Advanced Health Economics

Econ 555 & HPA 543
Monday, 6:00-8:30
Lecture Center A, Room A003

Frank J. Chaloupka
Economics Department: 2118 University Hall, 312-413-2367
IHRP: 4th floor, NW corner, Westside Research Office Building, 312-413-2287
Office Ho urs: Monday, 4:00-5:45, and by appointment
website: (link to course materials under “teaching”)
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 insurance
on the demand for health care services, the role of government in health care markets and in
promoting 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, 4th Edition, Sherman Folland, Allen C. Goodman,
and Miron Stano, Prentice Hall, 2004. Strong undergraduate health economics text covering
most key topics. See web-site for additional information:
Health Care Economics, 6th Edition, Paul J. Feldstein, Thompson, Delmar Learning, 2005.
Good introductory undergraduate health economics text, particularly for those with less of a
background in economics.
Grades will be based on a midterm examination (30%), a final examination (30%), a research
paper (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 due
on May 2. Proposed topics for the research paper are due on February 7; the final draft of the
paper is due on April 29.

New York: Columbia University Press. • Leibowitz AA (2004). • Grossman M (2004). 291(10):1238-1245. Comparative dynamic analysis of the full Grossman model. • Fuchs V (1996). chapters 1. Chicago: University of Chicago Press. 8. Journal of Health Economics 23(4):663-672. 4. 30 years later: a very personal retrospective and prospective reflection. Topel RH eds. new answers. The Demand for Health: A Theoretical and Empirical Investigation. Actual causes of death in the United States. this issue contains a variety of other papers focused on Arrow’s seminal AER paper) • Arrow K (2001). Haas-Wilson D. chapters 1-3. 5 • Grossman M (1972). Policy and Law. The demand for health and health concerns after 30 years. Murphy KM. Sage WM (2001). • Ehrlich I. Journal of Health Economics 17(4):383-425. Churma H (1990). and health care reform. chapter 7. Journal of Political Economy 82:223-255. Journal of Health Politics. The demand for health: some new empirical 3. • Ried W (1998). • Nordhaus WD (2003). Is medical care different? Old questions. Journal of Health Economics 23(4):629-636.Course Schedule/Reading List Week 1: Introduction and Overview • Texts: Handbook (HB). 2000. Goodman and Stano (FGS). chapters 2. In Measuring the Gains from Medical Research: An Economic Approach. Kenneth Arrow and the chaing economics of health care: “Why Arrow? Why now?” Journal of Health Politics. Folland. . On the concept of health capital and the demand for health. • Hammer PJ. Gerberding JL (2004). Web exclusive: http://content. 13(2):227-237. (in addition to this paper. Journal of the American Medical Association. Journal of Health Economics 5(3):195-233. American Economic Review. Murphy KM. chapter 1 • Arrow K (1963). Feldstein. Topel RH (2003). and Law. Reflections on the reflections. for the National Bureau of Economic Research. The economic value of medical research. The demand for health. 53(5):941-973. 2. Topel RH eds. Journal of Health Politics. Health Affairs. Weeks 2-3: The Demand for Health and Demand for Medical Care • Texts: HB. The health of nations: The contribution of improved health to living standards. Feldstein. Introduction. American Economic Review 86(1):1-24. Ginsburg PB (2004). chapters 4. Policy. 26(5):835-849. 6. In Measuring the Gains from Medical Research: An Economic Approach.w4.354 • Mokdad AH. • Murphy KM. Economics. Policy and Law 26(5):1197-1203. Journal of Political Economy 98(4):761-782. values.healthaffairs. • Wagstaff A (1986). • Pauly MV (1988). Tracking health care costs: Trends turn downward in 2003. • Grossman M (1972). • Strunk BC. FGS. Chicago: University of Chicago Press. A model of the demand for longevity and the value of life extension. Marks JS. Uncertainty and the welfare economics of medical care. Stroup DF.

Trends in medical spending by age. What do people buy when they don’t buy health insurance and what does that say about why they are uninsured? National Bureau of Economic Research Working Paper 9826. Journal of Political Economy 83(3):595-614. Cutler DM (2004). American Economic Review 58(3):533-539. FGS. American Economic Review 77(3): 251-277. Mechanic D (2002). Macroeconomic conditions.• • • • • • • • • Goodman AC. Health insurance. Simon KI (2003). Week 4: Health Care Insurance. Disadvantage. Health insurance and the demand for medical care: evidence from a randomized experiment. Marquis MS (1987). Reber SJ (1998). 9 • Manning WG. White C. New York: Columbia University Press for the National Bureau of Economic Research. 11. Deaton A (2002). chapters 8. Keeler EB. health care costs and the distribution of health insurance. Cambridge (MA): Harvard University Press. Meara E. and social policy. Long SH (1995). National Bureau of Economic Research Working Paper 10029. Health Affairs 21(2):4859. The economics of moral hazard: a comment. National Bureau of Economic Research Working Paper 11099. • Pauly M (1968). treatment and outcomes: using auto accidents as health shocks. et al. Acton JP (1975). and Adverse Selection • Texts: HB. • Glied S. Duan N. National Bureau of Economic Research Working Paper 11007. • Doyle JJ (2005). Macroeconomic conditions. health. N Terlckyj. Feldstein. Health behavior. Health Affairs 23(6):107-113. Moral Hazard. • Cawley J. Health insurance coverage and the macroeconomy. ed. Free for All? Lessons from the RAND Health Insurance Experiment. chapters 6. chapters 7. A. 14. Chicago: University of Chicago Press. In Economic Aspects of Health. V Fuchs. Applications and extensions of the Grossman health care model. and schooling. Leibowitz. • Marquis MS. Southern Economic Journal 65:791-806. Tilford JM (1999). • Newhouse JP (2004). . National Bureau of Economic Research Working Paper 10092. inequality. ed. Consumer-directed health plans and the RAND Health Insurance Experiment. Newhouse JP. Journal of Political Economy 99(2):287-305. 10. Fuchs V (1982). The correlation between health and schooling. Journal of Health Economics 14(1):47-63. health knowledge. • Levy H. Paying for health insurance: the trade -off between competition and adverse selection. DeLeire T (2003). Kenkel D (1991). and mortality. Policy implications of the gradient of health and wealth. (1993). Health Affairs 23(4):176-183. Nonmonetary factors in the demand for medical services. Health Affairs 21(2):13-30. Jack K (2003). • Newhouse JP. Stano M. Time preference and health: an exploratory study. 8. Worker demand for health insurance in the non-group market. Grossman M (1975). • Cutler DM. Ruhm CJ (2004). 11. In Household Production and Consumption.

1997-2001. Washington DC: Academy Health. Health Affairs web exclusive. Fringe benefits and the demand for part-time workers. Konig M (2003). Gauthier AK. Chollet D. Wilson JA. Haught R (2004). and constestability in health insurance: a study of Blue Cross plans. monopsony. • Gruber J. Week 5: Supply of Insurance. Health plan choice: price elasticities in a managed competition setting. FGS. Ginsburg PB (2004). Health Insurance Coverage in American: 2003 Data Update. Washington DC: Academy Health. Consolidation and the transformation of competition in health insurance. Solomon N (2000). Mapping State Health Insurance Markets. Konig M (2003). labor supply. Washington E (2003). Smieliauskas F. Ginsburg PB (2004). National Bureau of Economic Research Working Paper 9567. chapter 12. • The Kaiser Family Foundation and Health Research and Educational Trust. The labor market effects of rising health insurance premiums. Madrian BC (2002). Subsidies to employee health insurance premiums and the health insurance market. Monopoly. • Robinson JC (2004). Managed Care • Texts: HB. Robinson JC (2004). • Chollet D. Economic Inquiry 34(4):662-677. chapter 8 • Miller RH. Smieliauskas F. • Royalty AB. 2001: Structure and Change. • Baicker K. Reinvention of health insurance in the consumer era. Health Affairs 21(4):63-86. Feldstein. National Bureau of Economic Research Working Paper Number 8817. Applied Economics 31:551-563. • Foreman SE. Supplement to Health Services Research. Feldstein. Consolidation and the transformation of competition in health insurance. • Clancy CM. Consumer Driven Health Care: Beyond Rhetoric with Research and Experience. As the health insurance underwriting cycle turns: what next? Health Affairs 23(6):91-102. Journal of the American Medical Association 291(15):1880-1886. As the health insurance underwriting cycle turns: what next? Health Affairs 23(6):91-102. • The Kaiser Commission on Medicaid and the Uninsured (2004). Health Affairs 23(6):11-24. Scheffler RM (1996). Week 6: Health Insurance and the Labor Market • Texts: HB. chapter 1 • Sheils J. editors (2004). chapter 12. . The cost of tax-exempt health benefits in 2004. 2004 Annual Survey. • Buchmueller TC (1999).• • • Grossman JM. Health Affairs 23(6):11-24. and job mobility: a critical review of the literature. National Bureau of Economic Research Working Paper Number 11160. 2001: Structure and Change. • Grossman JM. Mapping State Health Insurance Markets. Journal of Human Resources 34(1): 1-41. Chandra A (2005). chapter 13. • Robinson JC (2004). • Gruber J. Employer Health Benefits. HMO plan performance update: an analysis of the literature. Luft HS (2002). Health insurance.

Health Care Financing Review 25(1):1-22. and health outcomes: a model of elderly health dynamics. et al. Weeks 7-8: Public Health Insurance Programs • Texts: HB. Feldstein. 19 • Cutler D. • Currie J. 21. Health expenditure trends in OECD countries. 20. Employee Benefit Research Insitute (2004). • Cutler D. McBride TD. Health Affairs 23((6):79-90. Wage and benefit changes in response to rising health insurance costs. Ziller EC. National Bureau of Economic Research Working Paper Number 8455. Goldman D. • Shore-Sheppard LD (2005). Rogowski JA. Buntin MB. National Bureau of Economic Research Working Paper Number 9907. Expanding public health insurance to parents: effects on children’s coverage under Medicaid. Health benefits in 2004: Four years of double-digit premium increases take their toll on coverage. Coburn AF. chapters 15. • Institute of Medicine (2004). Prescription drugs. National Bureau of Economic Research Working Paper 10799. Saving Babies: The efficacy and cost of recent changes in the Medicaid eligibility of pregnant women. Health care markets. Journal of Political Economy 104(6):1263-1296. Tax policy for health insurance. Issue Brief Number 276. National Bureau of Economic Research Working Paper Number 11091. Grogger J (2003). Gruber J (1996). (2004). National Bureau of Economic Research Working Paper Number 10977. Norton EC (2004). Stemming the tide? The effect of expanding Medicaid eligibility on health insurance. Yegian JM (2004). National Bureau of Economic Research Working Paper 11063. Reschovsky JD. chapters 17. 18. Escarce JJ (2004). Orosz E (2003). Washington DC: Institute of Medicine. Gruber J (2004). 19. 23. The effect of tax credits for nongroup insurance on health spending by the uninsured. FGS. International Journal of Health Care Finance and Economics 4:27-41. Hadley J (2004). The role of the individual health insurance market and prospects for change. Andrews C (2004). the safety net. Insuring America’s Health: Principles and Recommendations. Health Affairs 23(5):200-209. and access to care among the uninsured. • Aizer A. Twice Shy. Does public insurance crowd out private insurance? Quarterly Journal of Economics 111:391-430. • Dubay L.• • • • • • • • Miller RD (2004). Parental Medicaid expansions and health insurance coverage. Patterns of individual health insurance coverage. Sood N. Gruber J (1996). • Huber M. Gruber J (2001). Kenney G (2003). Health Policy in the Clinton Era: Once Bitten. Health Services Research 38(5):1283-1301. Gilleskie DB. chapters 17. Health Affairs web exclusive. Estimating the compensating differential for employer provided health insurance. • Yang Z. 1996-2000. Leibowitz A (2005). Marquis MS. 1990-2001. Health Affairs 23(6):210-221. Gabel J. National Bureau of Economic Research Working Paper 10964. Sources of health insurance and characteristics of the uninsured: analysis of the March 2004 Current Population Survey. • Gresenz CR. medical care. .

Nichols L (2004). Hospital ownership and costs and quality of care: is there a dime’s worth of difference? Journal of Health Economics 20(1):1-21. Week 9: The Market for Hospital Services • Texts: HB. It’s the prices stupid: why the United States is so different from other countries. The changing effects of competition on non-profit and for-profit hospital pricing Symposia on Health Care Reform. Is US health really the best in the world? Journal of the American Medical Association 284:483-485. • Morrisey M (1994). Cost-Shifting in Health Care: Separating Evidence from Rhetoric. Racine A (2003). Journal of Health Economics 18(1):69-86. 28. Melnick G. Chip shots: association between the state children’s health insurance programs and immunization coverage and delivery. Zwanziger J (1999). Anderson GF. The non-for-profit hospital as a physicians’ cooperative. Cunningham P. 1998-2003: Implications for physician participation. Feldstein. McFeeters J. Journal of the American Medical Association 268(13):1709-1714. (1994). 2004. Rogers W. Piccone GA.harvard. Anderson GF (2004). Journal of Health Economics 7(1):47-58. Joyce T. Pricing by non-profit institutions: the case of hospital cost-shifting. Petrosyan V (2003). 23 June. Available on. Hospital characteristics and quality of care. Issue Brief. • Dranove D (1988). Hussey PS. chapter 11 • Newhouse J (1970). Changes in Medicaid physician feeds. Does publicly provided health insurance improve the health of low. • Sloan FA. American Economic Review 60(1):64-74. Journal of Economic Perspectives. McGinty M. 27. 21. 14. Is incremental change working? Or is it time to reconsider universal coverage? The Commonwealth Fund. • Pauly MV. National Bureau of Econo mic Research Working Paper 9831. 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. Redisch M (1973). Starfield B (2000).line at: http://www. Rethinking Social Insurance. Taylor DH. Draper D. Kaestner R. Kahn K. . Reinhardt UE. • Keeler E. chapters 13. et al. Reinhardt UE. Rubinstein L.income children in the United States? National Bureau of Economic Research Working Paper 6887. Feldstein M (2005). FGS. Newhouse J. Washington DC: The American Enterprise Institute Press. Brook R (1992). Chou SY (2001). Health Affairs web exclusive. Racine A (1999). 8(3):3-73. Harrison E.ksg. National Bureau of Economic Research Working Paper 11250. chapters 20.pdf Joyce T.• • • • • • • • • Zuckerman S. Hussey PS. American Economic Review 63(1):87-99. Health Affairs 22(3):89-105. Cubanski J (2004). • Keeler E. Toward a theory of nonprofit institutions: an economic model of a hospital.

The medical malpractice ‘crisis’: recent trends and the impact of state tort reforms. Journal of Law and Economics 36:179-204. Stoddard JJ (2003). • Rossiter LF. • Haas-Wilson D (1986). and quality of primary care services. Wilensky GR (1984). Pauly MV (1998). The supply of surgeons and the demand for operations. Priority setting for medical technology and medical practice assessment. • Baicker K. Shanley M. Advertising and the price. Vernon JA (2005). chapters 9. chapters 9. Desai KR. Zeckhauser RJ. 15. Health Affairs web exclusive. (1991). The competitive nature of the primary-care physician services market. • Escarce JJ. chapter 24 Week 11: The Market for Physician Services. 20. chapters 10. 22. 15 • Casalino LP. 13. Physician ownership of ancillary services: indirect demand inducement or quality assurance? Journal of Health Economics 14(3):263-289. • Phelps CE. Journal of Human Resources 19(2):232-244. 10. Medical Care 28(8):703-723. • Dubay L. Physician responses to medical fee reductions: changes in the volume of coronary artery bypass graft (CABG) surgeries in the Medicare and private sectors. 12. Public hospitals: privatization and uncompensated care. 14. Feldstein. New England Journal of Medicine 324:370-376. . Waidman T (1999). chapter 4. Sass TR (1995). Physician opportunity costs in physician practice cost functions.• • • Dranove D. Journal of Health Economics 4:93-117. The Pharmaceutical Industry • Texts: HB. 25. Parente ST (1990). National Bureau of Economic Research Working Paper Number 10709. 16. The impact of malpractice fears on cesarean section rates. • McCarthy TR (1985). The effect of commercial practice restrictions: the case of optometry. The effect of malpractice liability on the delivery of health care. Identification of physician induced demand. White W (1993) Price and concentration in hospital markets: the switch from patient-driven to payer-driven competition. Archives of Internal Medicine 163:1958-1964. 26. Reed M. quantity. Journal of Health Economics 17(2):129-151. Young GJ (2000). Journal of Health Economics 17(6):675-99. FGS. Health Affairs 19(2):31-36. Incidence of adverse events and negligence in hospitalized patients. Chandra A (2004). Journal of Law and Economics 29(1):165-186. Journal of Health Economics 18(4):491-522. Hospital ownership mix efficiency in the US: an exploratory study. • Mitchell JM. Journal of Human Resources 13(Supplement):35-56. • Fuchs VR (1978). • Rizzo JA. • Thorpe KE (2004). Lake TK. Benefits and barriers to large medical group practices in the United States. Journal of Human Resources 27(3):381-421. National Bureau of Economic Research Working Paper Number 11192. Kaestner R. Week 10: Economic Evaluation: Application in Health Economics (Sherry Eme ry) • Texts: HB. Devers KJ. FGS. • Yip WC (1998). VanDeusen Lukas C. • Brennan TA. et al. Santerre RE.

Institute of Medicine. Bonnie RJ.hypertensive drugs. Rizzo JA (1999). and their consequences. Gail MH (2005). Williamson DF. chapters 29. The National Academies Press. The effects of price on alcohol use. In Competitive Strategies in the Pharmaceutical Industry. and obesity. FGS. Economic Inquiry 36(1): 39-48. Department of Health and Human Services. Tort Liability: A Primer. Chaloupka FJ. chapter 22 • Mokdad AH. editors (2000). Medical Malpractice Insurance: Multiple Factors Have Contributed to Increased Premium Rates. Week 12: The Economics of Health Behavior • Texts: HB. overweight. Regulation of Pharmaceutical Innovation: The 1962 Amendments. Clarkson KW (1996). Excess deaths associated with underweight. General Accounting Office (2003). Congressional Budget Office (2003).” in Reducing Underage Drinking: A Collective Responsibility. An empirical analysis of alcohol addiction: results from the Monitoring the Future panels. 291(10):1238-1245. Journal of the American Medical Association. Medical Malpractice: Implications of Rising Premiums on Access to Health Care. . Dranove D. Graubard BI.S. Department of Health and Human Services (2003). • Flegal KM.S. Peltzman S (1974). McClellan MB (1996). Stroup DF. • Chaloupka FJ (2004). Meltzer D (1994). 31. abuse. The Effects of Tort Reform: Evidence from the States. Do important drugs reach the market sooner? RAND Journal of Economics 25:40-2-423. Washington DC: U. Congressional Budget Office (2004). Washington DC: Congressional Budget Office.S. eds. O’Connell ME. Tobacco Control in Developing Countries. General Accounting Office (2003). Washington DC: Congressional Budget Office. Washington DC: National Research Council.• • • • • • • • • • • Kessler DP. Washington DC: The World Bank. Do doctors practice defensive medicine? Quarterly Journal of Economics 111(2):353-390. • Jha P. Washington DC: American Enterprise Institute. • Grossman M. 293(15):1861-1867. Journal of the American Medical Association. The effects of research and promotion on rates of return. Actual causes of death in the United States. • Jha P. Chaloupka FJ (1999). 30. Limiting Tort Liability for Medical Malpractice. Gerberding JL (2004). Marks JS. The Economics of U. Curbing the Epidemic: Governments and the Economics of Tobacco Control. Chaloupka FJ. U. Oxford: Oxford University Press. Washington DC: General Accounting Office. Journal of Law and Economics 42:89-116. Washington DC: Congressional Budget Office. 2000. Advertising and competition in the ethical pharmaceutical industry: the case of anti. Congressional Budget Office (2004). Washington DC: General Accounting Office. Sirtalan I. Washington DC: American Enterprise Institute. Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Health Care. Helms RB ed.

Response by adults to increases in cigarette prices by sociodemographic characteristics. Pechacek T. et al. Levy DT. Chaloupka FJ (1999). Chaloupka FJ (1998). Chaloupka FJ (2003). The impact of tobacco control program expenditures on aggregate cigarette sales: 1981-2000. Chaloupka FJ. 37(3):401-411. Grosssman M. Gruber J.. State drug control spending and illicit drug participation. Chaloupka FJ. Chicago: University of Chicago Press for the National Bureau of Economic Research. 68(1):156-165. Saffer H.• • • • • • • • • • • Tauras JA. Grossman M. Tauras JA. Johnston LD. Pacula RL. State tobacco control spending and youth smoking. Chaloupka FJ (2000). The demand for illicit drugs. Journal of Health Economics 19(6):1117-1137. Laixuthai A (1997). National Bureau of Economic Research Working Paper Number 8331. The Effects of Price and Access Laws on Teenage Smoking Initiation: A National Longitudinal Analysis. Journal of Health Economics 22(5):843-859. The effects of tobacco control policies on smoking rates: a tobacco control scorecard. The demand for cocaine by young adults: a rational addiction approach. Chaloupka FJ. Journal of Public Health Management and Practice 10(4):338-353. ed. Farrelly MC. (2005). Chaloupka FJ. The Eastern Economic Journal 23(3):253-276 . Do youths substitute alcohol and marijuana? Some econometric evidence. Southern Economic Journal. American Journal of Public Health 95(2):338-344. Saffer H. Farrelly MC. Pechacek T. Chaloupka FJ. Saffer H. Gitchell J (2004). Contemporary Economic Policy 19(2):150-161. Bray JW. The effect of tobacco advertising bans on tobacco consumption. Economic Inquiry. Journal of Health Economics 17(4):427-474. in An Economic Analysis of Risky Behavior Among Youth. Woollery T (2001). et al. Marijuana and Youth. Dave D (2001). O’Malley PM.