and promotion on rates of return. In

Competitive Strategies in the Pharmaceutical Industry,Helms RB ed. Washington DC:American Enterprise Institute.

Week 12: The Economics of Health Behavior

Texts: HB, chapters 29, 30, 31; FGS, chapter 22 Mokdad AH, Marks JS, Stroup DF, Gerberding JL (2004). Actual causes of death in the

United States, 2000.Journal of the American Medical Association,291(10):1238-1245.

Flegal KM, Graubard BI, Williamson DF, Gail MH (2005). Excess deaths associatedwith underweight, overweight, and obesity.Journal of the American Medical

Association, 293(15):1861-1867.

Jha P, Chaloupka FJ (1999). Curbing the Epidemic: Governments and the Economics of

Tobacco Control. Washington DC: The World Bank.

Jha P, Chaloupka FJ, editors (2000). Tobacco Control in Developing Countries. Oxford:

Oxford University Press.

Chaloupka FJ (2004). The effects of price on alcohol use, abuse, and their

consequences, inReducing Underage Drinking: A Collective Responsibility, Bonnie RJ,OConnell ME, eds. Washington DC: National Research Council, Institute of Medicine,The National Academies Press.

Grossman M, Chaloupka FJ, Sirtalan I. An empirical analysis of alcohol addiction:results from the Monitoring the Future panels.Economic Inquiry36(1): 39-48.

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Tauras JA, OMalley PM, Johnston LD. The Effects of Price and Access Laws on

Teenage Smoking Initiation: A National Longitudinal Analysis. National Bureau ofEconomic Research Working Paper Number 8331.

Farrelly MC, Bray JW, Pechacek T, Woollery T (2001). Response by adults to increases

in cigarette prices by sociodemographic characteristics. Southern Economic Journal,

68(1):156-165. Farrelly MC, Pechacek T, Chaloupka FJ (2003). The impact of tobacco control program

expenditures on aggregate cigarette sales: 1981-2000. Journal of Health Economics

22(5):843-859.

Tauras JA, Chaloupka FJ, et al. (2005). State tobacco control spending and youth

smoking. American Journal of Public Health95(2):338-344.

Levy DT, Chaloupka FJ, Gitchell J (2004). The effects of tobacco control policies on

smoking rates: a tobacco control scorecard. Journal of Public Health Management andPractice10(4):338-353.

Saffer H, Chaloupka FJ (2000). The effect of tobacco advertising bans on tobacco

consumption.Journal of Health Economics19(6):1117-1137.

Saffer H, Chaloupka FJ, Dave D (2001). State drug control spending and illicit drugparticipation. Contemporary Economic Policy19(2):150-161.

Pacula RL, Chaloupka FJ, Grosssman M, et al. Marijuana and Youth, in An Economic

Analysis of Risky Behavior Among Youth, Gruber J, ed.. Chicago: University of ChicagoPress for the National Bureau of Economic Research.

Saffer H, Chaloupka FJ (1999). The demand for illicit drugs.Economic Inquiry,37(3):401-411.

Grossman M, Chaloupka FJ (1998). The demand for cocaine by young adults: a rationaladdiction approach. Journal of Health Economics17(4):427-474.

Chaloupka FJ, Laixuthai A (1997). Do youths substitute alcohol and marijuana? Some

econometric evidence. The Eastern Economic Journal 23(3):253-276