Advanced Healthcare Economics
2 credits
BU.552.750.xx
Class Day/Time & Start/End date
Semester
Class Location
Instructor:
Full Name
Contact Information:
Phone number: (###) ###-####
E-mail Address:
Office Hours:
Day/s
Times
Prerequisites:
BU.552.650 Fundamentals in Healthcare Economics or equivalent.
Required Text and Learning Materials



Thomas Rice and Lynn Unruh, The Economics of Health Reconsidered, 3rd Edition, Health
Administration Press, 2009.
Feldstein, Paul J., Applications in Health Economics, www.healtheconbook.com, 2009.
Journal articles: see listing below, by course topic.
Recommended Reading
 Modern Healthcare
 Health Affairs
 Health Leaders
 The Wall Street Journal
Blackboard Site
A Blackboard course site is set up for this course. Each student is expected to check the site throughout the
semester as Blackboard will be the primary venue for outside classroom communications between the
instructors and the students. Students can access the course site at https://blackboard.jhu.edu. Support for
Blackboard is available at 1-866-669-6138.
Course Evaluation
As a research and learning community, the Carey Business School is committed to continuous improvement.
The faculty strongly encourages students to provide complete and honest feedback for this course. Please
take this activity seriously because we depend on your feedback to help us improve so you and your
colleagues will benefit. Information on how to complete the evaluation will be provided towards the end of the
course.
Disability Services
Johns Hopkins University and the Carey Business School are committed to making all academic programs,
support services, and facilities accessible. To determine eligibility for accommodations, please contact the
Carey Disability Services Office at time of admission and allow at least four weeks prior to the beginning of
BU.552.750.xx Advanced Healthcare Economics – Instructor’s Name - Page 2 of 8
the first class meeting. Students should contact Rachel Hall in the Disability Services office by phone at 410234-9243, by fax at 443-529-1552, or email: carey.disability@jhu.edu.
Important Academic Policies and Services
 Honor Code
 Statement of Diversity and Inclusion
 Tutoring
 Carey Writing Center
 Inclement Weather Policy
Students are strongly encouraged to consult the Johns Hopkins Carey Business School Student Handbook
and Academic Catalog and the School website http://carey.jhu.edu/syllabus_policies for detailed information
regarding the above items.
Course Description:
This course applies the analytical tools of economics to issues in health care. Topics include: the use of
economic incentives to influence health behavior; asymmetric information and the role of agency in health
care; the application of behavioral economics to health care; government as payer and regulator, and
equity/ethical considerations; the role of health insurance; and the theory of the firm as it applies to
physicians, hospitals, and systems.
Course Overview:
This course will build on the foundation of the economics concepts learned in previous courses, extending
the scope of economic theory and tools, and – more importantly – applying them to the health care sector.
The course will use mainstream neoclassical microeconomic theory as the basis for analysis, but will explore
the implications when the assumptions of this model are violated.
This course assumes that students have at least an elementary knowledge of the health care industry.
Student Learning Objectives for This Course
All Carey graduates are expected to demonstrate competence on four Learning Goals,
operationalized in eight Learning Objectives. These learning goals and objectives are supported by
the courses Carey offers. For a complete list of Carey learning goals and objectives, please refer to
the website http://carey.jhu.edu/LearningAtCarey/LGO/index.html.
The learning objectives for this course are:
1. Apply economic tools appropriately to analyze business and public policy issues in health
care.
2. Develop an analytical, logically-ordered, critically constructive style of analysis of issues in
health care organization, delivery, and financing, as well as health policy.
3. Integrate current literature on economic concepts, methods, and applications to issues in
health care and the general political economy.
4. Apply lessons from class to real-life situations, in health care and in the general political
economy.
5. Use appropriate research techniques (e.g., literature searches, standard formats for citation
and attribution, statistical analysis) to contribute to the body of knowledge in health
economics.
Attendance Policy
[The university attendance policy states that instructors will clearly communicate attendance expectations
and grading policy in the course syllabus.]
Sample Attendance policy:
Attendance and class participation are part of each student’s course grade. Students are expected to attend
all scheduled class sessions. Each class will include opportunities for teams to work together. Failure to
attend class will result in an inability to achieve the objectives of the course. Excessive absence will result in
BU.552.750.xx Advanced Healthcare Economics – Instructor’s Name - Page 3 of 8
loss of points for team participation. Regular attendance and active participation are required for students to
successfully complete the course.
Assignments
Student performance in the course will be evaluated on the basis of individual periodic assignments; teambased projects; and course participation.
Periodic Assignments: Throughout the course, I will distribute assignments that each student will be required
to complete within one week, using only economic analysis. (That is, students should complete each
assignment without consultation with current or former students, and should refrain from offering their
personal opinion of the answer.) Answers should be no longer than 400 words (not including references,
footnotes, tables, or figures). Students will be required to submit 6 of the 7 assignments posted throughout
the course. (Extra credit will not be given if students submit more than 6 assignments.) Students should use
APA style for the text and references.
For those students who have not taken Fundamentals of Economics for Health Care:
Economic Issue Analysis: Students will be randomly assigned to teams. Four weeks prior
to the due date, each team will be given its health-related topic. On the designated due
date, the team will present its analysis along with another team that will argue the opposing
position. Each team will have no more than 10 minutes to present its case. In addition, on
the due date the team will submit a paper of no more than 1,500 words (not including
references, footnotes, tables, or figures) summarizing its analysis, using APA style for the
text and references.
Systematic Literature Review: Students will form their own teams, of 2 to 3 students (i.e.,
no solo projects). Each team will conduct a systematic review of the literature on a topic of
their choosing in healthcare economics. (e.g., Does supplier-induced demand exist in health
care? Why is there so much regional variation in health care expenditures in the US?) The
team will prepare a report of approximately 3,000 words, and make a 5-minute presentation
in class. The report should be in a research-style format, using APA style for the text and
references. The report is due at the last class. (Preliminary proposals or “works-inprogress” can be handed in for advice and critique – and without grade.)
Optional “challenge” project: A small number of students (≤4) can opt out of the economic
issue analysis and systematic literature review in favor of undertaking a challenge project.
The challenge is to create a good or service that accomplishes three objectives: (1) It
improves the health of a specified population; (2) It is free to the end-user; and (3) The
organization making/distributing the good or service earns a profit (fully-costed) on the good
or service. The project deliverables will be: (1) a written report describing the idea,
demonstrating “proof-of-concept,” presenting a financial pro forma, and providing a highlevel development and launch timeline; and (2) an oral presentation to me.
For those students who have taken Fundamentals of Economics for Health Care:
Research Project: The research project will require a significant amount of effort, which can
BU.552.750.xx Advanced Healthcare Economics – Instructor’s Name - Page 4 of 8
usually be accomplished more effectively as teams than as individuals. (However,
individual projects are acceptable, if the topic and/or circumstances warrant.) Students will
undertake the research proposal that they developed and submitted in Fundamentals of
Economics for Health Care.
The results of the research project will be presented in two ways: (1) a 15-minute oral
presentation; and (2) a research paper. Both should be in a research-style format (rather
than an advocacy, policy prescription, or journalistic format). That is, the presentation – in
content and style – should follow the format of presentations at a professional conference.
The paper – in content and style – should follow the format and citation standards of a
specified peer-reviewed professional journal (e.g., JAMA, NEJM, Health Affairs, Journal of
Health Economics).
Course participation involves more than just attending class. This course will be more successful the more
that all students are engaged and offering their perspectives on the topics discussed in class and throughout
the course. I appreciate that individual personalities and cultural backgrounds will influence both learning
styles and willingness to speak in class. Nevertheless, as the Prophet Muhammad wrote, “Asking good
questions is half of learning.” To that end, my expectations for you throughout the course will be: “Did you
ask a good question today?” (“Ask” can mean both in class and out of class; both oral and written; both
knowledge-seeking and hypothesis-generating.) See Angelo Ciardiello, “Did you ask a good question
today? Alternative cognitive and metacognitive strategies.” Journal of Adolescent and Adult Literacy,
1998, pp. 210-219, which describes this philosophy in more detail.
Evaluation and Grading
For those students who have not taken Fundamentals of Economics for Health Care:
Assignment
Course Learning Objectives
Weight
Periodic Assignments
Economic Issue Analysis
Systematic Literature Review
Course Participation
1
1
1
1
30%
25%
25%
20%
2
2
2
2
3
3
3
3
4
4
4
5
5
For those students who have taken Fundamentals of Economics for Health Care:
Assignment
Course Learning Objectives
Weight
Periodic Assignments
Research Project
Course Participation
1
1
1
30%
50%
20%
2
2
2
3
3
3
4
4
5
Important notes about grading policy:
The grade for good performance in a course will be a B+/B. The grade of A- will only be awarded for
excellent performance. The grade of A will be reserved for those who demonstrate extraordinarily excellent
performance. *The grades of D+, D, and D- are not awarded at the graduate level. Grade appeals will ONLY
be considered in the case of a documented clerical error.
BU.552.750.xx Advanced Healthcare Economics – Instructor’s Name - Page 5 of 8
Tentative Course Calendar*
*The instructors reserve the right to alter course content and/or adjust the pace to accommodate class
progress.
Course Calendar
Week
1
2
3
4
5
1
Content
Incentives and Human Behavior
Markets with Asymmetric Information
Agency in Health Care
Market Failure and the Efficiency Role of
Government
Resource Allocation in Health Care: Is the
Market a Useful Mechanism?
Textbooks1
Rice & Unruh
Feldstein
Chapters 1-3
Chapters 1-3
Chapter 5
pp. 255-266
Chapter 9 & 10
pp. 88-89
pp. 3-10, 13-15, 22-23,
28-34, 68-70, 82-84.
165-170, 175-177, 228230
6
The Market for Health Insurance
Chapter 4
7
8
Health Care Organizations as Firms
Behavioral Economics in Health Care
Chapters 6 & 7
Additional reading assignments are listed below, and will be posted on the e-reserves section of the course Blackboard
site.
BU.552.750.xx Advanced Healthcare Economics – Instructor’s Name - Page 6 of 8
ADDITIONAL READING
Key:
*** Essential
** Important
* Recommended
Week 1 Incentives and Human Behavior
**Volpp, K. G., John, L. K., Troxel, A. B., Norton, L., Fassbender, J., & Loewenstein, G. (2008). Financial
incentive-based approaches for weight loss: A randomized trial. JAMA: The Journal of the American
Medical Association, 300(22), 2631-2637.
**Volpp, K. G., Troxel, A. B., Pauly, M. V., Glick, H. A., Puig, A., Asch, D. A., et al. (2009). A randomized,
controlled trial of financial incentives for smoking cessation. The New England Journal of Medicine,
360(7), 699-709.
*Thornton, R. L. (2008). The demand for, and impact of, learning HIV status. American Economic Review,
98(5), 1829-1863.
*Cohen, J., & Dupas, P. (2010). Free distribution or cost-sharing? Evidence from a randomized malaria
prevention experiment. Quarterly Journal of Economics, 125(1), 1-45.
*The Psychology of Food Consumption
Downs, J. S., Loewenstein, G., & Wisdom, J. (2009). Strategies for promoting healthier food choices.
American Economic Review, 99(2), 159-164.
Wansink, B., Just, D. R., & Payne, C. R. (2009). Mindless eating and healthy heuristics for the irrational.
American Economic Review, 99(2), 165-169.
Bertrand, M., & Schanzenbach, D. W. (2009). Time use and food consumption. American Economic
Review, 99(2), 170-176.
*Lacetera, N., Macis, M., & Slonim, R. (2012). Will there be blood? Incentives and displacement effects in
pro-social behavior. American Economic Journal: Economic Policy,
*Mellstrom, C., & Johannesson, M. (2008). Crowding out in blood donation: Was Titmuss right? Journal of
the European Economic Association, 6(4), 845-863.
**Bryan, G., Karlan, D., & Nelson, S. (2010). Commitment devices. Annual Review of Economics, 2, 671698.
**DellaVigna, S., & Malmendier, U. (2004). Contract design and self-control: Theory and evidence. Quarterly
Journal of Economics, 119(2), 353-402.
Weeks 2 & 3
Markets with Asymmetric Information; Agency in Health Care
***Akerlof, G. A. (1970). The market for "lemons": Quality uncertainty and the market mechanism. Quarterly
Journal of Economics, 84(3), 488-500.
*Riley, J. C. (2001). Silver signals: Twenty-five years of screening and signaling. Journal of Economic
Literature, 39(2), 432-478.
**Rothschild, M., & Stiglitz, J. (1976). Equilibrium in competitive insurance markets: An essay on the
economics of imperfect information. Quarterly Journal of Economics, 90(4), 629-649.
Week 4 Market Failure and the Efficiency Role of Government
*Weisbrod, B. A. (1964). Collective-consumption services of individual-consumption goods. Quarterly Journal
of Economics, 78(3), 471-477.
***Sunstein, C. R., & Thaler, R. H. (2003). Libertarian paternalism is not an oxymoron. The University of
Chicago Law Review, 70(4), 1159-1202.
BU.552.750.xx Advanced Healthcare Economics – Instructor’s Name - Page 7 of 8
***Hardin, G. (1968). The tragedy of the commons. Science, 162(3859), pp. 1243-1248.
Week 5 Resource Allocation in Health Care:
Is the Market a Useful Mechanism?
***Calabresi, G., & Bobbitt, P. (1978). Tragic choices. New York: Norton, pp. 17-50.
**Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior &
Organization, 1(1), 39-60.
**Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science,
211(4481), 453-458.
**Becker, G. S., & Elías, J. J. (2007). Introducing incentives in the market for live and cadaveric organ
donations. Journal of Economic Perspectives, 21(3), 3-24.
**Howard, D. H. (2007). Producing organ donors. Journal of Economic Perspectives, 21(3), 25-36.
**Roth, A. E. (2007). Repugnance as a constraint on markets. Journal of Economic Perspectives, 21(3), 3758.
**Ham, C. (1999). Tragic choices in health care: Lessons from the Child B case. BMJ: British Medical
Journal, 319(7219), pp. 1258-1261.
*Daniels, N., & Sabin, J. (1997). Limits to health care: Fair procedures, democratic deliberation, and the
legitimacy problem for insurers. Philosophy & Public Affairs, 26(4), pp. 303-350.
Week 6 The Market for Health Insurance
**Baicker, K., & Chandra, A. (2008). Myths and misconceptions about U.S. health insurance. Health Affairs,
(W533-543)
***Arrow, K. J. (1963). Uncertainty and the welfare economics of medical care. American Economic Review,
53(5), 941.
***Manning, W. G., Newhouse, J. P., Duan, N., Keeler, E. B., Lelbowitz, A., & Marquis, M. S. (1987). Health
insurance and the demand for medical care: Evidence from a randomized experiment. American
Economic Review, 77(3), 251.
***Pauly, M. V. (1968). The economics of moral hazard: Comment. American Economic Review, 58(3), 531.
**Finkelstein, A., & McGarry, K. (2006). Multiple dimensions of private information: Evidence from the longterm care insurance market. American Economic Review, 96(4), 938-958.
*Arnott, R. J., & Stiglitz, J. E. (1988). The basic analytics of moral hazard. Scandinavian Journal of
Economics, 90(3), 383-418.
*Muennig, P., Franks, P., & Gold, M. (2005). The cost effectiveness of health insurance. American Journal of
Preventive Medicine, 28(1), 59-64.
*Johnson, E. J., Hershey, J., Meszaros, J., & Kunreuther, H. (1993). Framing, probability distortions, and
insurance decisions. Journal of Risk and Uncertainty, 7(1), 35-51.
Week 7 Health Care Organizations as Firms
***Coase, R. H. (1937). The nature of the firm. Economica, 4(16), 386-405.
***Drucker, P. F. (1994). The theory of the business. Harvard Business Review, 72(5), 95-104.
*Gibbons, R. (2005). Four formal(izable) theories of the firm? Journal of Economic Behavior & Organization,
58(2), 200-245.
*Town, R., Wholey, D. R., Kralewski, J., & Dowd, B. (2004). Assessing the influence of incentives on
physicians and medical groups. Medical Care Research and Review, 61(3), 80S-118S.
Week 8
Behavioral Economics in Health Care
***Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica,
47(2), 263-292.
BU.552.750.xx Advanced Healthcare Economics – Instructor’s Name - Page 8 of 8
**Frank, R. G. (2007). Behavioral economics and health economics. In P. Diamond, & H. Vartiainen (Eds.),
Behavioral economics and its applications (pp. 195-234). Princeton, NJ: Princeton University Press.
*Kahneman, D., Krueger, A. B., Schkade, D., Schwarz, N., & Stone, A. A. (2006). Would you be happier if
you were richer? A focusing illusion. Science, 312(5782), 1908-1910.
*Tversky, A., & Kahneman, D. (1986). Rational choice and the framing of decisions. Journal of Business,
59(4), S251-S278.
**McNeil, B., Pauker, S., Sox, H., & Tversky, A. (1982). On the elicitation of preferences for alternative
therapies. The New England Journal of Medicine, 306(21), 1259-1262.
*Rottenstreich, Y., & Hsee, C. K. (2001). Money, kisses, and electric shocks: On the affective psychology of
risk. Psychological Science, 12(3), 185-190
**Thaler, R. H. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12(3), 183-206.
Copyright Statement
Unless explicitly allowed by the instructor, course materials, class discussions, and examinations are created
for and expected to be used by class participants only. The recording and rebroadcasting of such material,
by any means, is forbidden. Violations are subject to sanctions under the Honor Code.