Course Details

Course Number: 94-705

Health Economics

Units: 12

This course will teach the student to use economic analysis to understand critical issues in health care and health policy.

We will address issues such as the following:

1. What factors best explain the level and rate of growth of U.S. health expenditures?
2. Does the recent high rate of growth of U.S. health care expenditures make U.S. firms less competitive in international markets?
3. What are some of the likely consequences (intended and unintended) of the proposed reforms to Medicare?
4. Can physicians induce demand for their services?
5. What are the impacts of managed care on the health care system?
6. Do strong affiliations between physicians and health plans hurt competition?

The student who successfully completes this course will be able to:

1. Identify the flow of resources in the U.S. health care system, how purchasers pay for their services, and how providers obtain their revenues.
2. Understand the value of health and health care.
3. Evaluate how health care resources should be allocated.
4. Describe the structure of the health insurance industry, explain the incentives facing insurers, understand the strategies they use to compete and their impacts on social welfare.
5. Understand the demand for medical care, and what role providers play in shaping this demand.
6. Explain the economics of managed care and describe how competition works in health care.

Class will consist of lectures and group presentations. Evaluation will include homework problems, group projects, and exams. This course will interest any individual planning a career in health or related industries. It will also be of interest to students who wish to understand how economics is applied to some of our most prominent and contentious policy issues.

Skills: Prerequisites: Students should have had at least one semester of master's level or intermediate undergraduate microeconomics (e.g., 90-803 Economic Principles of Policy Analysis or 90-710 Applied Economic Analysis). No prior knowledge of health care is supposed.

Soft Prerequisites:

Reasonable proficiency with basic economics, statistics, graphs and basic algebra. For example, in economics, you should be comfortable with demand and supply, elasticity, and imperfection competition. In statistics you should know probability, hypothesis testing, and regression. Successful completion of courses in microeconomics and statistics will usually suffice. See me if you are unsure if you have adequate preparation. Appendices 1 and 2 in the textbook (JL) review basic economics and statistics, respectively.


90-709 Intermediate Economic Analysis 12 Credits
90-710 Applied Economic Analysis 12 Credits

Martin S. Gaynor