EC781 Health Economics I
Fall 2015
SSW Room 546; 11-12:30pm MW
Albert Ma
Room 557
270 Bay State Road
ma@bu.edu
Office hours: Thursday 11-12:30pm, Friday 2:00-3:30pm, or by appointment
This is the first of a two-course sequence in Health Economics at the Ph.D. level. Students should have
studied the core courses of the Ph.D. program; in addition, background in Game Theory and Industrial
Organization will be helpful.
The Boston University academic code of conduct is available here:
http://www.bu.edu/academics/files/2011/08/AcademicConductCode.pdf
There will be class presentations, a mid-term examination, and a final examination.
Grading will be as follows.
Presentation:
Midterm Examination:
Final Examination:
20%
40%
40%
The final exam is at 12:30-2:30p, on Wednesday December 16.
1
Health Care, Insurance, Moral Hazard and Adverse Selection
Kenneth J. Arrow, 1963, “The Welfare Economics of Medical Care,” American Economic Review, 53,
941-973
Zeckhauser, Richard, 1970, “Medical Insurance: A Case Study of the Tradeoff between Risk Spreading
and Appropriate Incentives,” Journal of Economic Theory, 2, 10-26
Pauly, Mark, 1968, “The Economics of Moral Hazard: Comment,” American Economic Review, 58, 531537
Ma, Ching-to Albert and Michael H. Riordan, 2002, “Health Insurance, Moral Hazard, and Managed
Care,” Journal of Economics & Management Strategy, 11, 81-107
Blomqvist, Ake, 1997, “Optimal non-linear health insurance,” Journal of Health Economics, 16, 303 –
321
Akerlof, George, 1970, “The Market for Lemons: Qualitative Uncertainty and the Market Mechanism,”
Quarterly Journal of Economics, 84(3), 488-500.
Rothschild, Michael and Joseph E. Stiglitz, 1976, “Equilibrium in Competitive Insurance Markets: An
Essay on the Economics of Imperfect Information,” Quarterly Journal of Economics (90(4), 630-649
Villeneuve, Bertrand, 2005, “Competition between Insurers with Superior Information,” European
Economic Review, 321-340.
Chade, Hector and Edward Schlee, 2012, “Optimal Insurance with Adverse Selection,” Theoretical
Economics 7, 571-607.
Chiappori, Pierre-Andre, and Bernard Salanie, 2000, “Testing for Asymmetric Information in Insurance
Markets,” Journal of Political Economy, 108, 56-78.
De Meza, David and David C. Webb, 2001, “Advantageous Selection in Insurance Markets,” Rand
Journal of Economics, 32, 249-262.
Einav, Liran, and Amy Finkelstein, 2011, “Selection in Insurance Markets: Theory and
Empirics in Pictures,” Journal of Economic Perspectives, 25, 115-138.
Hendren, Nathaniel, 2014, “Unraveling versus Unraveling: A Memo on Competitive Equilibria and Trade
in Insurance Markets,” Geneva Risk And Insurance Review, 39, 176-183.
Hendren, Nathaniel, 2013, “Private Information and Insurance Rejections,” Econometrica 81, 1713-1762.
The Patient-Physician Interaction
Dranove, David, 1988, “Demand Inducement and the Physician/Patient Relationship,” Economic Inquiry,
26, 251-298
2
Rochaix, Lise, 1989, “Information Asymmetry and Search in the Market for Physician Services,” Journal
of Health Economics, 8, 53-84.
Ma, Ching-to Albert and Thomas G. McGuire, 1997, “Optimal Health Insurance and Provider Payment,”
American Economic Review, 87, 685-704.
Jack, William, 2005, “Purchasing health care services from providers with unknown altruism,” Journal of
Health Economics, 24, 73-94.
Chone, Philippe and Ching-to Albert Ma, 2011, “Optimal Health Care Contracts under Physician
Agency,” Annales d'Economie et de Statistique, Number 101/102, January/June, 229-256.
Liu, Ting and Ching-to Albert Ma, 2013, “Health Insurance, Treatment Plan, and Delegation to Altruistic
Physician,” Journal of Economic Behavior & Organization, 85, 79-96.
Barham, Victoria and Olga Milliken, 2015, “Payment Mechanisms and the Composition of Physician
Practices: Balancing Cost-containment, Access, and Quality of Care,” Health Economics, 24, 895-906.
Hennig-Schmidt, Heike, Reinhard Selten, and Daniel Wiesen, 2011, “How Payment Systems
Affect Physicians’ Provision Behaviour—An Experimental Investigation,” Journal of
Health Economics 32, 637-646.
Hennig-Schmidt, Heike, and Daniel Wiesen, 2014, “Other-regarding behavior and motivation in health
care provision: An experiment with medical and non-medical students,” Social Science & Medicine, 108,
156-165.
Godager, Geir, and Daniel Wiesen, 2013, “Profit or patients’ health benefit” Exploring the heterogeneity
in physician altruism,” Journal of Health Economics, 32, 1105-1116.
Godager, Geir, Ching-to Albert Ma, and Daniel Wiesen, 2015, “Competition and Physician Altruism: A
Laboratory Experiment,” working paper.
Mimra, Wanda, Alexander Rasch, and Christian Waibel, 2015, “Second Opinions in Markets for Expert
Services: Experimental Evidence,” ETH Zurich working paper.
Provider Payment and Incentives
Ellis, Randall P. and Thomas G. McGuire, 1986, “Provider Behavior under Prospective Reimbursement:
Cost Sharing and Supply,” Journal of Health Economics, 5, 129-151.
Ellis, Randall P. and Thomas G. McGuire, 1990, “Optimal Payment System for Health Services,” Journal
of Health Economics, 9, 375-396.
Ma, Ching-to Albert, 1994, “Health Care Payment Systems: Cost and Quality Incentives,” Journal of
Economics & Management Strategy, 3, 93-112
Ma, Ching-to Albert, 1998, “Cost and Quality Incentive in Health Care: A Reply,” Journal of Economics
& Management Strategy, 7, 139-142, 1998.
3
Ma, Ching-to Albert and Henry Y. Mak, 2015, “Information Disclosure and the Equivalence of
Prospective Payment and Cost Reimbursement,” Journal of Economic Behavior & Organization, 117,
439–452.
Bardey, David, Chiara Canta, and Jean-Marie Lozachmeur, 2012, “The Regulation of Health Care
Providers’ Payments when Horizontal and Vertical Differentiation Matter,” Journal of Health Economics,
31, 691-704.
Barros, Pedro Pita, 2003, “Cream-skimming, Incentives for Efficiency and Payment System,” Journal of
Health Economics, 22, 419-443.
Selection and Risk Adjustment
Jacob Glazer, and Thomas G. McGuire, 2000, “Optimal Risk Adjustment in Markets with Adverse
Selection: An Application to Managed Care,” American Economics Review, 90, 1055-1071.
Glazer, Jacob, and Thomas G. McGuire, 2006, “Optimal Quality Reporting in Markets for Health Plans,”
Journal of Health Economics, 25, 295-310.
Bijisma, Michiel, Jan Boone, and Gijsbert Zwart, 2014, “Competition Leverage: How the Demand Side
Affects Optimal Risk Adjustment,” Rand Journal of Economics, 45, 792-815.
David M. Cutler and Sarah Reber, 1998, “The Tradeoff between Competition and Adverse Selection,”
Quarterly Journal of Economics, 113, 433-466.
Miller, Nolan, 2005, “Health Benefits and Wages: Minimizing Total Compensation Cost,” Journal of
Health Economics, 24, 931-949.
Lorenz, Normann, 2015, “The interaction of Direct and Indirect Risk Selection,” Journal of Health
Economics, 42, 81-89.
Quality Competition in the Health Care Market
Ching-to Albert Ma and Jim Burgess, 1993, “Quality Competition, Welfare, and Regulation,” Zeitschrift
fur Nationalokonomie, Journal of Economics, Vol. 58, 153-173.
Pedro Pita Barros and Xavier Martinez-Giralt, 2002, “Public and Private Provision of Health Care,”
Journal of Economics & Management Strategy, 11, 109-134
Biglaiser, Gary, and Ching-to Albert Ma 2003, “Price and Quality Competition under Adverse Selection:
Market Organization and Efficiency,” Rand Journal of Economics, 34, 266-286.
Bardey, David, and Jean-Charles Rochet, 2010, “Competition among Health Plans: a Two-Sided Market
Approach,” Journal of Economics & Management Strategy, 19, 435-451.
Olivella, Pau, and Marcos Vera-Hernandez, 2007, “Competition among Differentiated Health Plans under
Adverse Selection,” Journal of Health Economics, 26, 233-250.
4
Laine, Liisa, and Ching-to Albert Ma, 2015, “Quality and Competition between Private and Public
Firms,” Boston University working paper.
Managed Care and Health Maintenance Organization
Richard G. Frank, Jacob Glazer, Thomas G. McGuire, 2000 “Measuring Adverse Selection in Managed
Health Care,”, Journal of Health Economics, 19, 829-854.
Ma, Ching-to Albert, 2004 “Managed Care and Shadow Price,” Health Economics, 13, 199-202.
Malcomson, James, 2004 “Health Service Gatekeepers,” Rand Journal of Economics, 35, 401-421.
Brekke, Kurt R., Robert Nuscheler and Odd Rune Straume, 2007, “Gatekeeping in Health Care,” Journal
of Health Economics, 26, 149-170.
Dranove, David, and Kathryn E. Spier, 2003, “A Theory of Utilization Review,” BE Journal of Economic
Analysis and Policy, Contribution, available on-line at www.bepress.com
Ma, Ching-to Albert and Thomas G. McGuire, 2002, “Network Incentives in Managed Health Care,”
Journal of Economics & Management Strategy, 11, 1-36.
Miller, Nolan, 2006, “Insurer-provider Integration, Credible Commitment, and Managed-care Backlash,”
Journal of Health Economics, 25, 861-876.
Public and Private Health Care
Blackorby, Charles and David Donaldson, 1988, “Cash versus Kind, Self-Selection, and Efficient
Transfer” American Economic Review, 78, 691-700.
Besley, Timothy and Stephen Coate, 1991, “Public Provision of Private Goods and The Redistribution of
Income,” American Economic Review, 81, 979-984.
Pita Barros, Pedro, and Pau Olivella, 2005, “Waiting Lists and Patient Selection,” Journal of Economics
& Management Strategy, 14, 623-646.
Gonzalez, Paula, 2004 “Should Physicians’ Dual Practice be Limited? An Incentive Approach,” Health
Economics, 13: 505-524
Biglaiser, Gary and Ching-to Albert Ma, 2007, “Moonlighting: Public Service and Private Practice,”
Rand Journal of Economics, 38, 1113-1133.
Gonzalez, Paula and Ines Macho-Stadler, 2013, “A Theoretical Approach to Dual Practice Regulations in
the Health Sector,” Journal of Health Economics, 32, 66-87.
Ma, Ching-to Albert, 2003, “Public Rationing and Private Cost Incentives,” Journal of Public Economics,
88, 333-352.
5
Hoel, Michael, 2007, “What Should (Public) Health Insurance Cover?” Journal of Health Economics, 26,
251-262.
Grassi, Simona, and Ching-to Albert Ma, 2012, “Public Section Rationing and Private Sector Selection,”
Journal of Public Economic Theory, Vol. 14, 1-34.
Grassi, Simona and Ching-to Albert Ma, 2011, “Optimal Public Rationing and Price Response,” Journal
of Health Economics, Vol. 30, 1197-1206.
6