ECO311/HCA311: Economics of Health Care

PROPOSAL AND SYLLABUS:

 

 

Course Description:  This is a course designed to teach you the most basic principles of microeconomics and how to use those principles when thinking about health policy issues. We will use these principles to understand the demand for health care, the supply of health care, the health insurance market, and the role of the government in health policy.

The course characterizes America’s health care industry by focusing on the market structure and the conduct and performance of the sub-sectors that compose this industry. Private insurance, pharmaceuticals, physician services, hospital service and medical education markets are evaluated. Within each of these sub-sectors, output and pricing decisions are analyzed along with the positive economic implications for efficiency as well as the normative ethical implications. Additionally, malpractice, risk, and the role of competition and government regulation as a tool to remedy inefficiencies and inequities in these markets are studied. Alternative health care systems are also studied, including the Canadian, German, British and Japanese health care systems.

The purpose of the course is not to make you health economists.  The purpose instead is twofold, 1) to enrich your conceptual and technical understanding of the  economic principles that drive the health care system (the role of economic incentives, competition, and regulation in the performance of the health care system) and 2) to teach you a new way of thinking about health care issues – an economic way of thinking.

 

Instructor Biography:  Dr. Michael Guth is a health care researcher based in Oak Ridge, TN.  His current research comprises inefficiencies in health care insurance, pharmaceutical pricing, and best available treatments for Alzheimer’s disease, osteoporosis, and high cholesterol.  He has developed and/or taught more than twenty on-line courses at more than a dozen educational institutions in the areas of economics, finance, business strategy, business law, politics, and criminal justice.  Potential students are encouraged to view his web page at http://michaelguth.com/economist.htm and click on some of the papers and articles he has written.

 

Returning Messages:  In general, I will respond to e-mail messages within 24 hours, but you can usually expect a response sooner than that.  Therefore, students should check back shortly for a response after they send me a message.  I will return long distance phone calls from students only if the matter is urgent.  For both urgent and non-urgent matters, students are asked to communicate with me through e-mail if at all possible.

 

Course Content / Topics Covered:

1). Health Economics.
2). Production possibilities curve.
3). Opportunity Cost.
4). Cost-benefit analysis.
5). Theories of Health Economics.
6). Healthcare System - Models other countries.
7). First-dollar coverage.
8). National and Socialized Health Insurance.
9). The Production of Medical Services.
10). Utilization Management Programs.
11). Law of Diminishing marginal utility of Health services.
12). Structural, Process and outcome Quality.
13). Lifestyle, Medical Devices and Life Expectancy.
14). Healthcare Expenditures.
15). Law of demand for Healthcare Services.
16). Health Insurances impact on demand.
17). Coinsurance and Deductibles.
18). Indemnity Insurance.
19). Moral Hazard.
20). Own-price elasticity of demand.
21). Demand for private Health Insurance.
22). Risk Avoidance.
23). Employer contribution to Health Insurance.
24). Insurer relations.
25). Types of Managed Care Models.
26). Selective Contracting - Deselection.
27). Managed Care Gag rules.
28). Short and Long Run costs of production.
29). Neoclassical Cost Theory.
30). Cost Identification Analysis.
31). Under and Overprovision of Medical Services.
32). Value of Life.
33). Cost Effectiveness Analysis.
34). Perfect Competition.
35). Determination of Market Price and Quantity.
36). Taxes and Location of For-Profit Hospitals.
37). Regulated Market for Human Organs.
38). Profit Maximization.
39). Market Structure/Market Power.
40). Degree of Monopoly.
41). Oligopoly.
42). Barriers to market Entry.
43). Imperfect Consumer Information.
44). Monopsony and Price Setting.
45). Product Differentiation and Advertising.
46). Market Structure, conduct and performance.
47). Not-for Profit Concepts.
48). For-Profits and Profit Maximizing.
49). Physician Control Model.
50). Supplier Induced Demand.
51). Market Behavior and Hospital Ownership.
52). Ownership Conversion of Not-for-Profit to For-Profit.
53). Conversion Foundations.
54). Size Distribution of Community Hospitals.
55). Sources of Hospital Funds.
56). Managed Care and Market Structure.
57). Market Structure and Hospital Behavior.
58). Hospital Ownership and Hospital Behavior.
59). Drive Through Delivery.
60). Integrated Delivery System.
61). Hospital Price Inflation.

 

 

Learning Outcomes:  Upon successful completion of this course students will be able to:

• Compare past, present, and anticipated changes in the health care environment.
• Describe various payment sources and the populations they serve.
• Explain economic factors that influence health care decisions.
• Demonstrate an understanding of global factors affecting the health care industry.
• Illustrate how microeconomic theory can be used to understand the operation of health care markets as well as to analyze various problems and issues related to health care economics.
• Explain international comparisons and the global issues every country faces when addressing the problem of allocating resources in the health care sector.
• Evaluate political issues as they relate to health care economics.
• Compare the health care systems at least four other countries with that of the United States.
• Identify factors which influence the production of medical services.
• Relate structural, process and outcome quality to lifestyle and life expectancy.
• Compare and contrast not-for-profit hospital behavior to for-profit and profit maximizing behavior in terms of services offered.
• Relate what they have learned in this course to their work environment.

1.  REQUIRED:

• Our course textbook is Health Economics: Theories, Insights, and Industry Studies, 3^rd ed., by Santerre and Neun, Thomson/Southwestern Publishers, ISBN: 0-324-17186-2   © 2004. 
• Access to Internet for assignments and for study tools.

Textbook Overview:  Health Economics is an "applied" introductory health economics textbook. It is more "user friendly" and less theoretical than many of the health care books on the market.  The book illustrates how microeconomic theory can be used to understand the operation of health care markets as well as to analyze various problems and issues related to health care economics. In addition, international comparisons are discussed to give students a broad understanding of the issues every country faces when addressing the problem of allocating resources in the health care sector.

2.  CLASS POLICIES:

I will try to give you hints throughout the course that will assist you with problems.  The Internet will be a valuable research and question-answering-tool for you in this course.  Although some of the problems in this course are challenging, you will find the Internet contains helpful references or explanations for techniques with which you might not be familiar.   However, there are several policies that will be followed:

• This syllabus is subject to change based on student progress with the reading and homework assignments.  Please see the Announcements section of the course web page for any changes in assignments or due dates.
• No make-up exams or early exams will be given, except under extreme circumstances. In addition, late assignments will be graded and returned, but will not receive credit.  Students in this course will have multiple weeks to prepare answers for the mid-term exam and final exam. 
• Attendance will be required according to COSC guidelines for online courses.  Students are responsible for all course content and assignments whether they check the course web page routinely or not.
• Students are expected to complete the course on time; there are no extensions in online courses.
• A week in this course begins on a Monday and will end on the following Sunday.

 

 3.            ACADEMIC HONESTY

 

In Charter Oak’s current Student Handbook under Section 2:  Proscribed Conduct it states:

Charter Oak State College may discipline a student in the following situations:

For academic dishonesty, which shall in general mean conduct, which has as its intent or effect the false misrepresentation of a student’s academic performance including but not limited to: (a) cheating on examination; (b) plagiarizing, including submission of another’s ideas or papers as one’s own; (c) stealing or having unauthorized access to examinations; (d) falsifying records, transcripts, test scores or other data or (being represented by another individual for all or part of a distance learning course.

 

By registering for a Distance Learning course, a student attests that all assignments submitted and examinations completed are the work of the enrolled student.  Dishonesty will result in an “F” in the course and may incur other disciplinary action for Charter Oak State College students including dismissal from the College. 

 

4.  GRADING:

Grading Rubric for Discussion Postings

	10 (Excellent)	9 (Good)	8 (Fair)	7 (Poor)
Contribution to the Classroom	Posting is insightful, thorough, and interesting.	Posting is thorough and interesting.	Posting is interesting but lacks insight and depth.	Posting is uninteresting and/or too brief for the assignment.
Inspires Reply Postings from Other Students	A serious effort is made to frame the discussion posting in such a way as to encourage others to reply.  Posting generates questions and opens up new avenues for discussion.	A serious effort is made to frame the discussion posting in such a way as to encourage others to reply.	Some effort is made to frame the discussion posting in such a way as to encourage others to reply.	No effort is made to frame the discussion posting in such a way as to encourage others to reply.
Demonstrated Understanding of the Reading Assignment	Posting demonstrates a thorough understanding of the reading assignment and is substantiated by several examples from the textbook and/or companion website.	Posting demonstrates an understanding of the reading assignment and is substantiated by at least one example from the textbook and/or companion website.	Posting demonstrates an understanding of the reading assignment but is not substantiated by examples from the textbook and/or companion website.	Posting demonstrates very little understanding of the reading assignment.
Grammar, Mechanics, Spelling, and Sentence Structure	Posting is highly polished; no grammar or spelling errors.	Posting is polished; maximum of one grammar or spelling error.	Posting is adequate; maximum of two grammar or spelling errors.	Inadequate posting; more than two spelling or grammar errors.

 

GRADING RUBRIC FOR ESSAYS

 

Category	0-4 points	5-8 points	9-12 points	13-16 points	17-20 points
Technical Requirements (grammar, punctuation, spelling, ‘typed,’ double-spaced, min. length; font size no larger than 12	Grammar, Punctuation, spelling errors are frequent and distracting; not ‘typed; or d-spaced or not min length	Grammar, Punctation, & spelling errors are frequent and  distracting(>3 but <10); ‘typed’ d- spaced, and at least 3 pp. long.	Major  grammar, punctuation, & spelling errors (>3 but <10); ‘typed,’ d- spaced,and min length	Minor (<3) Grammar, Punctuation, & spelling errors; ‘typed,’ d- spaced, and at least 3 pp long.	Essay is Technically Flawless; ‘typed,’ d- spaced, and at least 3 pp long.
Documentation: Valid sources; Signal phrases; Quotes, para- Phrases, and Summaries are Appropriately Documented; Adequate original ideas. Works are cited Plagiarism is Avoided.*	Sources are not Appropriate; No signal Phrases; Inadequate Documentation;	Sources not Appropriate; No signal Phrases; Research is somewhat Documented But not well Integrated; Paper overly Dependent on outside Sources.	Sources Appropriate. No signal phrases. Research is Documented But not well Integrated; too dependent On outside sources.	Sources Appropriate; Use of  signal phrases; Research is Fairly well integrated and fairly Well documented. Works not Cited properly.	Sources Are Appropriate; Signal phrases are Used to introduce Research which is properly documented; Works cited.
Thesis is Debatable point. Opposing Viewpoint con- Sidered; Specific Supporting Evidence. Sensitivity To audience.	Thesis is not clear or is a fact; opposing views ignored. Lacks specific Evidence; Writer Not sensitive to Audience.	Thesis is Clear but Weak; evidence is Weak or very General. Opposition ignored.No Sensitivity to Audience.	Thesis is Debatable Point; Inadequate Evidence. Opposition Considered; Some Sensitivity to Audience.	Thesis is Debatable Point; Supporting Evidence is Moderate. Some Sensitivity to Audience.	Thesis is a Debatable point; opposing Points Recognized; specific supporting evidence; Sensitive to Audience.
Demonstrates Understanding of theories or methods or concepts discussed in class.	Does not Demonstrate Understanding of Topics discussed In class.	Demonstrates Lack of Understanding Of 3 or more Topics.	Demonstrates Fair under- Standing o f 1-2 topics.	Demonstrates Good Understandingof 3-4 topics.	Demonstrates Good Understanding Of 4-5 topics.
Critical thinking and analysis	Shows no effort and/or analysis.	Shows minimal effort and analysis.	Shows adequate Effort and Analysis.	Shows Excellent effort and Analysis.	Shows Exceptional Effort and Analysis.

                                                                                                            Total Score

COMPUTING YOUR FINAL GRADE

 

 

Academic Support

Tutoring

Charter Oak State College offers free online tutoring in several subjects including mathematics and writing. To take advantage of these Online Tutoring Services email Sue Israel, Distance Learning Administrator, at sisrael@charteroak.edu after week 1. She will provide you with the information and the instructions you need to get started. 

 

Library Access

iCONN.  The Connecticut Digital Library is a project of the Connecticut State Library and the Department of Higher Education.  It provides access over the World Wide Web to a wide selection of databases and other electronic resources.  Charter Oak’s distance learning students will have access to this database.  When students register for online and video courses, they will receive a barcode to verify usage of this educational resource from their home or office computer.  Students will find the website at www.iCONN.org.   Click on “Access from Off-Campus”.  Then click on the title of the database that you wish to use.  Enter your barcode number. 

Class Etiquette:

1.             Respect fellow classmates. There is a great deal that we can learn from each other, but this can not happen if students feel uncomfortable in class about speaking up (afraid that their ideas will be treated harshly or not "listened to" respectfully) or are worried about what will be said to them or about them once they do speak up. Make sure you do everything you can to make our classroom culture a comfortable learning environment for everyone in the class. We may have people from many different backgrounds in this class and people with many different levels of academic preparation. You should all feel comfortable and make each other comfortable with discussing the issues.

2.         Use an appropriate tone of voice. Say what you need to say, but say it in an appropriate tone of voice--one that is respectful and calm. Sarcasm, heavily judgmental or confrontational comments break down good will and create an inhospitable classroom atmosphere. Since this is course that deals with ethics, among other issues, this is particularly critical.  Bullying comments are inappropriate and unacceptable in this class. This is most important in a virtual classroom, where tone of voice is often difficult to "read" from the language on screen (although the use of emotions helps reduce this difficulty in some ways).  If you are able to be funny without offending others feel free to do so but please be careful.

3.         Take responsibility for making this class successful.  I am the facilitator/instructor but class discussion will be largely the “work” of you.  Ask yourself what you can do during each class discussion to move the class forward in a positive way.  I may ask a class member to assume responsibility to lead particular discussions but that does not excuse the remainder of the class from vigorous participation.

ASSIGNMENTS:

Homework assignments are due at the end of the week for the assigned reading.  A week is defined in this course as beginning on Monday and ending on the following Sunday.  Assignments will also be posted to the Blackboard Web page for this course.   Students should turn in their assignments through the digital drop box on Blackboard.  The homework assignments will be graded on a pass-fail basis subject to the following condition:  to receive a passing grade on the homework, the student must turn in answers that merit an A or B letter grade.  If a student does not complete the homework in a satisfactory manner, the assignment will be rejected and the student will have to resubmit corrected answers if he or she wants credit for that assignment.  Students will have only one opportunity to resubmit their homework assignment.   In place of a midterm and final exam, students will write a mid-term and final course paper. 

 

 

ACTIVE STUDENT LEARNING

Students will actively learn about health care economics in two manners.  First, the two required  papers in this course will ensure that students consider the ethical dimensions of providing health care – and most students do not immediately see the connection between ethical considerations and the manner in which health care is provided.  The second topic is more broadly concerned with efficiency and the economics of health care.  Both of these assignments will require students to demonstrate creativity and not merely regurgitate the same old information about the rising costs of health care.  Students will be asked to “think outside the box” and discuss how health care should be provided cost effectively, not merely describe how it is provided today.

Second, the weekly homework assignments ensure that students will master the contents of the textbook and the ambitious learning objectives for this course.  By turning in weekly homework assignments on their chapter reading assignments, students will have to understand the material and not simply skim over it while they devote all their energy to writing the two course papers.  Hopefully, the work and exercise of preparing homework answers will lead students to incorporate new material and concepts into their course papers that they would have otherwise overlooked.

 

ASSIGNMENTS: 

This area will contain all of the assignments for each course.  Please check back frequently for updates.

WEEK 1

·        The Scientific Method

o       Theorizing and Formulation of Hypothesis

o       Hypothesis Testing

·        Statistical Trends in Medical Expenditures

·        Economic Theory.  The Basis of Empirically Verifiable Hypotheses

o       Basic Choices Marginal Benefit Curves and Production Functions                       

o       Quantity and Quality Trade-Offs and the Production Possibility Curve –  Equity and Efficiency.

·         Health and Medical Care

o       What is health?

o        Why good health?

o        What is medical care?

·        Determining Production Efficiency Using a Health Care Production Function

o       Evidence on the production of health care in the U.S.

o       Major cause of death in the U.S.

o       Drug use & impact on number of low birth weight newborns in New York City

REQUIRED READINGS:

·        Santerre and Neun (hereafter referred to as Text) Chapters 1 & 2.

·        Homework exercises for Chapters 1 & 2 are due at the end of the week.

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.

 

 

WEEK 2

·        Cost and Benefit Analysis

o       “Mother, how much is the health of your child worth?”

o       Costs and benefits of medical technologies

o       Cost effectiveness analysis: Autologous Blood Donations-Are they cost effective?

o       Monetary value of improvements in health from 1970-1990. Was it worth it?              

 

·        Health Care Systems and Institutions

o       Role and financing methods of third-party payers

o       Risk management, reimbursement and consumer cost sharing

o       Differences between for-profit and not-for-profit providers

·        The U.S., British, Canadian, German & Japanese Health Care Systems

REQUIRED READING:

·        Text Chapters 3 & 4.

·        Homework exercises for Chapters 3 & 4 are due at the end of the week.

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.

WEEK 3

·        The Demand for Medical Services

·        Alternative Models of Demand for Medical Care

·        Hypothesis Testing

o       Economic Results

·        Demand for Medical Insurance

·        A Simple Model of the Demand for Health Insurance

·        Moral hazard and adverse selection

o       Elasticity and the demand for traditional and western medicine in Taiwan

o       Empirical estimation

o       An international look at income and  health care spending

o       Health care spending in the U.S.

o       Out of pocket expenditures in  2000           

REQUIRED READING:

·        Text Chapters 5 & 6.

·        Homework exercises for Chapters 5 & 6 are due at the end of the week.

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.

 

WEEK 4

*At the end of Week 4, the first course paper is due.  The first paper will concern a topic in ethics and ethical choices related to health care.

·        Medical Care, Production and Costs

·        Short-run production and cost of the representative firm           

o       Estimating Short-Run Cost functions for Hospital                       

o       Long-run production costs

·        Structure, conduct, performance and market analysis

o       A model of supply and demand

o       Explaining rising health care costs

o       Monopoly model of market behavior and performance

o       CON laws as an entry barrier into the dialysis industry

o       The effect of increased competition on dental prices in New Zealand

§         Price war in the blood banking idiustry

REQUIRED READING:

·        Text Chapters 7 & 8.

·        Homework exercises for Chapters 7 & 8 are due at the end of the week.

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.

WEEK 5

·        The Political Economy of Health Care

·        Market Failure and Government Intervention

·        Alcohol commercial bans and alcohol abuse: an international perspective

·        Cost of waiting for hospital services in Canada

·        The regulated market for human organs

·        Public Interest Theory and special Interest Theory of Government Intervention

·        Distributive Justice

o       The Rationale for Redistribution

o       Rawls’ Theory of Justice

·        Nozick’s Theory of Justice

·        Effects of Redistributive action on efficiency in exchange

·        Cash vs. In-Kind Transfers

·        Medicare and Medicaid as Redistributive Programs

·        Government Provision of Health Insurance

o       Why does the government product health insurance?

o       Medicaid and Medicare Programs-Past and Present

REQUIRED READINGS

·        Text Chapters 9 & 10

·        Homework exercises for Chapters 9 & 10 are due at the end of the week.

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.

WEEK 6

·        Private Health Insurance

o       An historical perspective of the private health insurance industry

o       Structure, conduct and performance

o       Empirical Observations on the Benefit Premium Ratio, Community Rating     

o       HMO’s, PPO’s and cost sharing

o       Why pays for employer-mandated health insurance?

o       News of adverse selection and cherry-picking behavior in Australia

·        The Physician Service Market

·        An overview: an historical perspective

·        Conduct, structure and performance

·        The geographical distribution of physicians

·        Medical malpractice and defensive medicine

REQUIRED READING:

·        Text  Chapters 11 & 12. 

·        Homework exercises for Chapters 11 & 12 are due at the end of the week. 

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.

WEEK 7

·        The Hospital Services Market

·        Structure, conduct and performance

·        Benefits and costs of hospital mergers

·        Drive-through deliveries

·        Relative performance of hospitals in the U.S. and Canada

·        The Pharmaceutical Industry

o       Structure, conduct and performance

o       Orphan drugs

o       Can physician drug recommendations be bought?

REQUIRED READING:

·        Text Chapters 13 & 14.

·        Homework exercises for Chapters 13 & 14 are due at the end of the week.

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.

WEEK 8

*At the end of Week 8, the second course paper is due.  This paper will concern one or more methods to improve the provision of health care either through lower costs or by reaching more people for the same level of expenditures.

·        The Long Term Care Health Industry

·        Structure, conduct and performance

·        An Overview of the Health Care Reform

·        Performance of the U.S. health care system:

o       A summary and international comparison

o       Disagreement concerning how health care reform should be designed

·        Cost Saving and Redistibutive Aspects of Health Care Reform Proposals

·        Medical Savings Accounts

·        Individual Mandates

·        Managed Competition

·        National Health Insurance

·        The Clinton health care plan

REQUIRED READING:

·        Text  Chapters 15 & 16.

·        Homework exercises for Chapters 15 & 16 are due at the end of the week.

·        Go to URL http://www.swlearning.com/economics/santerre/santerre3e/santerre3e.html  and read the Power Point slides / lecture notes for the two chapters assigned this week.  The slides can be found under the Student Resources button.