Economics 481

Health Economics

Fall 2009

Professor Vivian Ho

Office: Room 244, Baker Hall
Office Phone: 348-2195
Office Fax: 348-5278
Office Hours: by appointment

Course Prerequisites

Econ 370 and one of the following: Econ 382/Stat 310, or Econ 400/Stat 400, or Econ 446, or Stat 280.   Students will need a firm understanding of microeconomic theory and regression analysis in order to follow the lecture materials in this class.

Students with Disabilities

Any student with a documented disability needing academic adjustments or accommodations is requested to speak with me during the first two weeks of class. All discussions will remain as confidential as possible. Students with disabilities should also contact Disabled Support Services in the Allen Center.

Course Objectives

Health economics applies the tools of economics to issues of the organization, delivery, and financing of health care. The objectives of this course are to: (1) develop an understanding of the relevance of economic concepts to the health care sector, (2) to describe the system of health care financing and delivery arrangements in the health care sector, and (3) to impart an understanding of the role of economic factors in the development of public policy concerning health and health care.

Course Materials

1.Textbook: Health Economics, Theories, Insights and Industry Studies, 5th Edition
by R.E. Santerre and S.P. Neun (S&N), South-Western Cengage Learning, 2010

2. Powerpoint lecture notes, downloadable from website:

3. Case Studies: to be purchased online by the student.

In order to avoid the costs of purchasing a course packet, I will be placing copies of all Powerpoint lecture note slides on the web for you to download and print at your convenience. To view these slides, go to the above URL, which you may also reach through a hyperlink on my economics homepage. You will see a copy of this course syllabus. Scroll down to the Course Schedule near the bottom, and click on the topic for which you wish to view the slides. Powerpoint slides for each lecture will be available at least 24 hours before the start of each lecture.

Some advice on printing:
1. For the “Print what:” option, select “Handouts.”
2. For the “Slides per page” option, select 3.
3. In the Color/grayscale box, select “Pure black and white.” Otherwise, you will print out slides with white text and a black background, which are difficult to take notes on.

Class Format and Requirements

Format: Read the assignment before class, and come prepared to discuss either your questions about the reading or your applications of the ideas introduced here. We will occasionally discuss practice problems related to the reading in class.


Class Participation 10%
Homework 10%
Midterm (Oct 1) 20%
Paper 20%
Class presentation 15%
Final exam 25%

Homework: There will be 3 homework assignments which are due in the first half of the semester. Students are permitted to work together on the homework assignments, but each student must formulate responses to each question with their own wording.

Paper: 35% of your grade will be based on a team project. Each team will select a health care company, and describe how the competitive strategy of that firm has been affected by changing market forces and government intervention in recent years. You may use material from class, journal articles, magazine and newspaper articles, and the internet to support your argument. Teams will consist of 3-4 students, and each team is expected to submit one paper with a maximum of 10 pages of text, double spaced and typed.

Class Presentation: Each team will present their analysis to the class at the end of the semester.  Presentations will be 20 to 30 minutes in length.

Make-ups: There will be no make-ups for missed coursework, assignments, and examination unless you receive the permission of the instructor prior to the date of the assignment or exam.

Extra credit: There will be no extra credit assignments.

Exams: The midterm and final exams will be in class, closed book.

Course Schedule


1. An Overview of the Health Care Industry

Lecture 1

S&N, Chapter 1

2. Health, Medical Care, and Medical Spending

Lecture 2

S&N, Chapter 2

3. Demand for Medical Services

Lecture 3 Lecture 4

S&N, Chapter 5

4. Medical Care Production and Costs

Lecture 5 Lecture 5 Handouts

S&N, Chapter 7

5. The Demand for Medical Insurance

Lecture 6

S&N, Chapter 6
6. Case Study: Biopure Biopure Case Study
7. The Private Health Insurance Industry S&N, Chapter 11

8. Health Care Market Structure, Conduct, & Performance

Lecture 7

S&N, Chapter 8
9. Case Study: The Cost Conundrum From The New Yorker, 7/1/2009

10. The Physician Market

Lecture 8

S&N, Chapter 12

11. The Hospital Market

Lecture 10

S&N, Chapter 13

12. The Pharmaceutical Industry

Lecture 11
Lecture 12

S&N, Chapter 14

13. Government Regulation and Intervention

Lecture 13

S&N, Chapter 9

14. Government Provision of Health Insurance

Lecture 14
Lecture 15

S&N, Chapter 10

Data for Homework Assignment 1