Seventh Edition The Economics of Health and Health Care Sherman Folland Professor of Economics, Oakland University Allen C Goodman Professor of Economics, Wayne State University Miron Stano Professor of Economics and Management, Oakland University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Executive Editor: David Alexander Editorial Director: Sally Yagan Editor in Chief: Donna Battista Assistant Editor: Lindsey Sloan Editorial Assistant: Emily Brodeur Director of Marketing: Patrice Jones Senior Managing Editor: Nancy Fenton Production Project Manager: Nancy Freihofer Permissions Specialist: Estelle Simpson Senior Manufacturing Buyer: Carol Melville Cover Photo: Yang MingQi/Fotolia Cover Design: Jayne Conte Full-Service Project Management and Composition: Integra Printer/Binder: Edwards Brothers Cover Printer: Lehigh Phoenix Text Font: 10/12 Times Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text Copyright © 2013, 2010, 2007, 2004, 2001 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, Upper Saddle River, New Jersey 07458 All rights reserved Manufactured in the United States of America This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458 Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps Library of Congress Cataloging-in-Publication Data Folland, Sherman The economics of health and health care/Sherman Folland, Allen C Goodman, Miron Stano.—7th ed p cm Includes bibliographical references and index ISBN-13: 978-0-13-277369-0 ISBN-10: 0-13-277369-4 I Goodman, Allen C II Stano, Miron III Title [DNLM: Economics, Medical Government Regulation Health Care Reform—economics Health Policy—economics Insurance, Health—economics W 74.1] LC Classification not assigned 338.4’73621—dc23 2011053121 10 ISBN 13: 978-0-13-277369-0 ISBN 10: 0-13-277369-4 BRIEF CONTENTS PART I PART II PART III Basic Economics Tools Chapter Chapter Chapter Introduction Microeconomic Tools for Health Economics Statistical Tools for Health Economics 48 Chapter Economic Efficiency and Cost-Benefit Analysis 20 63 Supply and Demand Chapter Chapter Production of Health 85 The Production, Cost, and Technology of Health Care Chapter Chapter Chapter Demand for Health Capital 129 Demand and Supply of Health Insurance Consumer Choice and Demand 173 105 148 Information and Insurance Markets Chapter 10 Asymmetric Information and Agency 195 Chapter 11 The Organization of Health Insurance Markets 210 Chapter 12 Managed Care 236 Chapter 13 Nonprofit Firms 265 PART IV Key Players in the Health Care Sector Chapter 14 Hospitals and Long-Term Care Chapter 15 The Physician’s Practice 302 283 Chapter 16 Health Care Labor Markets and Professional Training Chapter 17 The Pharmaceutical Industry 344 PART V 319 Social Insurance Chapter 18 Chapter 19 Chapter 20 Chapter 21 Chapter 22 Chapter 23 Equity, Efficiency, and Need 367 Government Intervention in Health Care Markets 390 Government Regulation: Principal Regulatory Mechanisms Social Insurance 435 Comparative Health Care Systems 466 Health System Reform 492 407 PART VI Special Topics Chapter 24 The Health Economics of Bads 513 Chapter 25 Epidemiology and Economics: HIV/AIDS in Africa 531 iii CONTENTS Preface xix Part I Basic Economics Tools Chapter Introduction What Is Health Economics? The Relevance of Health Economics The Size and Scope of the Health Economy Health Care’s Share of GDP in the United States Health Care Spending in Other Countries Importance of the Health Economy in Personal Spending Importance of Labor and Capital in the Health Economy Time—The Ultimate Resource The Importance Attached to Economic Problems of Health Care Delivery Inflation Access Quality The Economic Side to Other Health Issues Economic Methods and Examples of Analysis 10 Features of Economic Analysis 10 Examples of Health Economics Analysis 11 Does Economics Apply to Health and Health Care? 12 An Example: Does Price Matter? 12 Is Health Care Different? 13 Presence and Extent of Uncertainty 13 Prominence of Insurance 13 Problems of Information 14 Large Role of Nonprofit Firms 15 Restrictions on Competition 15 Role of Equity and Need 16 Government Subsidies and Public Provision 16 Conclusions 16 Summary 17 • Discussion Questions 18 • Exercises Chapter Microeconomic Tools for Health Economics Scarcity and the Production Possibilities Frontier 21 Practice with Supply and Demand 23 The Demand Curve and Demand Shifters 23 The Supply Curve and Supply Shifters 24 Equilibrium 25 Comparative Statics 25 iv 20 18 Contents Functions and Curves 26 Linear Functions 27 Demand Functions 27 Derived Demand 28 Consumer Theory: Ideas Behind the Demand Curve 28 Utility 29 Indifference Curves 30 Budget Constraints 31 Consumer Equilibrium 32 Individual and Market Demands 33 Elasticities 33 Production and Market Supply 35 The Production Function 35 Production Functions 36 Isocost Curves 38 Cost Minimization or Output Maximization 39 Marginal and Average Cost Curves 40 The Firm Supply Curve Under Perfect Competition 41 Monopoly and Other Market Structures 43 Conclusions 45 Summary 45 • Discussion Questions Chapter Statistical Tools for Health Economics Hypothesis Testing 49 Difference of Means 49 The Variance of a Distribution 50 Standard Error of the Mean 51 Hypotheses and Inferences 53 Regression Analysis 54 Ordinary Least Squares (OLS) Regressions A Demand Regression 56 Estimating Elasticities 57 Multiple Regression Analysis 58 Interpreting Regression Coefficients 58 Dummy Variables 59 Statistical Inference in the Sciences and Social Sciences 60 Conclusions 61 Summary 61 • Discussion Questions 46 • Exercises 47 • Exercises 62 48 55 61 Chapter Economic Efficiency and Cost-Benefit Analysis Economic Efficiency 63 Cost-Benefit Analysis: Background 66 Cost-Benefit Analysis: Basic Principles 66 Measuring Costs 67 63 v vi Contents Risk Equity Versus Equality of Marginal Costs per Life Saved 67 Marginal Analysis in CBA 68 Discounting 70 Risk Adjustment and CBA 71 Distributional Adjustments 72 Inflation 72 Valuing Human Life 72 Willingness to Pay and Willingness to Accept 73 Contingent Valuation 73 How Valuable Is the Last Year of Life? 73 Cost-Benefit Analyses of Heart Care Treatment 75 Cost-Effectiveness Analysis 76 Advantages of CEA 77 Cost-Utility Analysis, QALYs, and DALYs 77 An ACE Inhibitor Application of Cost-Effectiveness Analysis 78 QALYs Revisited: Praise and Criticism 78 Are QALYs Consistent with Standard Welfare Economics? 78 Extra-Welfarism 79 Sen’s Capability Approach and QALYs 79 Linearity Versus What People Think 79 The Ageism Critique of QALYs 80 Conclusions 80 Summary Part II 81 • Discussion Questions 81 • Exercises 82 Supply and Demand Chapter Production of Health 85 The Production Function of Health 85 The Historical Role of Medicine and Health Care 88 The Rising Population and the Role of Medicine 88 What Caused the Mortality Rate Declines? Was It Medicine? 89 What Lessons Are Learned from the Medical Historian? 93 The Production of Health in the Modern Day 93 Preliminary Issues 93 The Contribution of Health Care to Population Health: The Modern Era 94 Is Health Care Worth It? 95 Prenatal Care 96 The World’s Pharmacies 97 How Does Health Care Affect Other Measures of Health? 97 On the Importance of Lifestyle and Environment 98 Cigarettes, Exercise, and a Good Night’s Sleep 99 The Family as Producer of Health 100 Social Capital and Health 100 Environmental Pollution 101 Income and Health 101 Contents The Role of Schooling 101 Two Theories About the Role of Schooling 102 Empirical Studies on the Role of Schooling in Health Conclusions 102 Summary 103 • Discussion Questions 103 vii 102 • Exercises Chapter The Production, Cost, and Technology of Health Care 104 105 Production and the Possibilities for Substitution 106 Substitution 106 What Degree of Substitution Is Possible? 107 Elasticity of Substitution 107 Estimates for Hospital Care 109 Costs in Theory and Practice 109 Deriving the Cost Function 110 Cost Minimization 111 Economies of Scale and Scope 112 Why Would Economies of Scale and Scope Be Important? 113 Empirical Cost-Function Studies 114 Difficulties Faced by All Hospital Cost Studies 114 Modern Results 116 Summary: Empirical Cost Studies and Economies of Scale 116 Technical and Allocative Inefficiency 116 Technical Inefficiency 116 Allocative Inefficiency 117 Frontier Analysis 118 The Uses of Hospital Efficiency Studies 119 For-Profit Versus Nonprofit Hospitals 120 Efficiency and Hospital Quality 120 Are Hospital Frontier Efficiency Studies Reliable? 120 Performance-Based Budgeting 121 Technological Changes and Costs 121 Technological Change: Cost Increasing or Decreasing? 121 Health Care Price Increases When Technological Change Occurs 122 Diffusion of New Health Care Technologies 124 Who Adopts and Why? 124 Other Factors That May Affect Adoption Rates 125 Diffusion of Technology and Managed Care 126 Conclusions 126 Summary 126 • Discussion Questions Chapter Demand for Health Capital 127 129 The Demand for Health 129 The Consumer as Health Producer 129 Time Spent Producing Health 130 Labor–Leisure Trade-Offs 131 Trading Leisure for Wages 132 Preferences Between Leisure and Income 132 • Exercises 127 viii Contents The Investment/Consumption Aspects of Health 133 Production of Healthy Days 133 Production of Health and Home Goods 134 Investment over Time 135 The Cost of Capital 135 The Demand for Health Capital 136 Marginal Efficiency of Investment and Rate of Return 136 The Decreasing MEI 136 Changes in Equilibrium: Age, Wage, and Education 137 Age 137 Wage Rate 138 Education 139 Empirical Analyses Using Grossman’s Model 139 Obesity—The Deterioration of Health Capital 141 An Economic Treatment of Obesity 142 Economic Effects 143 Why Has Obesity Increased? 144 Conclusions 145 Summary 146 • Discussion Questions Chapter Demand and Supply of Health Insurance 146 • Exercises 148 What Is Insurance? 148 Insurance Versus Social Insurance 149 Insurance Terminology 149 Risk and Insurance 150 Expected Value 150 Marginal Utility of Wealth and Risk Aversion 151 Purchasing Insurance 152 The Demand for Insurance 153 How Much Insurance? 153 Changes in Premiums 155 Changes in Expected Loss 155 Changes in Wealth 156 The Supply of Insurance 157 Competition and Normal Profits 157 The Case of Moral Hazard 159 Demand for Care and Moral Hazard 159 Effects of Coinsurance and Deductibles 162 Health Insurance and the Efficient Allocation of Resources The Impact of Coinsurance 162 The Demand for Insurance and the Price of Care 166 The Welfare Loss of Excess Health Insurance 167 The Income Transfer Effects of Insurance 168 Conclusions 170 Summary 170 • Discussion Questions 146 171 162 • Exercises 171 Contents Chapter Consumer Choice and Demand 173 Applying the Standard Budget Constraint Model 174 The Consumer’s Equilibrium 175 Demand Shifters 176 Health Status and Demand 178 Two Additional Demand Shifters—Time and Coinsurance The Role of Time 178 The Role of Coinsurance 180 Issues in Measuring Health Care Demand 182 Individual and Market Demand Functions 182 Measurement and Definitions 183 Differences in the Study Populations 183 Data Sources 183 Experimental and Nonexperimental Data 184 Empirical Measurements of Demand Elasticities 184 Price Elasticities 184 Individual Income Elasticities 185 Income Elasticities Across Countries 186 Insurance Elasticities 187 Impacts of Insurance on Aggregate Expenditures 189 Other Variables Affecting Demand 189 Ethnicity and Gender 189 Urban Versus Rural 190 Education 190 Age, Health Status, and Uncertainty 191 Conclusions 191 Summary Part III 192 • Discussion Questions 193 178 • Exercises Information and Insurance Markets Chapter 10 Asymmetric Information and Agency 195 Overview of Information Issues 196 Asymmetric Information 196 On the Extent of Information Problems in the Health Sector 196 Asymmetric Information in the Used-Car Market: The Lemons Principle 198 Application of the Lemons Principle: Health Insurance 199 Inefficiencies of Adverse Selection 200 Experience Rating and Adverse Selection 201 The Agency Relationship 202 Agency and Health Care 202 Consumer Information, Prices, and Quality 203 Consumer Information and Prices 203 193 ix 588 References Delivery,” Journal of the Maine Medical Association 68 (1977): 275–279 Wennberg, John E and Alan Gittelsohn, “Small Area Variations in Health Care Delivery,” Science 182 (1973): 1102–1108 Wennberg, John E and Alan Gittelsohn, “Variations in Medical Care Among Small Areas,” Scientific American 246 (1982): 120–134 Wennberg, John E., B A Barnes, and M Zubkoff, “Professional Uncertainty and the Problem of Supplier-Induced-Demand,” Social Science and Medicine 16 (1982): 811–824 Williamson, Oliver E., The Economics of Discretionary Behavior: Managerial Objectives in the Theory of the Firm (Upper Saddle River, NJ: Prentice Hall, 1964) Wittman, Donald, “Efficient Rules in Highway Safety and Sports Activity,” American Economic Review 72 (1982): 78–90 Wolfe, Barbara L and Jere R Behrman, “Women’s Schooling and Children’s Health: Are the Effects Robust with Adult Sibling Control for the Women’s Childhood Background?” Journal of Health Economics (1987): 239–254 Wennberg, John E et al., “Changes in Tonsillectomy Rates Associated with Feedback and Review,” Pediatrics 59 (1977): 821–826 Wolfe, John R and John H Goddeeris, “Adverse Selection, Moral Hazard, and the Wealth Effects in the Medigap Insurance Market,” Journal of Health Economics 10 (1991): 433–459 Wennberg, John E et al., “Hospital Use and Mortality Among Medicare Beneficiaries in Boston and New Haven,” New England Journal of Medicine 321 (1989): 1168–1173 Woods, Robert and P R Andrew Hinde, “Mortality in Victorian England: Models and Patterns,” Journal of Interdisciplinary History 18 (1987): 27–54 Wheeler, Benedict W., “Health-Related Environmental Indices and Environmental 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Economics 10 (2001): 583–585 Yaniv, Gideon, Odelia Rosin, and Yossef Tobel, “Junk-food, Home Cooking, Physical Activity and Obesity: The Effect of the Fat Tax and the Thin Subsidy,” Journal of Public Economics 93 (2009): 823–830 Williams, Alan and Richard Cookson, “Equity in Health,” Handbook of Health Economics, Volume I, A J Culyer and J P Newhouse (eds.) 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Evidence from a College Alcohol Study,” Applied Economics 10 (2003): 1227–1239 Williams, Scott C et al., “Quality of Care in U.S Hospitals as Reflected by Standardized Measures, 2002–2004,” New England Journal of Medicine 353 (2005): 255–264 Yip, Winnie C., “Physician Response to Medicare Fee Reductions: Changes in the Volume of Coronary Bypass Graft (CABG) Surgeries in the Medicare and Private Sectors,” Journal of Health Economics 17 (1998): 675–699 Yoo, Byung-Kwang et al., “Impacts of Informal Caregiver Availability on Long-term Care Expenditures in OECD Countries,” Health Services Research 39 (2004): 1971–1992 References 589 Zeckhauser, Richard J and David V P Marks, “Sign-Posting Selected Product Information and Market Function,” manuscript, John F Kennedy School of Government, 1989 Zwanziger, Jack and Adam Meirowitz, “Strategic Factors in Hospital Selection for HMO and PPO Networks,” in Managed Care and Changing Health Markets, Michael A Morrisey (ed.) (Washington, DC: AEI Press, 1998) Zipkin, Amy, “The Concierge Doctor is Available (at a Price),” New York Times, July 31, 2005, www.nytimes.com/ 2005/07/31/business/your_money/31doctor Zwanziger, Jack and Glen A Melnick, “The Effects of Hospital Competition and the Medicare PPS Program on Hospital Cost Behavior in California,” Journal of Health Economics (1988): 301–320 Zuckerman, Stephen, Jack Hadley, and Lisa Iezzoni, “Measuring Hospital Efficiency with Frontier Cost Functions,” Journal of Health Economics 13 (1994): 255–280 Zwanziger, Jack and Cathleen Mooney, “Has Competition Lowered Prices?” Inquiry 42 (2005): 73–85 NAME INDEX A Aaberge, Rolf, 383 Aaron, Henry J., 481 Abbott, Thomas A., 357 Absolo, Ignacio, 368 Acemoglu, Daron, 109 Acton, Jan P., 180 Adams, Scott J., 217 Ahituv, Avner, 535 Aigner, Dennis J., 119 Aizer, Anna, 97 Akerlof, George A., 198, 199 Al, Maiwenn J., 72 Aldy, Joseph E., 74, 75, 540 Alexander, Jeffrey A., 311 Allin, Sara, 476, 477, 482 Almond, Douglas, 95 Altman, Stuart H., 292 Alvarez-Dardet, Carlos, 87 Andermann, Anne Adina Judith, 123 Anderson, Geoffrey, 479 Anderson, Gerard F., 140, 487, 489 Anderson, John P., 139 Anderson, Odin W., 401 Andreoni, James, 267 Angell, Marcia, 359 Arnould, Richard J., 252, 269 Arrow, Kenneth J., 13, 195, 267, 269, 386 Ashcroft, John, 448 Atkinson, Scott E., 94 Auld, M Christopher, 102 Austin, D Andrew, 224 Aylward, Bruce, 537 B Bae, Jay P., 357 Bain, Joe S., 521 Baker, Laurence C., 126, 259, 397 Bala, Mohan V., 79 Balcombe, Kelvin, 397 Balia, Silvia, 99 Ball, James, 473 Ballou, Jeffrey P., 277 Balsa, Ana I., 189 Baltagi, Badi H., 522, 526 Barbetta, Gian Paolo, 120 Barry, John M., 537 Barry, Michael J., 316 Barsukiewicz, Camille K., 283 Bashaw, David J., 338 Bates, Alan, 448 Bates, Laurie J., 292 Bays, Carson W., 268 Beaulieu, Nancy D., 206 Becker, Gary S., 73, 140, 517, 521, 527, 528 Becker, Mark P., 313 Bentham, Jeremy, 385 Bergman, Richard N., 131 Besser, Richard, 532–533 Bhagwati, Jagdish, 501 Bhattacharya, Jay, 141, 217, 340 590 Bilodeau, David, 114 Bishop, Christine E., 298 Blank, Rebecca, 372 Bleichrodt, Han, 79 Blendon, Robert J., 259 Blomquist, Ake, 186 Bloom, David E., 536 Blumenthal, David, 307, 310 Blundell, Richard, 180 Bolin, Kristian, 100 Bonsang, Eric, 298 Borisova, Natalia, 141 Boulier, Bryan L., 534 Boyle, Sean, 469 Bradford, W David, 120, 316 Brekke, Kurt R., 45, 246 Brennan, Troyen A., 338 Brewer, Jan, 463 Brickley, James A., 277 Brody, Howard, 328 Brouwer, Werner B F., 71, 379 Brown, Douglas M., 108, 324–325 Brown, Jerry, 463 Brown, Randall S., 114 Brown, Timothy T., 100, 527 Browne, Mark J., 201 Bryan, Stirling, 73 Bunce, Victoria Craig, 230 Bundorf, M Kate, 207, 217 Burgess, James F., Jr., 109, 120 Burke, Mary, 125 Burstein, Philip L., 337 C Cahill, Timothy, 408 Calem, Paul S., 288 Campbell, Christine M., 527 Campbell, Denis, 473, 481 Cannon, Michael, 500 Capilouto, Eli I., 524 Capps, Cory, 121, 292 Card, David, 458 Cardon, James H., 201 Carey, Kathleen, 115 Carlsen, Fredrik, 310 Carlson, William L., 54 Carpenter, Christopher, 525 Carter, Richard A L., 186 Caudill, Stephen B., 125 Cawley, John, 2, 143 Chakvarty, Sujoy, 270, 278 Chaloupka, Frank J., 397, 516, 520, 522, 523, 525, 527 Chan, Sandra W., 523 Chaoulli, Jacques, 482 Chassin, Mark R., 313 Chatterji, Pinka, 516 Chen, Lin, 474 Chen, Pauline W., 328 Chernew, Michael C., 191, 206 Chilingerian, Jon, 120 Chiswick, Barry R., 184, 186 Chou, Shin-Yi, 206, 280 Christensen, Eric W., 269 Ciliberto, Frederico, 292 Civan, Abdülkadir, 364 Clancy, Carolyn, 500 Clark, Andrew E., 527 Clarkson, Kenneth W., 354 Claxton, Karl, 71 Cleverly, William O., 291 Clinton, Hilary, 439 Coate, Douglas, 35, 523, 525 Cobb, Charles, 37 Cochrane, Archibald L., 87 Cockburn, Iain, 360 Coffey, Rosanna M., 180 Cogan, John F., 497, 500, 501 Cohen, Joel W., 189, 270 Cohen, Joshua T., 505 Colditz, Graham A., 59 Cole, Nancy, 101 Collins, Sara R., 397 Comanor, William S., 355, 521 Commanor, William S., 100 Cone, Kenneth, 411 Conover, Christopher J., 411 Conrad, Robert F., 114 Contoyannis, Paul, 99 Conway, Karen S., 97 Cook, Phillip J., 516, 525, 527 Cookson, Richard, 79, 368, 380–381 Cooper, Philip F., 220, 260 Corman, Hope, 96 Corts, Kenneth S., 259 Courtemanche, Charles, 292, 305 Cowing, Thomas G., 114 Cowling, Keith, 522 Cremieux, Pierre-Yves, 94 Crocker, Thomas, 94 Cromwell, Jerry, 184, 337 Cropper, Maureen L., 75, 101 Cruz-Smith, Martin, 514 Culyer, Anthony J., 368, 376, 377 Currie, Janet, 96, 97, 98, 101, 191, 451, 459 Custer, William S., 109 Cutler, David M., 2, 74, 75, 76, 92, 95, 102, 144, 239, 249–250, 254, 280, 453, 456, 481, 497, 504 D Dalton, Kathleen, 450 D’ Andrea, Guy, 203 Daniels, Norman, 80, 381 Danzon, Patricia M., 360, 361 Datta, Tejwant S., 534 Dave, Dhaval, 523, 526 David, Guy, 189 Davis, Karen, 457 Davis, Mark A., 270, 295 Deaton, Angus, 101 Deb, Partha M., 108, 254 Debebe, Zelalem, 161 De Brantes, Francois, 203 Decker, Frederic H., 295 Name Index 591 Deer, Brian, 538 Defelice, Lisa A., 120 Deily, Mary, 120 Dekker, Thijs, 75 Derrick, Frederick W., 310 DeSimone, Jeff, 516 d’Hombres, Beatrice, 100 DiCicca, Phillip, 527 Dills, Angela K., 520 DiMasi, Joseph A., 349, 359, 400 Dixon, Anna, 500 Dobkin, Carlos, 458 Dobson, Allen, 411 Dockery, Douglas W., 101 Doerpinghaus, Helen I., 201 Dolan, Paul, 79 Donabedian, Avedis, 251 Dong, Frederick, 78 Donohue, Julie, 348 Dorn, Stan, 462 Doroodian, Khowsrow, 522 Douglas, Paul, 37 Dow, William H., 260 Dowd, Bryan, 167, 185 Doyle, Joseph, 98, 326 Dranove, David, 116, 121, 238, 257, 289, 309, 310, 314, 316, 350, 410, 411 Drummond, Michael F., 66 Dubos, Rene, 87 Duclos, Jean-Yves, 484 Dyck, Frank J., 313 E Easley, David, 269 Échevin, Damien, 484 Eddy, David M., 316 Efron, Bradley, 53 Eggleston, Karen, 277, 473, 475 Elixhauser, Anne, 81 Ellis, Randall P., 111, 248, 280 Elzinga, Kenneth G., 430 Emanuel, Ezekiel J., 217 Emmons, David W., 429 Epstein, Andrew, 312, 314 Escarce, José J., 124, 313, 325 Evans, Robert G., 114, 306 Evans, Ronald M., 131 Evans, William N., 96, 100, 526 Ewer, Steven M., 326 F Fang, Hai, 261, 316 Fare, Rolf, 118 Farmer, Paul, 87 Farsi, Mehadi, 114, 280 Fauci, Anthony S., 539 Feinglass, Joe, 422 Feldman, Roger D., 167, 185, 229, 258, 306, 310, 334, 500, 501 Feldstein, Martin, 166, 167 Feldstein, Paul J., 259 Finkelstein, Amy, 109, 143, 456, 459 Fletcher, Suzanne W., 59 Flood, Colleen, 483 Fogel, Robert W., 91, 92, 93, 533 Folland, Sherman T., 99, 100, 120, 280, 312, 313, 315, 386, 527 Fontana, Patrick, 408 Ford, Henry, 497 Forder, Julien, 298 Fournier, Gary M., 114 Fowler, Floyd J., 313 Fowler, Lynette, 120 Frank, Richard G., 261, 357, 359 Frech, H E., III, 97, 100, 258, 268, 364 Frederick, Shane, 70 Freeland, Mark S., 189, 233 Frenk, Julio, 87 Frew, Emma J., 73 Friedman, Bernard, 126 Friedman, Milton, 11, 336 Fuchs, Victor R., 17, 91, 98, 99, 102, 106, 217, 327, 335, 382, 461, 478 G Gabel, Jon, 400 Galewitz, Phil, 214 Gallett, Craig A., 522 Garavaglia, 280 Garber, Alan M., 77, 79 Garcia-Frapolli, 69 Garrett, Bowen, 462 Gaumer, Gary L., 338, 339 Gauthier, Anne K., 500 Gaynor, Martin, 45, 120, 185, 204, 277, 427, 429 Geoffard, Pierre-Yves, 534 George, Lloyd, 437 Gerdtham, Ulf-G., 140, 186, 475 Gertler, Paul J., 270 Getzen, Thomas E., 186 Ghosh, Arunabh, 462 Gibson, Teresa R., 362 Gillum, Brenda S., 260 Ginsburg, Paul B., 258, 416 Glaeser, Edward L., 100, 144 Glantz, Stanton A., 522 Glied, Sherry, 254 Goddeeris, John H., 201, 231, 280 Gold, Marthe R., 66, 77, 81 Goldberg, Lawrence G., 222 Goldberg, Theodore, 363 Goldfarb, Robert S., 534 Goldman, Dana P., 3, 201, 362 Goldstein, Karen P., 535 Golec, Joseph, 357 Gompers, Samuel, 438 Goodman, Allen C., 56, 135, 141, 185, 246, 260 Goodman, Clifford S., 66 Goodman, John C., 499 Gordon, Margaret, 466 Grabowski, David C., 270, 277, 297, 359, 449 Grabowski, Henry G., 357, 359 Graddy, Elizabeth, 338 Grady, Denise, 218–219 Grannemann, Thomas W., 114 Grant, Darren, 202 Graves, Edmund J., 260 Green, Lee A., 313, 500 Greenberg, Warren, 222 Greene, Jessica, 500 Gregory, Paul R., 35 Grépin, Karen A., 364 Griffin, James M., 526 Grossman, Joy M., 416 Grossman, Michael, 35, 94, 96, 102, 129, 191, 517, 523, 527, 528 Gruber, Jonathan, 96, 98, 101, 217, 219, 268, 277, 297, 305, 310, 445, 452, 453, 459, 462, 507, 525, 526 Grytten, Jostein, 202, 310 Guardado, José R., 429 Gully, O David, 280 H Haas-Wilson, Deborah, 205, 427 Hadley, Jack, 94, 120, 185, 494–495 Hahn, James S., 478 Häkkinen, Unto, 114 Hall, Thomas D., 336 Hamilton, James L., 523 Hamilton, Vivian, 298 Hammit, James K., 75 Hanratty, Maria, 98 Hansen, Ronald W., 359 Hansen, W Lee, 330 Hansmann, Henry B., 269, 270, 277, 280 Harrington, Scott, 189 Harris, Jennifer L., 397 Harris, Gardiner, 328, 345 Harris, Jeffrey E., 278–279, 523 Harrison, Teresa, 292 Hassan, Mahmud, 277 Hatch, Elizabeth E., 54 Hawley, Chris, 192 Hayek, Friedrich, 386 Headen, Alvin E., Jr., 337 Helland, Eric, 315 Hendel, Igal, 201 Henderson, Rebecca, 360 Henderson, Rochelle, 362 Hensley, Scott, 538 Hethcote, Herbert W., 533 Hill, Steven C., 126 Hilsenrath, Peter, 538 Himmelstein, David U., 481 Hirsch, Barry T., 331 Hirth, Richard, 270, 277, 278 Ho, Katherine, 305 Hoadley, Jack, 443 Hoch, Irving, 315 Hoff, Timothy J., 340 Hofler, Richard A., 120, 280 Hogarty, Thomas F., 430 Holahan, John, 458, 462 Hollingsworth, Bruce, 120, 280 Holloway, James J., 422 Holmes, Ann M., 108 Holtmann, Alphonse G., 114, 281 Hornbrook, Mark C., 115 Horrace, William C., 97 Horwitz, Jill R., 280 Hotz, Joseph, 535 Howard, David H., 205 Howard, Hilda A., 450 Hsiao, William, 425 Huang, Lien-fu, 186 Hubbard, R Glenn, 497, 500, 501 Hughes, Susan L., 298 Hungerford, Thomas L., 224 Hungerman, Daniel M., 268, 277 Hurd, Michael D., 188 Hurley, Jeremiah, 368, 377, 500 592 Name Index I Idson, Todd L., 281 Iezzoni, Lisa, 120 Iglehart, John K., 223 Ignagni, Karen, 164 Illich, Ivan, 87 Illife, Steve, 109 Islam, Kamrul, 100 Iversen, Tor, 305, 310 Iwasaki, Natsuko, 523 J Jacobson, Lena, 100 Jacobson, Mirelle, 520 Jacobson, Peter D., 325 Jantzen, Robert, 292 Jayachandran, Seema, 95 Jenner, Edward, 533 Jensen, Gail A., 109, 217, 230, 260, 400 Jowett, Sue, 73 Jha, Ashish K., 293 Jiménez-Martin, Serji, 191 Joesch, Jutta M., 259 Johannesson, M., 140 Johnson, Lyndon B., 438 Jones, Andrew, 99, 383, 384 Jones, Andrew M., 99 Jones, Lewis W., 327 Jones, Robert F., 332 Jonsson, Bengt, 475 Joyce, Geoffrey F., 362 Joyce, Theodore J., 94, 96, 100, 507 K Kaarboe, Oddvar, 100 Kane, Carol K., 429 Kantarevic, Jasmin, 326 Kaplan, Robert M., 139 Kapur, Kanika, 410 Katzman, Brett, 527 Kawachi, Ichiro, 397 Keehan, Sean P., 16, 402, 508 Keeler, Emmett B., 292 Keeler, Theodore E., 35, 523, 524, 525 Kefauver, Estes, 349 Kenkel, Donald S., 140 Kennedy, Anthony, 448 Kermack, William O., 533 Kessel, Reuben, 11, 244, 335, 336 Kessler, Daniel P., 270, 289, 497, 500, 501 Kim, Daniel, 397 Kleinerman, Ruth A., 54 Kochi, Ikuho, 75 Köksal, Bülent, 364 Kolata, Gina, 164 Konetzka, Tamara, 297 Koolman, Xander, 383, 384 Kooreman, Peter, 119, 120 Köszegi, Botond, 526 Kronick, Richard, 229 Krueger, Alan B., 217, 495, 496 Kutinova, Andrea, 97 Kuznets, Simon, 11, 336 L Laine, Juha, 120 Lakdawalla, Darius N., 141, 279 Lalonde, Marc, 86 Lamberton, Charles E., 184 Landon, Bruce E., 254 Lane, H Clifford, 539 Lanoie, Paul, 520 Laugesen, Murray, 523 Law, Michael R., 364 Leclair, Paul, 520 Lee, Dwight R., 207 Lee, Robert H., 185 Lee, Roger I., 327 Lee, Young Hoon, 119 Leeper, Ed, 53 Leffler, Keith B, 333, 337 Le Grand, Julian, 471–472 Lehner, Laura A., 109 Leibowitz, Arlene A., 140 Leonard, Kenneth L., 205, 316, 317 Lerner, Abba, 427 Lessler, Daniel S., 410 Levin, Dan, 522 Levitt, Steven D., 515 Levy, Helen, 443 Lewit, Eugene M., 35, 523, 525 Liang, J Nellie, 108 Lichtenberg, Frank R., 361, 364 Lien, Diana S., 96, 277 Light, Donald W., 359 Lindeboom, Maarten, 102 Lindgren, Bjorn, 100, 519 Lindhjem, Henrik, 75 Lindrooth, Richard, 116, 121, 292 Lindsay, Cotton M., 333, 336 Linet, Martha S., 54 Lingle, Linda, 454 Linna, Miika, 114 Liska, David, 462 Liu, Hong, 261 Liu, Zhimei, 260 Lleras-Muney, Adriana, 95, 102 Locke, John, 386 Loewenstein, George, 70 Loheac, Youenn, 527 Lo Sasso, Anthony T., 341 Loubeau, Patricia R., 292 Lovell, C.A Knox, 119 Lu, John Z., 355 Luft, Harold S., 252, 253, 256 Lundborg, Petter, 519 Luo, Ye, 297 Ly, Dan P., 497 M Ma, Jin, 475 MacDonald, Ziggy, 517 Madan, Sandan, 501 Madrian, Brigitte C., 219, 220 Maestas, Nicole, 458 Magnusson, Jon, 120 Mahal, Ajay, 536 Mann, Thomas, 90 Mannes, Robert, 357 Manning, Willard G., 35, 60, 167, 184, 252, 253, 519 Mansfield, Edwin, 35, 358 Mark, Tami L., 120, 280 Markowitz, Sara, 527 Marquis, M Susan, 167, 260 Mason, Michael, 408 Mather, Dell, 363 Maude-Griffin, 168 Mayberry, Robert M., 189 Maynard, Alan, 471 Mays, Glen P., 401 Mbeki, Thabo, 545 McCain, John, 439, 504 McCarthy, Patrick S., 520 McCarthy, Thomas R., 185 McClellan, Mark, 239, 254, 270, 277, 289, 413 McCue, Sally M., 313 McCullough, Jeffrey S., 125 McGarry, Kathleen, 188 McGeary, Kerry Anne, 527 McGlynn, Elizabeth A., 204 McGuinness, Tony, 522 McGuire, Thomas G., 189, 195, 303, 308, 309, 310 McKay, Niccie L., 120, 288 McKendrick, Anderson G., 533 McKeown, Thomas, 87, 88, 89, 91, 533 McKinlay, John B., 90, 533 McKinlay, Sonja M., 90, 533 McKnight, Robin, 459 McLaughlin, Catherine G., 228, 258 McQueen, M P., 501 Meads, Chris, 523 Meara, Ellen, 456 Meirowitz, Adam, 244 Mello, Michelle, 489 Mellor, Jennifer, 525 Melnick, Glen A., 258, 292, 421 Meltzer, David, 350 Meyerhoeffer, Chad D., 188 Miles, John J., 429 Mili, Fatima, 189 Mill, John Stuart, 386 Miller, Theodore R., 75 Miller, Douglas L., 100 Miller, Grant, 92 Miller, Richard, 97, 100, 364 Miller, Robert H., 252, 253 Miron, Jeffrey A., 520 Mitchell, Janet B., 184 Mitchell, Jean M., 114 Mocan, Naci, 100 Monheit, Alan C., 115, 180, 220 Mooney, Gavin, 289, 314 Moore, Michael J., 516, 526, 527 Moretti, Enrico, 97 Morrisey, Michael A., 2, 109, 217, 230, 239, 258, 291, 410, 422 Motheral, Brenda R., 362 Mrozek, Janusz R., 75 Mueller, Curt D., 180 Mukamel, Dana B., 185 Mullahy, John, 140, 520 Mullen, Kathleen, 261 Murphy, Kevin M., 73, 93, 95, 140, 517, 521, 527, 528 Mushkin, Selma, 93 N Nardell, Edward, 87 Nash, John, 288, 416 Nassiri, Abdelhak, 305 Nauenberg, Eric, 482 Nelson, Alan R., 189, 520 Newbold, Paul, 54 Name Index 593 Newhouse, Joseph P., 15, 60, 97, 98, 184, 186, 188, 191, 233, 239, 254, 256, 271, 275–276, 277, 333, 455, 479 Nguyen, Nguyen X., 310 Nicholson, Sean, 254, 312, 314, 339 Nord, Eric, 80 Nordhaus, William, 71 Norton, Edward C., 260, 277, 294, 299 Nozick, Robert, 385, 386–387 Nyman, John A., 168, 170, 297 O Oakeshott, Isabel, 471 Obama, Barack, 365, 439, 504 O’Donoghue, Ted, 70 Ofili, Elizabeth, 189 Ogur, Jonathon D., 108 O’Halloran, Patrick L., 338 O'Hara, Maureen, 269 Ohsfeldt, Robert L., 524 Okun, Arthur, 372 Okunade, Albert, 108 Olesen, Ole B., 114 Olivella, Pau, 246 Olkin, Ingram, 60 Olsen, Jan Abel, 79 O’Neill, Dave, 479, 483–484 O’Neill, June, 479, 483–484 Oreopoulus, Philip, 102 Oster, Emily, 546 Oullette, Pierre, 94 Over, Mead, 543 Owings, Maria, 305, 310 Ozcan, Yasar A., 120 P Pakes, Ariel, 305 Parente, Stephen T., 313, 314, 501 Pareto, Vilfredo, 368 Paris, Valérie, 403 Parkin, David, 186 Paul, Chris, 337 Pauly, Mark V., 109, 114, 115, 120, 153, 195, 203, 215, 274, 275–276, 279, 302, 303, 308, 309, 325, 376, 380, 387, 420, 496, 498, 499, 502 Paxson, Christina, 101 Pearson, Steven D., 505 Peden, Edgar A., 189, 233 Peltzman, Sam, 337, 349, 403 Petersen, Niels S., 114 Peterson, Mark A., 13 Phelps, Charles E., 77, 79, 184, 186, 306, 311, 313, 314 Phibbs, Ciaran, 126 Philippini, Massimo, 114 Philipson, Tomas, 73, 272, 279, 350, 362, 534, 535, 536, 539 Picone, Gabriel A., 191, 280 Pilon, Caroline, 94 Pink, George, 116 Pisano, Susan, 218 Plotzke, Michael Robert, 292, 305 Polachek, Solomon, 204 Polling, Red, 502 Polsky, Daniel, 254, 315 Porter, Jack Ray, 515 Posner, Richard, 539 Poullier, Jean-Pierre, 186 Powell, Lisa M., 295, 397, 516 Pozen, Alexis, J 481 Preya, Colin, 116 Pritchett, Lant, 101, 104 Q Quast, Troy, 305 Quiggin, John, 79 R Racine, Andrew D., 100 Raffel, Marshall W., 283, 294 Raffel, Norma K., 283 Rashad, Inas, 220 Rawls, John, 385–386 Reagan, Patricia B., 191 Reber, Sarah, J., 249–250 Redisch, Michael, 274, 275–276, 279, 420 Reinhardt, Uwe E., 292, 306, 324, 380, 495, 496 Relman, Arnold S., 359 Reynolds, Roger, 457 Rhee, Sang-O., 335 Ried, Walter, 77 Ringel, Jeanne S., 100, 526 Rizzo, John A., 125, 254, 261, 288, 305, 307, 310 Roberts, Brandon, 315 Roberts, Mark J., 522 Robertson, Peggy, 218–219 Robinson, James C., 223 Robinson, Lisa A., 75 Rochaix, Lise, 305 Rolph, John E., 12 Romney, Mitt, 507 Roos, Leslie L., 479 Ropeik, David, 538 Rosen, Harvey S., Rosenthal, Meredith B., 203, 261, 504 Rosenzweig, Mark R., 94, 100, 515 Rosett, Richard N., 186 Rosin, Odelia, 142 Ruffin, Roy J., 35 Ruiz, Maria Teresa, 87 Russell, Louise B., 81 S Sacks, Jerome, 60 Saffer, Henry, 520, 522, 523, 526, 527 Safriet, Barbara J., 339 Salkever, David S., 357, 410 Samuelson, Larry, 522 Santerre, Rexford E., 270, 280, 281, 290, 292 Sanz de Galdeano, Anna, 220 Sappington, David, 305 Sarpong, Eric, 220 Sasser, Alicia C., 340 Satterthwaite, Mark A., 203 Scanlon, Dennis P., 206, 256 Scanlon, William J., 296 Schaeffer, Leonard, 223 Schelling, Thomas, 516 Schmidt, Peter, 119 Schnelle, John F., 295 Schoen, Cathy, 484, 486 Schultz, T Paul, 94, 100 Schumacher, Edward, 331 Schwartz, Joel, 101 Schweitzer, Stuart O., 347, 358 Segal, Leonie, 19, 81 Seldon, Barry J., 337, 522 Sen, Amartya, 79, 380 Sen, Anindya, 525 Sen, Bisakha, 527 Sendi, Pedram, 72 Sevilla, Jaypee, 536 Shapiro, Jesse M., 144 Shaw, James W., 97 Shen, Yu-chu, 277 Shen, Yu-chu, 277, 280 Shenkman, Elizabeth, 305 Shepperd, Sasha, 109 Sheu, Mei-ling, 525 Shleifer, Andrei, 413, 416 Shortell, Stephen M., 238 Showalter, Mark, 315 Siciliani, Luigi, 45 Sickles, Robin C., 94, 139 Sidhu, Nirmal, 102 Silverman, Elaine, 278, 419 Simon, Carol J., 238, 257 Simon, Kosali I., 229 Sindelar, Jody, 140, 520 Sisko, Andrea, 508 Skinner, Jonathan, 278, 419 Skocpol, Theda, 439 Sloan, Frank A., 120, 125, 270, 276, 280, 306, 310, 334, 411, 422 Smedley, Brian D., 189 Smith, Adam, 73, 386 Smith, Francis B., 90 Smith, James P., 101 Smith, Richard D., 79 Smith, Sharla A., 401 Sorensen, Rune, 310 Spector, William D., 185, 270 Spence, A Michael, 271 Spetz, Joanne, 259 Staiger, Douglas O., 277 Stano, Miron, 135, 246, 312, 313 Starr, Paul, 283, 335–336 Stefos, Theodore, 115 Steinberg, Jonny, 545 Steinberg, Richard, 267 Steiner, Claudia, 126 Steinfels, Peter, 448 Steinwald, A Bruce, 334 Stern, Nicholas, 71 Stewart, Kathryn, 416–417 Stigler, George J., 204, 337 Stiglitz, Joseph, 72 Stith, Adrienne Y., 189 Straume, Odd Rune, 45 Strauss, Robert P., 114 Street, Andrew, 120 Studdert, David M., 410 Succi, Melissa J., 291 Sullivan, Daniel, 331 Summers, Lawrence H., 101, 104 Suraratdecha, Chutima, 108 Svorny, Shirley, 339 T Tay, Abigail, 293 Taylor, Laura O., 75 Temin, Peter, 268, 283, 399 Tengs, Tammy O., 68 594 Name Index Teplensky, Jill D., 125 Thorne, Betty, 54 Tibshirani, Robert, 53 Tilford, John M., 135, 184 Tobel, Yossef, 142 Topel, Robert H., 93, 95 Toren, Mark, 120 Torrance, George W., 77 Tremblay, Carol Horton, 522, 523, 524 Tremblay, Victor J., 522, 523, 524 Troyer, Jennifer L., 295 Trude, Sally, 261 Truffer, Christopher J., 446 Tsuchiya, Aki, 368 Tumlinson, Anne, 206 Turati, Gilberto, 120 Tye, Joe B., 522 U Uribe, Martin, 191 V Valdez, R Burciaga, 97 Valdmanis, Vivian G., 120 Valvona, Joseph, 422 van Doorslaer, Eddy, 377, 383, 384 Van Horn, R Lawrence, 277 Van Houten, Courtney H., 299 van Kempen, Luuk, 161 van Lear, William, 120 Vara-Hernández, Marcos, 246 Varkevisser, Marko, 180 Vernon, John A., 270, 280, 281, 357, 359, 360 Viscusi, W Kip, 67, 74, 75, 519, 540 Vita, Michael G., 114 Vitaliano, Donald F., 120 Vogel, Ronald J., 97 Vogt, William B., 45, 185, 427, 429 W Waber, Rebecca L., 205 Wade, Nicholas, 131 Wagner, Todd H., 326 Wagstaff, Adam, 376, 377 Wakefield, Andrew J., 538 Wallin, Susan, 458 Wang, Jian, 476 Warburton, Rebecca N., 359 Warner, Kenneth E., 516, 522 Watson, Diane, 476, 477, 482 Wechsler, Henry, 516 Wedig, Gerard J., 35, 184, 191 Wehner, Paul, 309, 310 Weinick, R M., 189 Weinstein, M.A., 81 Weir, David, 443 Weisbrod, Burton A., 230–231, 266, 268, 277, 280 Wells, Kenneth B., 12 Wennberg, John E., 311, 312, 313 Wertheimer, Nancy, 53 Wheeler, Benedict W., 315 White, William D., 202, 238, 257, 316 Whitehead, Jenny, 471 Whynes, David K., 73 Wickizer, Thomas M., 259, 410 Wiener, Joshua, 458 Wiggins, Steven N., 357 Wilde, Oscar, 74 Williams, Aimee, 462 Williams, Alan, 80, 368, 381 Williams, Jenny, 516 Williams, Scott C., 293 Willke, Richard J., 109 Wilson, Duff, 345 Wilson, Paul W., 120 Wilson, R Mark, 191 Wilson, Thomas A., 521 Windmeijer, Frank, 180 Wirjanto, Tony S., 525 Wittman, Donald, 387 Wolfe, Barbara L., 126 Wolfe, John R., 201 Wolpin, Kenneth I., 100, 515 Wolstenholme, Jane L., 73 Wood, Elaine, 260 Woolhandler, Steffie, 481 Wu, Vivian Y., 254, 291 Y Yaisawarng, Suthathip, 121 Yamada, Tadataka, 537 Yaniv, Gideon, 142 Yazbeck, Abdo, 94, 139 Yip, Winnie C., 310 Yoo, Byung-Kwang, 298 Z Zago, Angelo M., 120 Zarkin, Gary A., 79 Zeckhauser, Richard J., 125, 305, 307, 310 Zeliotis, Georges, 482 Zellers, Wendy K., 228 Zhun Cau, 189 Zimmerman, Heinz, 72 Zinman, Jonathan, 525 Zivin, Joshua Graff, 316, 317 Zuckerman, Stephen, 120, 280 Zuvekas, Samuel H., 188, 189 Zwanziger, Jack, 244, 289, 421 SUBJECT INDEX A Access costs and, employer vs individual mandates, 495–496 ensuring, 495–498 insurance separation from employment and, 496–497 single payer vs multiple insurers, 497–498 ACE See Angiotensin-converting enzyme inhibitor Addiction models application of, 518–519 capital stock and, 518 imperfectly rational, 516 myopic, 516–517 policy implications of, 519 rational, 140, 517–518 steady state and, 518 Addictive stock, 518 Adoption of technology, 124–126 Adverse selection, 187, 218 HMOs and, 249–251 insurance and, 200–201 Advertising alcohol consumption and, 523 bads restrictions and, 520–523 as barrier to entry, 521 brand switching and, 522–523 as complementary good, 521–522 DTC, 316, 348 as information, 520–521 quackery and, 521 theories, 520 Africa case study, 539–546 Age demand and, 191 equilibrium and, 137–138 Ageism, QALYs and, 80 Agency defined, 202 health care and, 202–203 physician’s practice and, 305–306 Aggregate expenditures, insurance and, 189 AIDS See Auto-immune deficiency syndrome Alcohol consumption advertising and, 523 bads and, 514, 515–516 across countries, 514 dangers of, 515–516 excise taxes and, 523–528 Allocative inefficiency, 117–118 Alternative delivery systems development, 499 Analysis, economic examples of, 11 features of, 10 Angiotensin-converting enzyme (ACE) inhibitor, 78 Antitrust enforcement, 426 exemptions, 426–427 government regulation and, 426–431 monopoly power measurement, 427–429 procedures, 429–430 Asian countries, 473 Aspirin, 123 Asymmetric information See also Agency; Consumer information adverse selection and, 200–201 experience rating and, 201 imperfect information vs., 199 information problems and, 196–197, 199 lemons principle and, 198–201 overview, 196 Autism, 538 Auto-immune deficiency syndrome (AIDS) annual and cumulative rates of, 539, 540 case study, 539–546 cost of, 540, 543 diseases associated with, 539–540 economic theory vs reality, 545–546 fighting, 543–545 overview about, 539 as pandemic, 539, 542 in South Africa, 545 B Bads addiction models and, 516–519 advertising restrictions and, 520–523 alcohol consumption and, 514, 515–516 cultures and behaviors and, 514–515 excise taxes and, 523–528 other interventions for, 520 overview about, 513 public intervention rationales for, 519–520 smoking and, 515 Basal Metabolic Rate (BMR), 142–143 Benchmark model, supplier-induced demand, 308–309 BMI, See Body Mass Index BMR See Basal Metabolic Rate Body Mass Index (BMI), 141–142 Brand switching, 522–523 Budget constraint model, standard consumer’s equilibrium and, 175–176 demand shifters and, 176–177 health status and demand and, 178 overview, 174–175 Budget constraints, 31 Budgeting, performance-based, 121 C Cadillac tax, 439, 506 Caesareans, 218–219 Canada administrative costs in, 481 background about, 476–478 costs in, 479, 481 GDP and, 469 physician fees in, 478–479 private insurance future in, 482 resources, 469 self-reported unmet need in, 484 spending in, 468 system origins, 477 technology availability in, 480 U.S compared with, 477–478, 481–484 Canada Health Transfer (CHT), 477 Capital, 6–7 Capital stock, 518 CBA See Cost-benefit analysis CDHPs See Consumer-directed health plans CEA See Cost-effectiveness analysis Certificate-of-need (CON), 411–412 Chaoulli v Quebec lawsuit, 482 Cheatham, J W., LLC, 214 Chicken Pox, 533 Children, Medicaid and, 458 Children’s Health Insurance Program (CHIP), 450–451, 453–454, 462 China conclusions about, 475–476 emerging system in, 473–476 GDP and, 469 government policy initiatives in, 474 nonprofit and for-profit in, 475 organization of care in, 473–474 performance of system in, 474–475 private sector and, 474 spending in, 468 urban and rural areas in, 474 CHIP See Children’s Health Insurance Program Choice, for patients/providers, 493, 508 Cigarettes, 99–100 See also Smoking advertising and, 520–523 excise taxes and, 523–528 Clinical decision making, 316 Coinsurance, 149–150 demand shifters and, 180–182 impact of, 162–166 market effects and, 181–182 reduced, 180–181 Commodity taxes and subsidies, 395–396 Comparative health care systems See also Contemporary health care systems public’s evaluation, 484–487 spending differences across countries, 487–489 Comparative statics, 25–26 Comparative utilization, HMOs and, 252 Compensating differentials, 217–218 Competition costs and, 287–291 hospitals and, 257–258, 287–291 insurance market, 258–259 international, 502–504 managed care and, 256–259 model deviations, 373–374 normal profits and, 157–159 perfect, 41–43, 373–374 pharmaceutical industry, 346–347, 357 promotion of, 374–375 restriction of, 15 theoretical issues of, 256–257 yardstick competition theory, 413–417 595 596 Subject Index Competitive strategies alternative delivery systems development, 499 CDHPs, 499–500 free trade, 501 other market, 500–501 reform, health system, 498–502 regulation vs., 498 representation of, 501–502 Complementary good, 521–522 CON See Certificate-of-need Consumer DTC advertising, 316, 348 equilibrium, 32–33, 175–176 as health producer, 129–130 Consumer-directed health plans (CDHPs), 499–500 Consumer information informed buyers and, 204 prices and, 203–204 quality and, 204–207 Consumer theory budget constraints and, 31 consumer equilibrium and, 32–33 demand curve and, 28–33 described, 28 indifference curves and, 30–31 utility and, 29–30 Contemporary health care systems Asian countries compared, 473 Canada, 476–484 China, 473–476 country resources compared, 469 spending by country, 468 technology availability by country, 480 typology of, 466–467 United Kingdom, 467–473, 480 Contract failure, 269–270 Cookstoves, 69 Copayment, 149–150 drugs and, 164 impact of, 162–166 pharmaceutical industry and, 361–362 Cost-benefit analysis (CBA) background, 66 basic principles, 66–72 heart care treatment and, 75–76 human life valuing and, 72–76 marginal analysis in, 68–69 measuring costs, 67 overview about, 66–67 risk and, 67–68 Cost containment, 361–363, 493, 507–508 Cost-effectiveness analysis (CEA), 76 ACE inhibitor and, 78 advantages of, 77 Cost-function deriving, 110–111 empirical studies, 114–116 structural vs behavioral, 114 study difficulties, 114–115 Costs See also Loading costs access and, of AIDS, 540, 543 Canada’s, 479, 481 competition and, 287–291 containment, 361–363, 493, 507–508 cost curves, marginal and average, 40 demand for insurance and, 166 GDP and, 3–5 of health capital, 135–136 HMOs and, 252 hospitals, 286–291 inflation and, 8–9 managed care and, 255–256 measuring, 67 minimization, 39–40, 111–112 nursing homes, 287, 294 other countries and, 4–5 personal spending and, 5–6 preventive care and, 505 of prospective payment system, 421–423 quality and, relevance of, 12–13 saving lives and, 67–68 shifting, 289–291 society and, 40 technological change and, 3, 121–124, 231 in theory and practice, 109–116 universal coverage and, 494–495 Cost-utility analysis (CUA), 77–80 Creaming, 248, 249 Crowd-out, 453 CUA See Cost-utility analysis D DALYs See Disability-adjusted life-years Data envelopment analysis (DEA), 118–119 Decision making, rational, 10 Deductible, 150, 162 Demand See also Supplier-induced demand; Supply and demand age, health status, and uncertainty and, 191 brand switching and, 522–523 consumer as health producer and, 129–130 derived, 28 education and, 190 elasticities, 184–188 ethnicity and gender and, 189–190 excess, 296–297, 328–329 functions, 27–28 for health, 129–131 for health capital, 136–137 health status and, 178 individual and market functions of, 182–183 for insurance, 153–157, 166 issues in measuring, 182–184 of labor, 319–324 labor shortages and, 328–329 moral hazard and, 159–161 nursing homes and, 296–297 other variables influencing, 189–191 prevention, 535 price of care and, 166 regression, 56–57 resource allocation and, 162–168 unmet, 266–267 urban vs rural, 190 Demand curve budget constraint model and, 176–177 consumer theory and, 28–33 demand shifters and, 23–24 economic efficiency and, 64 Demand shifters, 176–178 coinsurance and, 180–182 demand curve and, 23–24 time and, 178–180 Department of Defense (DOD), 400 Department of Veterans Affairs (VA), 400 Derived demand, 28 Diagnosis Related Groups (DRGs) prospective payment and, 412–413 yardstick competition theory and, 413–417 Difference of means distribution, variance of, and, 50–51 hypotheses and inferences and, 53–54 overview about, 49–50 standard error of mean and, 51–53 as statistical tool, 49–54 Diffusion of technology, 124–126 Direct-to-consumer (DTC) advertising, 316, 348 Disability-adjusted life-years (DALYs), 80 Discounting, 69–71 Discrimination price, 355–356, 372 statistical, 202 Disease eradication difficulties, 537 Disparities, in health care, 189 Distribution, variance of, 50–51 Distributional adjustments, 72 Doctor-assisted suicide, 448 DOD See Department of Defense Donations, 267–268 Doughnut hole, 442, 443 DRGs See Diagnosis Related Groups Drug(s) copayment, 164 DTC advertising and, 316 FDA and, 400 formularies, 363 insurance, 442–444 legalization, 527–528 new, 363–364 war on, 527–528 DTC See Direct-to-consumer advertising Dummy variables, 59–60 Dumping, 248–249 E Economic efficiency See also Cost-benefit analysis demand curve and, 64 efficient quantity and, 65–66 overview about, 63–64 supply curve and, 64–65 Economies of scale described, 112 empirical cost-function studies and, 114–116 value of, 113 Economies of scope described, 112–113 value of, 113 Education control of, 335–336 demand and, 190 equilibrium and, 139 foreign graduates, 334–335 join production and, 333–334 labor issues and, 332–336 medical school revenue sources, 332 subsidy justification in, 332–333 Subject Index 597 Efficiency See also Economic efficiency allocative inefficiency and, 117–118 competitive equilibrium and, 370 competitive markets and, 368–373 equity and, 372–373 for-profit/nonprofit firms, 280–281 frontier analysis and, 118–119 hospital, 119–121 hospital quality and, 120 Pareto, 368–369 social health insurance and, 375–376 technical inefficiency and, 116–117 Efficient quantity, 65–66 Elasticities, 177 across countries, 186–187 demand, 184–188 estimating, 57 income, 185–187 insurance, 187–188 as microeconomics tool, 33–35 prevalence, 535 price, 184–185 of substitution, 107–109 Electromagnetic fields (EMFs), 53–54 Elzinga and Hogarty criterion, 430–431 EMFs See Electromagnetic fields Employer-employee mandate, 493 Employer mandate, 493, 495–496 Employer provision compensating differentials and, 217–218 history of, 212–213 of insurance, 212–219 labor market and, 213–215, 219–221 labor supply and, 219–221 other impacts of, 218–219 spousal coverage and, 215 tax system and, 215–217 Employer sponsored managed care, 240–242 Endowment, redistribution of, 371–372 Environmental pollution, 101 Epidemics economic consequences of, 535–537 government role battling, 538–539 rational, 534–535 Epidemiology concepts from, 531–534 disease eradication difficulties, 537 epidemics economic consequences, 535–537 information and, 537 SIR model and, 533–534 Epidemiology, economic HIV/AIDS case study, 539–546 prevention demand prevalence elasticity and, 535 rational epidemics and, 534–535 Equilibrium, 25 age and, 137–138 changes in, 137–139 competitive, 370 consumer, 32–33, 175–176 education and, 139 HMOs and, 249–251 wage rate and, 138–139 Equity, 16 efficiency, 372–373 horizontal, 382–384 Ethnicity, 189–190 Exchanges, 506 Excise taxes bads and, 523–528 consumption reducing effects of, 524–527 illegal drugs/prohibition and, 527–528 influences on smoking, 526–527 in practice, 524–527 in theory, 524 Exclusions, 150 Exercise, 99–100, 131 Expected loss, 155–156 Expected value, 150–152 Expenditure shares model, 487–489 Experience rating, 201 Externalities, 266–267, 394 Externality model, of HMO, 247 Extra-welfarism, 79, 379–381 F Factor substitution, labor and, 322, 324–325 Fair innings proposal, 381 FDA See Food and Drug Administration Fee-for-service (FFS), 237 HMOs and, 248–249 managed care vs., 239 FFS See Fee-for-service Food and Drug Administration (FDA), 400 For-profit firms China and, 475 conversion into, 279–280 efficiency, 280–281 hospitals, 120, 276–280 Free trade, 501 Frontier analysis, 118–119 Functions and curves demand functions, 27–28 derived demand, 28 linear functions, 27 overview, 26–27 G Game theory, 288 GDP See Gross Domestic Product Gender demand and, 189–190 physician income and, 340–341 Generic entry, 357 Generic substitutes, 362–363 Germany, 485–486 Global warming cookstoves and, 69 discounting and, 69 Goddeeris’s model, 231–232 Government epidemics and, 538–539 initiatives of Chinese, 474 role of, 16 Government intervention externalities and, 394 failure, 402–404 forms of, 395–398 in health markets, 398–402 monopoly power and, 391–392 public goods and, 392–394 rationale for, 390–395 Government regulation antitrust and, 426–431 competitive strategies vs., 498 of hospital sector, 410–412 objectives of, 409–410 of physician payment, 423–425 prospective payment system and, 412–413, 417–423 Gross Domestic Product (GDP) by country, 469 health care’s share of U.S., 3–5 NHE and, Grossman’s model health production and, 139–145 rational addiction and, 140 H Hazard rate, 531 Health demand for, 129–131 investment/consumption aspects of, 133–135 measuring, 94 Health capital consumer as health producer and, 129–130 cost of, 135–136 demand for, 136–137 exercise and, 131 obesity and, 141–145 time and, 130–131 Health care See also Comparative health care systems; Contemporary health care systems agency and, 202–203 competition restriction and, 15 disparities in, 189 economics relevance to, 12–13 government role and, 16 insurance prominence and, 13–14 need and equity and, 16 NHE for, nonprofit firms role in, 15 RHIE and, 97–98 social insurance and, 451–454 uncertainty and, 13 unique features of, 13–16 U.S GDP and, 3–5 value of, 95 Health economics defined, future regarding, 17 health care as unique, 13–16 relevance of, 3–9, 12–13 Health economists role of, Health economy access and, GDP and, 3–5 inflation and, 8–9 labor and capital in, 6–7 NHE and, other countries and, 4–5 other health issues and, personal spending and, 5–6 size and scope of, time and, 7–8 Health Insurance Portability and Accountability Act (HIPAA), 399 598 Subject Index Health maintenance organizations (HMOs), 241 comparative utilization and costs and, 252 empirical results on, 251–254 equilibrium and adverse selection and, 249–251 experience rating and, 201 externality model of, 247 FFS and, 248–249 methodological study issues and, 251 modeling individual, 246 practices of, 254 prediction framework illuminating, 248 RAND study on, 252 recent study evidence regarding, 252–254 types of care and, 247–248 Health Savings Account (HSA), 499–500 Heart care treatment, 75–76 Hill-Burton Act, 399–400 HIPAA See Health Insurance Portability and Accountability Act HIV See Human immunodeficiency virus HMOs See Health maintenance organizations Home health, 298–299 Horizontal equity, 382–384 Hormone replacement therapy (HRT), 59 Hospice, 298–299 Hospitals closing inefficient, 121 closures, mergers, and restructuring, 291–293 competition and, 257–258, 287–291 costs, 286–291 cost shifting and, 289–291 efficiency, 119–121 government regulation of, 410–412 history of, 284–285 managed care and, 243–244, 257–258 MAR and, 288 modeling, realism in, 278 nonprofit behavior models, 270–280 nonprofit compared with for-profit, 120, 276–279 nonprofit conversion into for-profit, 279–280 nonprofit efficiency and, 280–281 organization of, 285–286 overview, 283–284 as physicians’ cooperative, 274 profit-deviating nonprofit, 272–274 prospective payment system and, 420–421 quality, 120, 293 regulation and accreditation, 286, 410–412 substitution and, 109 as two firms, 278–279 HRT See Hormone replacement therapy HSA See Health Savings Account Human immunodeficiency virus (HIV) See also Auto-immune deficiency syndrome case study, 539–546 as pandemic, 539, 542 statistics on, 539, 541, 542 Human life, valuing CBA and, 72–76 contingent valuation, 73 heart care treatment and, 75–76 last year of life, 73–75 VSL and, 74–75 willingness to pay and accept and, 73 Hypothesis difference of means and, 53–54 physician practice style, 312–313 target income, 306–308 testing, 49 I Illegal drugs, excise taxes and, 527–528 Imperfect information, 199 Imperfectly rational addiction models, 516 Incidence rate, 531 Income, 101 elasticities, 185–187 leisure vs., 132–133 transfer effects of insurance, 168–170 Indifference curves, 30–31 Individual and market demands, 33 Individual mandate, 439, 493, 505 employer vs., 495–496 Inferences difference of means and, 53–54 in sciences and social sciences, 60 Inflation, 8–9 marginal analysis and, 72 Medicaid and Medicare and, 455–456 technological change and, 122–124, 233 Informal care, 298–299 Information See also Agency; Asymmetric information; Consumer information issues, 196 problems of, 14–15, 196–197 Informed buyers, 204 Innovation pharmaceutical industry, 360–361 Insecticide-treated bed net (ITN), 161 Insurance See also Coinsurance; Social insurance adverse selection and, 200–201 aggregate expenditures and, 189 caesareans and, 218–219 CHIP, 450–451, 453–454, 462 demand for, 153–157, 166 elasticities, 187–188 expected loss changes and, 155–156 experience rating and, 201 explained, 148–149 future of Canadian private, 482 HIPAA and, 399 income transfer effects of, 168–170 labor market and, 213–215 lemons principle applied to, 199–201 mandated, 400 mobility and, 219–221 moral hazard and, 159–162 personal spending and, 14 pharmaceutical industry and, 352–353 premium changes and, 155 price of care and, 166 prominence of, 13–14 purchasing, 152–153 resource allocation and, 162–168 retirement and, 219 risk and, 150–153 secondary, 164–165 separation from employment, 496–497 single payer vs multiple insurers, 497–498 substitution and, 352–353 supply of, 157–159 tax system and, 215–217 terminology, 149–150 wealth changes and, 156–157 welfare loss of excess, 167–168 Insurance markets compensating differentials and, 217–218 employer provision and, 212–219 labor market and, 213–215 labor supply and employer-based, 219–221 loading costs and, 210–212 managed care competition and, 258–259 past 30 years in, 223–224 practices in, 222–223 for private insurance, 221–222 tax system and, 215–217 technological change impacting, 230–233 uninsured and, 212, 224–230 Isocost curves, 38–39 Isoquants, 320–321 ITN See Insecticide-treated bed net J Join production, 333–334 Junk food tax, 397 K Keiki Care, 454 L Labor demand of, 319–324, 328–329 education and, 332–336 employer provision and, 213–215, 219–221 factor substitution and, 322, 324–325 insurance and, 213–215 licensure and monopoly rents, 336–339 manpower availability, 325–332 marginal productivity of, 321–322 monopsony and, 330–332 overview of, 6–7 physician assistants, 324–325 physician issues of, 339–341 physician productivity measurement, 324 production functions and isoquants and, 320–321 shortages, 327–332 substitution among factors and, 324–325 supply of, 322–323 Last year of life, 73–75 Legalization, of drugs, 527–528 Leisure income vs., 132–133 traded for wages, 132 Lemons principle asymmetric information and, 198–201 insurance and, 199–201 used-car market and, 198–199 Liberalism, classical and modern, 386–387 Licensure and monopoly rents overview about, 336–339 public and self-interest theories, 337–338 quality and, 338–339 Life saving, 67–68 Limitations, 150 Linear functions, 27 Linearity vs assumptions, 79–80 Loading costs impacts of, 211–212 Subject Index 599 insurance firms and, 210–212 uninsured and, 212 Loading fees, 150 Long-run average cost (LRAC), 40 Long-term care (LTC) financing, 297–298 hospice, home health, and informal care, 298–299 Medicare and Medicaid and, 449–450 LRAC See Long-run average cost LTC See Long-term care M Makena, 345 Malpractice, 315 Managed care See also Health maintenance organizations background regarding, 236–237 backlash, 259–262 competitive effects, 256–259 costs and, 255–256 development and growth of, 244–246 economic characteristics of, 238–239 economics of, 245–246 employer sponsored, 240–242 features of, 238 federal policy and, 244–245 FFS vs., 239 hospital contracts, 243–244 hospital market competition, 257–258 insurance market competition, 258–259 Medicaid and Medicare, 242 modeling, 246–251 organizational structure within, 237–238 physician contracts, 242–243 plans emergence, 239–244 P4P and, 261 spending growth and, 255–256 technological change and, 259 technology diffusion and, 126 theoretical competition issues, 256–257 Mandated coverage, 229–230 MAR See Medical arms race Marginal analysis, 10 in CBA, 68–69 discounting and, 70–71 distributional adjustments and, 72 inflation and, 72 risk adjustment and, 71–72 Marginal efficiency of investment (MEI) decreasing, 136–137 rate of return and, 136 Marginal productivity, of labor, 321–322 Marginal utility, of wealth, 151–152 Marin County, 430 Market failure externalities and, 266–267 public goods and, 267–268 Mean, standard error of, 51–53 Measuring costs, 67 Medicaid child population and, 458 cost sharing impact, 448 criticisms of, 462–463 cuts in, 463 doctor-assisted suicide and, 448 effects of, 454–459 eligibility, 446–448 enrollment by group, 446 establishment, 438–439 health status improvement, 458–459 improvement of, 452 indirect impacts, 457 inflation and, 455–456 as managed care, 242 Medicare relationship, 449–450 overview, 445 payment for, 449 services scope and duration, 448 Medical arms race (MAR), 288 Medical Savings Account (MSA), 499 Medicare beneficiary payment liabilities, 444 case mix severity, 418–420 criticisms of, 462–463 effects of, 454–461 enrollment numbers, 441 establishment, 438–439 expenditures, 460–461 future prospects, 459–461 health status improvement, 458–459 indirect impacts, 457 inflation and, 455–456 length of stay and, 417–418 as managed care, 242 Medicaid relationship, 449–450 overview, 440 Part A, 440 Part B, 440–441 Part C, 441 Part D, 442–444 program financing, 444 prospective payment system and, 417–423 provider payments, 445 recent changes, 459 Medicine history and, 93 mortality rate decline and, 89–92 production of health and, 88–93 rising population and, 88–89 MEI See Marginal efficiency of investment MenAfriVac, 533 Mexican nursing homes, 192 Microeconomics tools consumer theory, 28–33 elasticities, 33–35 functions and curves, 26–28 individual and market demands, 33 monopoly and, 43–45 overview, 20 perfect competition supply curve, 41–43 production and market supply, 35–39 scarcity and PPF, 21–23 supply and demand analysis, 23–26 Models, use of, 10 Monopoly antitrust and, 427–429 government intervention and, 391–392 microeconomics tools and, 43–45 pricing, 354–355, 356–357 rents, 336–339 Monopsony, 330–332 Moral hazard coinsurance/deductibles effects and, 162 demand for care and, 159–161 insurance and, 159–162 Mortality rate clean water and, 92 decline, 89–92 nutrition reduced, 91 prenatal care and, 96–97 public health reduced, 91–92 MSA See Medical Savings Account Myopic addiction models, 516–517 N National health expenditures (NHE), National Health Service (NHS) overview about, 469–470 performance and reforms under, 471–473 private care vs., 470–471 United Kingdom’s, 469–473 woman excluded from, 471 Need, 16 CON, 411–412 Daniels’ concept of, 381 distribution criticisms, 382 distributions from, 376–382 horizontal equity and, 382–384 self-reported unmet, 484 Netherlands, 485–486 Net revenue per physician (NR/M), 274–275 NHE See National health expenditures NHS See National Health Service Nonprofit firms behavior models, 270–280 China and, 475 as contract failure and, 269–270 conversion into for-profit, 279–280 donations and, 267–268 efficiency vs for-profits, 280–281 financial matters and, 270 for-profit hospitals and, 120, 276–280 health care role of, 15 market failure: externalities and, 266–267 market failure: public goods and, 267–268 NR/M maximization and, 274–275 overview about, 265–266 physicians’ cooperative and, 274, 275–276, 277 prevalence of, reasons for, 266–270 profit-deviating, 272–274 quality-quantity theory, 271–272, 275–276, 277 relevance of, 268–269 unmet demands and, 266–267 NR/M See Net revenue per physician Nurses, monopsony and, 330–332 Nursing homes background about, 294 costs, 287, 294 excess demand and, 296–297 Mexican, 192 nonprofit efficiency and, 280–281 quality of care, 295–296 Nutrition reduced mortality, 91 O Obesity causes of increasing, 144–145 economic effects, 143–144 economic treatment of, 142–143 health capital and, 141–145 OLS See Ordinary least squares 600 Subject Index Opportunity cost, 21 Ordinary least squares (OLS), 55–56 Oregon doctor-assisted suicide, 448 Output maximization, 39–40 P Pandemic, 539, 542 Pareto efficiency, 368–369 Patents, 345 Patient Protection and Affordable Care Act (PPACA), 1, 439, 446 administrative ease and, 508 cost containment and, 507–508 estimated fiscal effects of, 509 exchanges and, 506 key areas of focus, 505 patient/physician choice and, 508 predictions about, 508–510 provisions of, 505–506 safety net and, 507 Pay-for-performance (P4P), 261 Penicillin, 95 Perfect competition, 373–374 supply curve, 41–43 Performance-based budgeting, 121 Personal spending, 5–6 insurance and, 14 Pharmaceutical industry competition, 346–347, 357 copayment and, 361–362 cost containment, 361–363 DTC advertising, 348 entry barriers in, 347–348 innovation, 360–361 insurance and, 352–353 least-cost-production and, 351–352 new drugs and, 363–364 overview, 344–346 patents and media attention and, 345 pricing and, 354–357 profits and, 354 R&D, 357–361 regulation of, 349–350 structure of, 346–348 substitutability and, 350–357 technological change and, 353–354 Physician assistants, efficient utilization of, 324–325 Physicians availability of, 326–327 Canada and, 478–479 income by gender, 340–341 labor issues, 339–341 managed care and, 242–243 NR/M and, 274–275 PPACA and, 508 productivity measurement of, 324 recent trends regarding, 328 regulation of payment to, 423–425 specialization and, 339–340 Physicians’ cooperative, 274, 275–276, 277 Physician’s practice agency and, 305–306 clinical decision making and, 316 DTC drug advertising, 316 financial incentive and, 305 issues and policy puzzles, 315–317 malpractice and, 315 model of, 303–305 overview, 302 paying for outcomes regarding, 316–317 SAV and, 311–315 style hypothesis and, 312–313 supplier-induced demand and, 305–311 Point of service (POS), 241 Pollution, environmental, 101 Population health, 94–95 rising, 88–89 POS See Point of service P4P See Pay-for-performance PPACA See Patient Protection and Affordable Care Act PPF See Production possibilities frontier PPOs See Preferred provider organizations Pre-existing conditions, 150 Preferred provider organizations (PPOs), 241 Pregnancies, 310 Premium, 149 Premium, changes in, 155 Prenatal care, 96–97 Prescription drug insurance, Medicare, 442–444 Prevalence elasticity, 535 Prevalence rate, 531 Prevention demand prevalence elasticity, 535 Preventive care, 505 Price consumer information and, 203–204 discrimination, 355–356, 372 dispersion, 204 elasticities, 184–185 insurance and, 166 monopoly pricing, 354–355, 356–357 relevance of, 12–13 Production of health and home goods, 134–135 of healthy days, 133–134 Production and market supply cost curves, marginal and average, 40 cost minimization or output maximization, 39–40 isocost curves and, 38–39 as microeconomics tools, 35–39 Production function examples of, 36–38 explained, 35–36 and labor, 320–321 recent studies regarding, 326 substitution and, 38 total and marginal contributions and, 85–87 Production of health See also Substitution Grossman’s model and, 139–145 issues, 93–94 medicine and, 88–93 modern day, 93–97 other health measures and, 97–101 overview about, 85 population health and, 94–95 prenatal care and, 96–97 production function and, 85–87 schooling role in, 101–102 Production possibilities frontier (PPF), 21–23 Profit-deviating nonprofit hospital, 272–274 Prohibition, excise taxes and, 527–528 Prospective payment system cost effects of, 421–423 DRGs and, 412–413 government regulation, 412–413, 417–423 hospital’s financial condition from, 420–421 Medicare’s, 417–423 Public goods, 267–268 Public health reduced mortality, 91–92 Public provision, 396–398 Pure premiums, 150 Q QALY See Quality-adjusted life-year Quackery, 521 Quality assurance, 238 consumer information and, 204–207 costs and, hospitals, 120, 293 of licensure, 338–339 nursing homes, 295–296 other indicators of, 206–207 patient perceptions of, 205 reform and, 504–505 Quality-adjusted life-year (QALY) ACE inhibitor and, 78 ageism and, 80 extra-welfarism and, 79 linearity vs assumptions and, 79–80 overview about, 77–78 Sen’s capabilities and, 79 standard welfare economics and, 78–79 technological change and, 123–124 Quality-quantity nonprofit theory, 271–272, 275–276, 277 R RAND Health Insurance Experiment (RHIE), 97–98 RAND HMO study, 252 Rate of return, 136 Rational addiction, 140, 517–518 Rational decision making, 10 Rational epidemics, 534–535 Rawlsian justice, 385–386 R&D See Research and Development Reform, health system background about, 492 basic issues in, 493–494 competitive strategies, 498–502 employer vs individual mandates, 495–496 ensuring access to care, 495–498 goals of, 492–495 insurance separation from employment, 496–497 international competitiveness, 502–504 under NHS, 471–473 other market, 500–501 PPACA and, 505–510 preventive care and, 505 quality of care, 504–505 single payer vs multiple insurers, 497–498 universal coverage costs, 494–495 Subject Index 601 Regression analysis demand regression and, 56–57 dummy variables, 59–60 multiple, 58–60, 313 OLS and, 55–56 overview about, 54–55 regression coefficients interpretation, 58–59 SAV and, 313 as statistical tool, 54–57 Regulation See Government regulation Reinforcement, 517 Relative rates of return, 330 Report cards, 206–207 Reputation goods, 203–204 Research and Development (R&D), 357–361 Resource allocation, 162–168 Retail value scales (RVSs), 424–425 Retirement, 219 Revascularization, RHIE See RAND Health Insurance Experiment Risk, 67–68 adjustment, 71–72 aversion, 151–152 insurance and, 150–153 RVSs See Retail value scales S Safety net, 492–493, 507 SAV See Small area variations Scarcity defined, 22 PPF and, 21–23 Schooling, role of, 101–102 Selective contracting, 238–239 Sen’s capabilities, 79 SFA See Stochastic frontier analysis Shortages dynamic, 329–330 excess demand and, 328–329 labor, 327–332 monopsony and, 330–332 relative rates of return and, 330 Single payer, vs multiple insurers, 497–498 SIR See Susceptible-Infective-Removed Skimping, 248, 249 Sleep, 99–100 Small area variations (SAV) contributions to, 311–312 diffusion of information and, 311–315 inappropriate utilization cost and, 313–314 multiple regression and, 313 other applications of, 315 physician practice style hypothesis and, 312–313 Smoking See also Cigarettes across countries, 515 excise taxes influence on, 526–527 Social capital, 100 Social insurance See also Medicaid; Medicare CHIP, 450–451 criticisms of, 462–463 early U.S., 438 efficiency rationale for, 375–376 European beginnings, 437–438 health and, 451–454 historical roots, 437–439 policies and programs, 435–437 PPACA, 439 vs private, 149 Social justice theories, 385–387 Social welfare See Welfare South Africa, 545 Specialization, 339–340 Spending across countries, 468, 487–489 managed care, 255–256 personal, 5–6, 14 Spousal coverage, 215 Standard error of estimate, 56 of mean, 51–53 Statistical discrimination, 202 Statistical tools difference of means, 49–54 elasticities, estimating, 57 hypothesis testing, 49 inference, 60 multiple regression analysis, 58–60 overview about, 48–49 regression analysis, 54–57 Steady state, 518 Steering, 238 Stochastic frontier analysis (SFA), 119 Substitution care professionals and, 108 degrees of, 107 elasticity of, 107–109 example explaining, 106–107 hospital care estimates of, 109 insurance and, 352–353 pharmaceutical industry and, 350–357 production function and, 38 Suicide, doctor-assisted, 448 Supplier-induced demand benchmark model and, 308–309 fees and, 309–311 inducement/marketing parallel and, 309 modeling, 306–311 physician agency and, 305–306 pregnancies and, 310 target income hypothesis and, 306–308 Supply of insurance, 157–159 of labor, 322–323 Supply and demand analysis, 23–26 comparative statics and, 25–26 demand curve and shifters, 23–24 equilibrium and, 25 law applicability, 407–408 supply curve and shifters, 24–25 Supply curve economic efficiency and, 64–65 perfect competition, 41–43 shifters and, 24–25 Susceptible-Infective-Removed (SIR), 533–534 Switzerland, 485–486 T Target income hypothesis, 306–308 Taxes, 215–217, 395–396, 397, 401 Technical inefficiency, 116–117 Technological change cost and, 3, 121–124, 231 diffusion of, 124–126 Goddeeris’s model and, 231–232 increasing/decreasing cost and, 121–122 inflation and, 122–124, 233 insurance markets and, 230–233 managed care and, 126, 259 pharmaceutical industry and, 353–354 QALYs and, 123–124 Technology, availability by country, 480 Thalidomide, 349 The Magic Mountain (Mann), 90 Theorem of the Second Best, 374–375 Time, 7–8 demand shifters and, 178–180 health capital and, 130–131 investment over, 135–136 trading leisure for wages, 132 Tolerance, 517 Tourism, medical, 501 Transfer programs, 398 Tuberculosis, 90 U UCR See Usual, customary, and reasonable Uncertainty, 13, 14–15 Uninsured counting, 224 firm size and, 227 impact of, 227 loading costs and, 212 mandated coverage impacts and, 229–230 myths, 226 overview about, 224 statistics on, 224–226 working, 227–229 United Kingdom, 467 GDP and, 469 NHS of, 469–473 resources, 469 spending in, 468 technology availability in, 480 United States (U.S.) Canada compared with, 477–478, 481–484 GDP and, 3–5 self-reported unmet need in, 484 social insurance history in, 438 technology availability in, 480 Universal coverage, 494–495 Used-car market, 198–199 Usual, customary, and reasonable (UCR), 423 Utilitarianism, 385 Utility, 29–30 See also Cost-utility analysis; Marginal utility Utility-possibility frontier, 377–378 Utilization review, 238 602 Subject Index V W VA See Department of Veterans Affairs Vaccination, 532–534, 538 Value of statistical life (VSL), 74–75 Valuing human life See Human life, valuing Variables, dummy, 59–60 VSL See Value of statistical life Wage rate, 138–139 War on Drugs, 527–528 Water, clean, 92 Wealth changes, 156–157 Welfare See also Need extra-welfarism, 79, 379–381 First Fundamental Theorem of, 371 insurance and, 167–168 QALY and, 78–79 Second Fundamental Theorem of, 372 Willingness to pay and accept, 73 Y Yardstick competition theory, 413–417 ...Seventh Edition The Economics of Health and Health Care Sherman Folland Professor of Economics, Oakland University Allen C Goodman Professor of Economics, Wayne State University Miron Stano Professor... Basic Economics Tools Chapter Introduction What Is Health Economics? The Relevance of Health Economics The Size and Scope of the Health Economy Health Care’s Share of GDP in the United States Health. .. www.rand.org/commentary/102305PE.html THE RELEVANCE OF HEALTH ECONOMICS The study of health economics is important and interesting in three related ways: (1) the size of the contribution of the health