THE HELLER SCHOOL FOR SOCIAL POLICY AND MANAGEMENT

BRANDEIS UNIVERSITY

HS 519a

Health Economics

Spring 2018

Christine BishopTuesday,

Office, Room 212Location of Class:G-53

Office Hours: Thursday 2:00 to 4:00

and byappointmentContact: Debbie DeWolfe (6-3123)

Course Description: Economic models of demand, production, and markets for goods and services can be used to analyze the key resource allocation questions in health care, and provide a basis for reforming our health system:

• Who receives health care?

• How is health care production carried out, at what cost?

•What kind of care, and how much, is produced?

The course will apply economic models to consider the demand for and utilization of health services; and supply of health services, encompassing issues of cost, efficiency, and accessibility of care. The incentives and behavior of consumers and producers of health care will be considered using these models. These tools will be applied to such issues as why health care spending has increased so much in the US; why more Americans face large out-of-pocket payments for health services; and the role of profit incentives in health care. Throughout, the challenges of health reform (ACA) will be considered from an economics viewpoint.

It is assumed that students have had an introduction to microeconomics: consumer demand, producer supply, markets. Students who wish to review basic concepts may find it useful to refer to a basic microeconomics text.

Course Objectives: To introduce the economic approach to analyzing resource allocation in the health care sector.

Course Requirements:

  • prepare handout and lead class discussion for two or more reading assignments:
  • problem sets and short assignments due almost every session in first half of course
  • paper topic and initial bibliography Discuss with me by

February 13 [Class 5]

  • paper topic and bibliographyDueMarch 13 [Class 8]
  • take-home mid-term problem setHanded out March 13 [Class 8]

Due March 20[Class 9]

  • draft course paperfor feedbackDue April 17 [Class 12]
  • course paper DUE APRIL 24

Students who have to miss any class (not recommended) are expected to borrow and review class notes of others and turn in a two-page summary of material covered. All written assignments must be completed timely.

Course Reading: The basic text for the course is: Folland, Sherman, Allen C. Goodman and Miron Stano (2013). The Economics of Health and Health Care. (Seventh Edition) Upper Saddle River, NJ, Prentice Hall. (Recent editions have similar material.)

The text will be supplemented with required and optional articles, available on LATTE. These may be selected /changed depending on student interests.

Plan for Each Class Session: Each class will be a mix of lecture/ discussion and presentation by students on cutting-edge research papers. Usually, a topic will be introduced in lecture and textbook reading one week and considered further in homework problems and relevant research papers the next week. Therefore, prior to each class, students will be expected to 1) submit homework problems relevant to last week’s lecture/ discussion 2) skim the abstracts of the articles that students will be presenting in class relevant to last week’s lecture/discussion topic and 3) read new material from the textbook or other source relevant to this week’s lecture/ discussion.

Provisions for Feedback: Feedback will be provided to students as written comments on written assignments and on the course paper and final exam. I will also provide feedback for class discussion leaders, with comments on their handouts and discussion.

Academic Integrity: Violations of University policies on academic integrity, described in Section 3 of Rights and Responsibilities, may result in failure in the course or on the assignment, and could end in suspension from the University. If you are in doubt about the instructions for any assignment in this course, you must ask for clarification.

Notice: If you have a documented disability and require any accommodations, please bring them to my attention prior to the second meeting of the class. If you have any questions about learning or other disabilities, contact Ravi Lakshmikanthan, disabilities coordinator for The Heller School at x 62753, or

Expectations for Reading Assignment Discussion Leaders: Prepare a one-page class handout summarizing the article using the following suggested questions as a guide as appropriate:

  • What question is the study attempting to address?
  • Theory? Hypotheses based in theory? How did the authors use economics?
  • What data are used?
  • Method?
  • Findings?

Come to class prepared to lead a discussion on the article, first examining these study aspects, then considering policy implications as appropriate. Other students are expected to read the article for the background and question.

Course Paper: The course paper should allow you to demonstrate, in 12-15 pages, that you can apply an economic approach to a particular health sector issue. Be sure to use a concept from the economics discussed in this course (demand, supply, markets) as the underpinning for your paper idea. Remember, just because money is counted does not make it economics.

I must approve your topic and an initial bibliography by the end of October. To the extent possible, I'll help you develop this. The paper can take a number of forms:

  • Choose an aspect of your dissertation area and explore the relevant economic literature.
  • Choose a health economics topic of special interest to you; develop a list of economic literature to review and discuss it with me; review the literature and write up your conclusions.
  • Students taking an econometrics course simultaneously may submit a substantiallyexpanded literature review and theoretical background for the empirical study they are preparing for that course, with the empirical work, as the paper for this course. (I have available several public use files and other health data sets that students may find interesting for an econometrics project.)

Background on health economics and writing:

Luft, H. S. (1986). “Health services research as a scientific process: the metamorphosis of an empirical research project from grant proposal to final report.” Health Serv Res 21(4): 563-84.

McCloskey, D. (1999). “Other Things Equal: Economical Writing: An Executive Summary.” Eastern Economic Journal 25(2): 239-42.

McCloskey, D. (1985). “Economical writing.” Economic Inquiry 24: 187-222.

Sloan, F.A. & Kasper, H., Eds. (2008). Incentives and Choice in Health Care. Cambridge, MA, MIT Press.

Bhattacharya, J., Tu, P. & Hyde, T. (2014). Health Economics. New York, Palgrave Macmillan.

Note: This course concerns the demand for and supply of health services. For an introduction to economics of HEALTH, review FGS Chapters 5 and 7.

Session 1 – January 16

First Day of Instruction

  • Council of Economic Advisors (2014). Economic Report of the President: Chapter 4, Recent Trends in Health Care Costs, Their Impact on the Economy, and The Role Of the Affordable Care Act. Report. March.
  • Emanuel, E. J. (2012). What We Give Up for Health Care. New York Times Opinionator. January 21.

Session 2 – January 23

  • [Prepare written assignment on health expenditures]
  • Read/skim FGS overview of the health economy
  • Carefully read FGS on consumer demand
  • Read/ skim article for student presentation
  • Read or skim articles about health expenditures

Written Assignment Due at January 22, 2:00 pm

  • Health expenditure trends, on LATTE

FGS Reading: Introduction, Consumer Demand

  • FGS Chapter 2 pp. 23-24, 26-35 reviews the demand relationship (“curve”) and demand-side shifters (and skim the prior pages in this chapter for context)
  • FGS Chapter 9

Read Article for Student Presentation: Consumer Demand

  • Phelps, Charles E. and Joseph P. Newhouse. "Effect of Coinsurance: A Multivariate Analysis." Social Security Bulletin June 1972 pp. 20-29, 44  (Yes, I realize this is a very old article. However it highlights the effect of price on use and provides a concrete definition of elasticity.)

Background Articles: The Health Economy; Dimensions of Health Reform

  • Glied, S., Ma, S. & Solis-Roman, C. (2016). Where The Money Goes: The Evolving Expenses Of The US Health Care System. Health Aff (Millwood), 35, 1197-1203. DOI: 10.1377/hlthaff.2015.1356.
  • Martin, A.B., Hartman, M., Benson, J. & Catlin, A. (2016). National Health Spending In 2014: Faster Growth Driven By Coverage Expansion And Prescription Drug Spending. Health Aff (Millwood), 35, 150-160. DOI: 10.1377/hlthaff.2015.1194.
  • Aaron, H. J. and P. B. Ginsburg (2009). "Is Health Spending Excessive? If So,What CanWeDoAbout It?" Health Aff (Millwood). [get a sense of the issues – we’ll come back to them when we know more.]
  • Chernew, M. (2010). "Health Care Spending Growth: Can We Avoid Fiscal Armageddon?" Inquiry 47(4): 285-295. [get a sense of the issues – we’ll come back to them when we know more.]
  • Chernew, M. E., L. Sabik, et al. (2010). "Ensuring the fiscal sustainability of health care reform." N Engl J Med 362(1): 1-3.

Session 3 – January 30

  • Prepare written assignment on demand (1)
  • Prepare for student-led discussion on articles relevant to last week’s discussion: impact of price on quantity demanded
  • Read FGS about further aspects of demand:

Written Assignment due January 29, 2 pm

  • To check up on your understanding of economics of demand: do FGS Chapter 2 Exercises 4,-6, and 9, p. 47. (FGS pp. 29-36 reviews consumer behavior – re-read to consolidate your understanding before doing the exercises. { Note you are asked to do the Exercises, and need NOT respond to the Discussion Questions.)
  • Handout posted on LATTE: do further elasticity problems in the handout
  • Resources on elasticity:
  • Use for Assignment:Bishop, C. E., A. Ryan, D. Gilden, J. Kubisiak and C. P. Thomas (2009). "Effect of an Expenditure Cap on Low-income Seniors' Drug Use and Spending in a State Pharmacy Assistance Program." Health Services Research 44(3): 1010 - 1028.

Read Articles for Student-led Discussion: Price and Quantity Demanded

  • Chandra, A., Gruber, J. & McKnight, R. (2014). The impact of patient cost-sharing on low-income populations: evidence from Massachusetts. J Health Econ, 33, 57-66. DOI: 10.1016/j.jhealeco.2013.10.008. 
  • Kozhimannil, K.B., Law, M.R., Blauer-Peterson, C., Zhang, F. & Wharam, J.F. (2013). The Impact of High-deductible Health Plans on Men and Women: An Analysis of Emergency Department Care. Med Care, 51, 639-645. DOI: 10.1097/MLR.0b013e31829742d0. 
  • Further Background – Optional: Swartz, K. (2010). Cost-sharing: Effects on spending and outcomes, Robert Wood Johnson Foundation

FGS Required Reading: Consumer Demand: Information and Agency

  • FGS Chapter 10: Agency relationship (pp. 202-203), consumer information (pp. 203-207)

Session 4 – February 6

  • Prepare written assignment on demand (2)
  • Prepare for student-led discussion on articles relevant to last week’s discussion: impact of information on consumer choice and the role of the physician as the patient’s agent.
  • Read FGS about insurance theory

Written Assignment due at February 5, 2 pm

  • More on demand: FGS Ch 9, Exercises 1-8, pp. 193-194.

Read Articles for Student-ledDiscussion

Information and Consumer Choice

  • Werner, R. M., R. T. Konetzka and D. Polsky (2016). "Changes in Consumer Demand Following Public Reporting of Summary Quality Ratings: An Evaluation in Nursing Homes." Health Serv Res51 Suppl 2: 1291-1309.
  • Wang, J., J. Hockenberry, S. Y. Chou and M. Yang (2011). "Do bad report cards have consequences? Impacts of publicly reported provider quality information on the CABG market in Pennsylvania." J Health Econ30(2): 392-407.

Agency: do physicians change treatment because of own incentives?

  • Sabbatini, A. K., J. C. Tilburt, E. G. Campbell, R. D. Sheeler, J. S. Egginton, et al. (2014). "Controlling Health Costs: Physician Responses to Patient Expectations for Medical Care." Journal of General Internal Medicine29(9): 1234-1241.

FGS and Background Required Reading: Demand for Health Insurance: Theory and Reality

  • Basics of demand for insurance: FGS Chapter 8 pp. 148-157. Be sure you understand how economists think of insurance, as shielding the buyer from a small chance of a large loss.
  • Moral Hazard Chapter 8 FGS pp. 159-161
  • Optional: Learn more about economists’ approach to health insurance: Get what you can out of this article. vanWinssen, K.P., van Kleef, R.C. & van de Ven, W.P. (2016). The demand for health insurance and behavioural economics. Eur J Health Econ, 17, 653-657. DOI: 10.1007/s10198-016-0776-3.

Session 5 – February 13

  • Prepare written assignment on theory of demand for insurance
  • Start thinking about course paper: set up an appointment to meet with me before October 6 to discuss your plan
  • Prepare for student-led discussion on articles relevant to last week’s discussion: consumers’ insurance purchase decisions.
  • Read FGS about insurance issues: income transfer effect, adverse selection, who pays for employer-sponsored health insurance, job-lock, employer choice to offer health insurance; and optional resources on these issues
  • Read Levy: Does health insurance promote health?

Written Assignment DueFebruary 12, 2pm

  • Insurance: FGS Chapter 8. Exercises 1-11, p 171-72

Read Articles for Student-led Discussion: Consumers’ Choice of Health Insurance

  • Barnes, A. J., Y. Hanoch and T. Rice (2015). "Determinants of coverage decisions in health insurance marketplaces: consumers' decision-making abilities and the amount of information in their choice environment." Health Serv Res50(1): 58-80.
  • Greene, J., J. H. Hibbard and R. M. Sacks (2016). "Summarized Costs, Placement Of Quality Stars, And Other Online Displays Can Help Consumers Select High-Value Health Plans." Health Aff (Millwood)35(4): 671-679.
  • Romley, J. A., Y. Sanchez, J. R. Penrod and D. P. Goldman (2012). "Survey results show that adults are willing to pay higher insurance premiums for generous coverage of specialty drugs." Health Aff (Millwood)31(4): 683-690.

FGS and Other Background Required Reading: Health Insurance Markets and Health Reform

  • Income transfer effect of insurance: pp. 168-170
  • Adverse selection pp. 196-201
  • Employer-sponsored health insurance: who pays for ESHI (pp. 212-219); job-lock (pp. 219-221); (if you have time: employer demand for health insurance (pp.227-229)
  • Does health insurance promote health? Everyone Read:
  • Levy, H. and D. Meltzer (2008). "The impact of health insurance on health." Annu Rev Public Health29: 399-409.
  • Optional resources on insurance:
  • Chandra, A., J. Gruber, et al. (2011). "The importance of the individual mandate--evidence from Massachusetts." N Engl J Med 364(4): 293-295.
  • Optional: Income transfer effect of health insurance -- John Nyman’s approach
  • Nyman, J. A. (2004). "Is 'moral hazard" inefficient? The policy implications of a new theory." Health Affairs 23(5): 194-199
  • Newhouse, J. P. (2006). "Reconsidering the Moral Hazard-Risk Avoidance Tradeoff." Journal of Health Economics 25(5): 1005.

No Class February 20

Session 6 – February 27

Read Articles for Student-led Discussion

  • Depew, B. (2015). "The effect of state dependent mandate laws on the labor supply decisions of young adults." J Health Econ39: 123-134.
  • Sommers, B. D., R. J. Blendon, E. Orav and A. M. Epstein (2016). "Changes in utilization and health among low-income adults after medicaid expansion or expanded private insurance." JAMA Internal Medicine.
  • Barbaresco, S., C. J. Courtemanche and Y. Qi (2015). "Impacts of the Affordable Care Act dependent coverage provision on health-related outcomes of young adults." J Health Econ40: 54-68.
  • Baicker, K., S. L. Taubman, H. L. Allen, M. Bernstein, J. H. Gruber, et al. (2013). "The Oregon experiment--effects of Medicaid on clinical outcomes." N Engl J Med368(18): 1713-1722.

Optional: predictions and outcomes for the ACA

  • Glied, S. and C. Solis-Roman (2014). "What will be the impact of the employer mandate on the U.S. workforce?" Issue Brief (Commonwealth Fund)27: 1-10.
  • Blavin, F., A. Shartzer, S. K. Long and J. Holahan (2016). Employer-Sponsored Insurance Stays Strong, with No Signs of Decay under the ACA: Findings through March 2016. Report. July 13.
  • Tinsley, L. J., S. A. Hall and J. B. McKinlay (2014). "Has Massachusetts health care reform worked for the working poor? Results from an analysis of opportunity." Ann Epidemiol 24(4): 312-318.
  • Nardin, R., L. Zallman, A. Sayah and D. McCormick (2016). "Experiences applying for and understanding health insurance under Massachusetts health care reform." International Journal for Equity in Health15.
  • Zallman, L., R. Nardin, M. Malowney, A. Sayah and D. McCormick (2015). "Affordability of health care under publicly subsidized insurance after Massachusetts health care reform: a qualitative study of safety net patients." International Journal for Equity in Health14.

FGS Required Reading: Introduction to Production

  • FGS Chapter 2, pp. 35-45
  • Chapter 6, pp. 105-109

Session 7 – March 6

Written Assignment DueMarch 5, 2pm

  • Production: FGS Chapter 6 Exercises 1, 2, 4, 5, 8 p. 127-8.

Read Articles for Student Discussion: Production

  • Brown, Douglas M. "Do Physicians Underutilize Aides?" Journal of Human Resources 22:3 (Summer 1988) 342-355. This is a difficult article, discussant please see me.
  • OPTIONAL Thurston, N. K. and A. M. Libby (2002). "A production function for physician services revisited." Review Of Economics And Statistics 84(1): 184-191.

FGS Required Reading: Cost Functions

  • FGS Chapter 6 pp. 109-116

Session 8 –March 13

  • Prepare a one to two-page description of your paper topic, including how you will use economic theory from this course and including selected references
  • To prepare for student-led discussion on articles relevant to last week’s discussion: cost functions for health services, read the abstracts of all the papers
  • Read FGS about nonprofit objectives and supply: Chapter 13
  • Midterm assessment passed out today – due March 20

Written Assignment DueMarch 12, 2pm

Outline for your paper with some references; refer to Syllabus p. 3

Read Articles for Student Discussion: Costs

Cost functions and productive efficiency continued: examine the set-up of these analyses, the questions they address, and the findings. Don’t worry too much about the econometrics.

  • Carey, K., J. F. Burgess, Jr. and G. J. Young (2015). "Economies of Scale and Scope: The Case of Specialty Hospitals." Contemporary Economic Policy33(1): 104-117.
  • Carey, K. and T. Stefos (2011). "Controlling for quality in the hospital cost function." Health Care ManagSci 14(2): 125-134. 
  • Baker, L. C., C. S. Phibbs, C. Guarino, D. Supina and J. L. Reynolds (2004). "Within-year variation in hospital utilization and its implications for hospital costs." J Health Econ23(1): 191-211.
  • McKay, N. L. and M. E. Deily (2008). "Cost Inefficiency and Hospital Health Outcomes." Health Economics17(7): 833.

FGS Required Reading: Nonprofit Providers

Read Chapter 13

Optional Background Reading: Working with Cost Data to Fit Cost Functions for Health Services Production

Take a look at the optional articles if you are interested in these particular provider types or analytic approaches:

  • Hirth, R. A., P. J. Held, S. M. Orzol and A. Dor (1999). "Practice patterns, case mix, Medicare payment policy, and dialysis facility costs." Health Serv Res33(6): 1567-92.
  • Dunlap, L. J., G. A. Zarkin and A. J. Cowell (2008). "Examining variation in treatment costs: A cost function for outpatient methadone treatment programs." Health Services Research43(3): 931-950.
  • Jha, A. K., E. J. Orav, A. Dobson, R. A. Book and A. M. Epstein (2009). "Measuring Efficiency: The Association OfHospital Costs And Quality Of Care." Health Affairs28(3): 897-906.
  • Ozgen, H. (2006). "Does chain affiliation make a difference in efficiency of dialysis providers in the USA." SocSci Med 62(9): 2112-2124.
  • Deep Background Resource: Rosko, M. D. and R. L. Mutter (2008). "Stochastic frontier analysis of hospital inefficiency: a review of empirical issues and an assessment of robustness." Med Care Res Rev 65(2): 131-166.
  • Deep Background Resource :Hollingsworth, B. (2008). "The measurement of efficiency and productivity of health care delivery." Health Econ 17(10): 1107-1128.
  • Literature Review is Helpful: Boussemart, J.-P., H. Leleu and V. Valdmanis (2015). "A Two-Stage Translog Marginal Cost Pricing Approach for Floridian Hospital Outputs." Applied Economics47(37-39): 4116-4127.

Session 9 – March 20

  • Midterm assessment due today
  • Read FGS about hospitals Chapter 14, pp. 283-293.
  • Read FGS about payment Chapter 20 pp. 412-426

Written Assignment DueMarch 19, 2pm