ECONOMICS of HEALTH

3d Module, 2002/2003

Professor: Judith Shapiro
TA: Irina Demidova

This course is an introduction for advanced economics students to contemporary theoretical analysis of,  empirical evidence on and policy debate about:

what and who produces health, how it is produced, variations in its production, consequences  of its production or lack of production

The basic reading, reluctantly adopted, is the text Economics of Health, by Zweifel and Breyer, which will usually be called Z&B. 

The reasons for starting from this text, in the absence of good alternatives, are discussed in the first lecture.  It remains the only text in the field to date which is suitable for well-trained and numerate advanced economics students.

For a number of topics there is alternate reading provided, in order to ensure that the topic is surveyed adequately (e.g., cost-effectiveness), up-to-date internationally (e.g. the economics of HIV/AIDS, American debate on the  cost-effectiveness of new pharmaceutical spending), highly relevant to Russia and other countries in our region.

A number of websites provide excellent up-to-date material.  The resource of first resort is www.nber.org, the longest-going research programme in the field. This, of course, is rather US-centred.  We will discuss why this can be a problem in Lecture 1 and later.

For us, www.minzdrav_rf.ru is also very important for basic information.

So is www.gks.ru with recent demographic information, www.demoscope.ru which is a demographic newsletter in Russian, normally published as a double-number every two weeks.

Demoscope  is produced on the 16^th floor of this building, and first-rate contributions from our students on health from an economic perspective would be very welcome. Previous issues of Demoscope are all available  online.

Lecture 1.1  considers:

(1) What can be covered in the economics of health?

(2)  What you already have learnt, primarily in microeconomics,  which is relevant to the economics of health

(3)   How the course will be organized

(4)   The particular problems of health and the economics of health: great uncertainty, great irreversibility, major ethical/equity concerns throughout time, the near-impossibility of separating production from distribution.  Are there parallels?

The Economics of Health is one of the newest fields to have its own North-Holland 2-Volume Handbook, and remains somewhat unstandardized, with major variations in subject matter between countries and departments.

• Studies of  the production of health. 

In common language, what makes individuals and populations healthier or unhealthier?  (We will discuss more about measuring this, life expectancy mortality, morbidity and X-Adjusted Life Years in Week 2).

Note the distinction between the production of health and the production of health care. Note also a distinction between the production of health and the production of utility.

Application to be discussed later: “Health care really does matter after all.”

What special problems seem to be part of health production in Russia, what problems are general to many transition countries, and what problems seem to be pressing problems nearly everywhere?

• The fundamental microeconomics of health care

Is health care really different from other commodities? Is this market failure irreparable, and what does it imply for market versus social or state provision of health care?

Have we learnt more since Arrow’s basic insights?

Health care insurance as a special sub-topic of insurance.

• The health care market: Supply, demand, industrial organization
• Health care as a part of public economics

Why health care is almost everywhere a topic for public economics.  The alternate private/public mix which has been developed in different countries. What is happening in Russia? What could happen? How should health care systems be compared?

• Cost-effectiveness and the role of the economist in the health sector: an introduction. (Students interested in further applications can find them in Cost-Benefit Analysis).

Afterwards read Chapter 1 of Text.

1.2: (Chapter 2 of Text and handouts).  Part I: Measuring Health I: Adjusted Life Years: QALYs, DALYS, life years.  How far have we come?  Can we really measure cost-effectiveness. Can we produce a single objective function? The debate over WHO rankings.

Part II: How health and health care has changed in the last century, the last two decades, the last year: an international overview. (Hsaio).

2.1 Part I: Demographers’ measures, particularly life expectancy.

Part II: What has happened to Russian mortality in the last century, the last two decades, the last few years? (Shapiro, Shapiro and Besstremyannaya).

2^nd week seminar: Trying to quantify health care: QALYs, DALYs and WHO rankings. How is it done? What should we do now? What is the research agenda?

3.1 Part I: Problems of Health Care Insurance in theory

Part II:  Alternate forms of health care provision in the world, and recent changes

3.2  is 3.1 continued

3^rd week seminar: Debate: Trade-offs in “American” versus “European” systems.

4.1 and 4.2 Return (in grater depth) to: is Health care really different from all other commodities? (Chapter 8 of Text)  Are there even partial cures for problems such as the agency problem? How much is inherent, how much is in-built institutionally?

5. The pharmaceutical market.

6. Health in transition.

7. The future of health care reform in the world, and particularly Russia.

The 7 +1 week course necessarily covers somewhat less than a full graduate economics semester in Economics of Health,  particularly as special emphasis is placed on contemporary applications, and within this the accent is on health and health care in the transition economies of Europe and Central Asia. Nonetheless, the essentials are all available for the student.

The course is designed for NES students, that is for students who are at ease with at least the mathematical analysis and econometric sophistication necessary for the reading,  but who care most about the intuition, the evidence, and current debates on alternative approaches.  No previous knowledge of the area of health itself is required, but an interest is highly desirable.

The marks for this course are as follows:

70% is for the final exam, which this year will be closed book. The format of this exam is discussed separately (below) and a number of examples from previous years are available.

A sample mid-term will be distributed at the second lecture of week 4, reflecting this year’s work, and sample answers will be considered in the first lecture of week 5.The option to take a mid-term exam, which will count for 25% of the total marks, replacing an equal number on the final examination, is also discussed below.

30% is for contributions in seminars and lectures, both oral and written.  Students will contribute to different answers and reports in the seminars, as well as working orally through some standard problems, for which written preparation may be done.

Students are offered the option to answer this sample mid-term, sight unseen, before its distribution.  Anyone who takes this option will receive an “indicative” grade, marked exactly on the normal basis, and, if desired, a consultation on areas for improvement and areas of excellence.

If and only it is favourable to the student, this sample will be used for 25%, and the final thus only 45%.