Aaron YelowitzApplied economist · University of Kentucky
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Historical

ECO 725 · Fall 2020

Health Economics

Historical syllabus; policies and dates reflect this term.

Archived syllabus. Policies, dates, assignments, and readings reflect Fall 2020.

Course information

Economics 725-001: Health Economics University of Kentucky Fall Semester 2019

  1. 0 Credits T/12:30 pm - 3:30 pm/Online

Instructor Information

Professor Aaron Yelowitz Office: 225H Business & Economics Building Email: aaron@uky.edu Office hours: Thursday, 2:00 pm - 4:00 pm Eastern Time (Via Zoom, please contact me ahead of time) and by appointment.

Course Description

This course rigorously examines the organization, financing, and management of the US health care system and programs, and emphasizes economic analysis contemporary health policy concerns. By the end of the semester, students should have the institutional knowledge and analytic tolls needed to contribute to current public policy debates about health and medical care. This course and ECO 724 Environmental Economics are the two courses that are the basis for the area in Environmental and Health Economics in the Ph.D. program in Economics.

Course Prerequisites

ECO 601 and 703 or consent of instructor.

Student Learning Outcomes

After completing this course, the student will be able to:

  1. Identify the major features of the health care system in the United States.
  2. Contrast how health care markets differ from other economic markets.
  3. Apply data to examine how health care markets operate.
  4. Analyze whether empirical findings from data application are consistent with theory.
  5. Integrate economic theory and empirical analysis to understand health care markets.
  6. Assess whether health care policy proposals will have the intended consequences.

Required Materials

  1. Readings: Peer-reviewed articles (available on JSTOR for UK subscribers) will form the core readings of this course. Some articles come from the Handbook of Health Economics (HPE), and are typically available on NBER’s website.
  2. In addition, supplemental handouts and PowerPoint slides will be distributed.

Activities and Assignments

Course Assignments

• Research Paper (50%) • Final Exam (35%) • In-Class Presentation (15%)

Summary Description of Course Assignments

  1. 50 points: All students will use publicly-available data of their choosing (i.e., HCUP, BRFSS, NHIS, NIS, CPS, ACS, SIPP, PSID, NLSY, GSS, NSAF, HRS, AHEAD, Vital Statistics, Census PUMS, Google Trends, SafeGraph, etc.) to ask and answer a research question related to health economics. Much of this data can be found on NBER, Census, ICPRS, or data.gov.

Students will provide data, programs, log files and write-up in electronic form. All programming must be done in Stata and write-up must be in Word. The write-up must not exceed 2000 words (approximately 12 manuscript pages), including diagrams, figures, tables and references. The word count will be strictly enforced, and the overall goal is to have a paper that conforms to the guidelines for short papers from both health policy and economics journals.

Your research paper proposal will be due by 10/6/2020, by 4 pm EST. I will give you feedback by 10/15/2020. The research paper (and programs, log files, data) will be due on 11/24/2020, by 4 pm EST.

  1. 35 points: There will be an online final exam during final exam week, on Tuesday, 12/1/2020 from 10:30 am - 12:30 pm. The exam will be closed book.
  2. 15 points: The field of health economics is vast and the goal of the in-class presentation is to teach the entire class about an unexplored aspect of public economics. Several recent winners of the John Bates Clark medal have made recent, important contributions to the field. The presentations will be around 15-20 minutes each (with questions), and will be conducted in the last Zoom session (11/24/2020). You must have the topic approved by me. The topics should focus on timely issues in health economics. Presentation proposals will be due by 11/10/2020, by 4 pm EST.

Submission of Assignments

All assignments will be submitted in an online fashion.

Course Grading

A grading curve will be applied; historically in classes similar to this, approximately 70% of students earn an A; 30% earn a B or lower.

Attendance Policy

/ Recording Policy / Facemask Policy Students are strongly encouraged to attend every live Zoom session and review the assigned materials in advance. Many of the subtleties of the readings will be easier to understand with live Zoom attendance. To better encourage participation during live sessions, you are encouraged (but not required) to keep your video camera on (and please keep your microphone muted to avoid sound feedback). However, if you are uncomfortable with your camera on, this is not required. Also, the live Zoom sessions will be recorded and subsequently shared on Canvas for students who were unable to attend the session.

This course is entirely online during fall 2020. As a consequence, there are no directives regarding facemask policy for this specific class. If, for some unforeseen reason, any part of this class ends up being in-person, all mask requirements will be fully enforced.

Course Topics / Outline / Readings

Module 1: Overview, Data Orientation, Empirics • Part 1 o Overview of syllabus, papers and goals of course. o Lay out expectations with respect to turning in paper (i.e. Word) and statistical programs (i.e. Stata, log files, do files). Objective: 2000-word paper potentially publishable in economics or public health journal. o Final exam discussion. • Part 2 o Yelowitz video on online data sources. Objective: be fast and correct with data sources, and in very short order, figure out whether there is sufficient potential with a dataset to move forward of a topic. • Yelowitz Powerpoint/video on using data - “Data Sources for Economics Students” o Examples of data sources: (a) Publicly available, pros/cons, (b) Data scraping (i.e. Diamonds), (c) Non-public, expensive data (i.e., Nielsen data, College of Pharmacy), (d) “Free” data with severe hoops (i.e. Census RDC, IRB approval, process of getting findings approved), (e) “Free” data with “buy-in” -- I.e. data from employer. o Discussion of data sources (HCUP, Safegraph, Neilsen) where training is needed. o Documenting data, internet data, data presentation. • Gentzkow, Matthew and Jesse M. Shapiro, 2014. “Code and Data for the Social Sciences: A Practitioner’s Guide.” University of Chicago mimeo. • Edelman, Benjamin. 2012. “Using Internet Data for Economic Research.” Journal of Economic Perspectives 26 (2): 189-206. • Schwabish, 2014. “An Economist’s Guide to Visualizing Data.” Journal of Economic Perspectives, 28(1): 209-34. • Varian, Hal R. 2014. “Big Data: New Tricks for Econometrics.” Journal of Economic Perspectives 28 (2): 3-28. • Mason, Winter, and Siddharth Suri. 2012. “Conducting Behavioral Research on Amazon’s Mechanical Turk.” Behavior Research Methods 44 (1): 1-23. o Difference-in-differences handout, Standard error corrections • Yelowitz difference-in-differences handout & examples • Gruber, Public Finance and Public Policy, “Empirical Tools of Public Finance,” 2005, Chapter 3. • Bertrand, M., E. Duflo, and S. Mullainathan. 2004. “How Much Should We Trust Differences-In-Differences Estimates?” The Quarterly Journal of Economics 119 (1): 249-75. • Cameron, A. Colin, Jonah B. Gelbach, and Douglas L. Miller. 2011. “Robust Inference With Multiway Clustering.” Journal of Business & Economic Statistics 29 (2): 238-49. Cameron, A. Colin, Jonah B. Gelbach, and Douglas L. Miller. 2008. “Bootstrap-Based Improvements for Inference with Clustered Errors.” Review of Economics and Statistics 90 (3): 414-27.

Module 2: Overview of US Health Care System, Health & Economy • Part 1 o Overview of health care system • Gruber, Public Finance and Public Policy, “Health Insurance I: Health Economics and Private Health Insurance,” 2005, Chapter 15. • Gruber, Public Finance and Public Policy, “Health Insurance II: Medicare, Medicaid, and Health Care Reform,” 2005, Chapter 16. • Part 2 o How does health vary with economic conditions • Ruhm, C. J. 2000. “Are Recessions Good for Your Health?” The Quarterly Journal of Economics 115 (2): 617-50. • Chetty R, Stepner M, Abraham S, Lin S, Scuderi B, Turner N, Bergeron A, Cutler D. The Association Between Income and Life Expectancy in the United States, 2001-2014. JAMA. 2016;315(16):1750-1766.

Module 3: Demand for Medical Care, Identification • Part 1 o Demand for medical care • Manning, Willard G., et al. 1987. “Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment.” American Economic Review, 77:251-277. • Aron-Dine, Aviva, Liran Einav, and Amy Finkelstein. 2013. “The RAND Health Insurance Experiment, Three Decades Later.” Journal of Economic Perspectives 27 (1): 197-222. • Finkelstein, Amy N, Sarah L Taubman, Bill J Wright, Mira Bernstein, Jonathan Gruber, Joseph P Newhouse, Heidi L Allen, Katherine Baicker, and. Oregon Health Study Group. 2012. “The Oregon Health Insurane Experiment: Evidence From The First Year.” Quarterly Journal of Economics 127 (August (3)): 1057-1106. • Part 2 o Identification of interventions • McClellan, M, B J McNeil, and J P Newhouse. 1994. “Does More Intensive Treatment of Acute Myocardial Infarction in the Elderly Reduce Mortality? Analysis Using Instrumental Variables.” JAMA: The Journal of the American Medical Association 272 (11): 859-66. • Angrist, Joshua D, and Jörn-Steffen Pischke. 2010. “The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics.” Journal of Economic Perspectives 24 (2): 3-30.

Module 4: Medical Malpractice • Part 1 o Medical malpractice • Kessler, Daniel, and Mark Mcclellan. 1996. “Do Doctors Practice Defensive Medicine?” The Quarterly Journal of Economics 111 (2): 353-90. • Currie, Janet, and W Bentley MacLeod. 2008. “First Do No Harm? Tort Reform and Birth Outcomes.” Quarterly Journal of Economics 123 (2): 795-830.

Module 5: Managed Care & Organizational Form and Performance

• Part 1 o Managed Care • Marton, J., Yelowitz, A. and Talbert, J., “A Tale of Two Cities? The Heterogeneous Impact of Medicaid Managed Care,” Journal of Health Economics, July 2014, 36(1): 47- 68. • Aizer, Anna, Janet Currie, and Enrico Moretti. 2007. “Does Managed Care Hurt Health? Evidence from Medicaid Mothers.” Review of Economics and Statistics 89 (3): 385-99. • Duggan, Mark, and Tamara Hayford. 2013. “Has the Shift to Managed Care Reduced Medicaid Expenditures? Evidence from State and Local-Level Mandates.” Journal of Policy Analysis and Management 32 (3): 505-35. • Part 2 o Organizational Form and Performance • Duggan, Mark G. 2000. “Hospital Ownership and Public Medical Spending.” The Quarterly Journal of Economics 115 (4): 1343-73. • Ho, Vivian, and Barton H. Hamilton. 2000. “Hospital Mergers and Acquisitions: Does Market Consolidation Harm Patients?” Journal of Health Economics 19 (5): 767-91. • Schmitt, Matt. 2017. “Do Hospital Mergers Reduce Costs?” Journal of Health Economics. 52: 74-94.

Module 6: Medicare and Medicaid

• Part 1 o Medicare • Finkelstein, Amy. 2007. “The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare.” The Quarterly Journal of Economics 122: 1-37. • Card, David, Carlos Dobkin, and Nicole Maestas. 2008. “The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare.” American Economic Review 98 (5): 2242-58. • Card, David, Carlos Dobkin, and Nicole Maestas. 2009. “Does Medicare Save Lives?” Quarterly Journal of Economics 124 (2): 597-636. • Abaluck, Jason, and Jonathan Gruber. "Choice inconsistencies among the elderly: evidence from plan choice in the Medicare Part D program." American Economic Review 101.4 (2011): 1180-1210. • Part 2 o Medicaid • Currie, Janet, and Jonathan Gruber. 1996a. “Health Insurance Eligibility, Utilization of Medical Care, and Child Health.” The Quarterly Journal of Economics 111 (2): 431-66. • Currie, Janet, and Jonathan Gruber. 1996b. “Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women.” Journal of Political Economy 104 (6): 1263. • Cutler, D. M., and J. Gruber. 1996. “Does Public Insurance Crowd out Private Insurance?” The Quarterly Journal of Economics 111 (2): 391-430. • Gruber, Jonathan, and Aaron Yelowitz. 1999. “Public Health Insurance and Private

Savings.” Journal of Political Economy 107 (6): 1249-74. • Yelowitz, Aaron S. 1995. “The Medicaid Notch, Labor Supply, and Welfare Participation: Evidence from Eligibility Expansions.” The Quarterly Journal of Economics 110 (4). Oxford University Press: 909-39.

Module 7: Adverse Selection

• Part 1 o Rothschild, Michael, and Joseph Stiglitz. 1976. “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information.” The Quarterly Journal of Economics 90 (4): 629. o Cutler, D. M., and S. J. Reber. 1998. “Paying for Health Insurance: The Trade-Off between Competition and Adverse Selection.” The Quarterly Journal of Economics 113 (2): 433-66. o Buchmueller, Thomas, and John DiNardo. 2002. “Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut.” American Economic Review 92 (1): 280-94. o Handel, 2013. “Adverse selection and inertia in health insurance markets: when nudging hurts.” American Economic Review, 103 (7), 2643-2682. o Handel, Ben, Igal Hendel, and Michael D. Whinston. 2015. “Equilibria in Health Exchanges: Adverse Selection versus Reclassification Risk.” Econometrica 83(4): 1261-1313.

Module 8: Health Insurance Expansions

• Part 1 o Dependent Coverage Mandates • Antwi, By Yaa Akosa, Asako S. Moriya, and Kosali Simon. 2013. “Effects of Federal Policy to Insure Young Adults: Evidence from the 2010 Affordable Care Act’s Dependent-Coverage Mandate.” American Economic Journal: Economic Policy 5 (4): 1-28. • Akosa Antwi, Yaa, Asako S. Moriya, and Kosali I. Simon. 2015. “Access to Health Insurance and the Use of Inpatient Medical Care: Evidence from the Affordable Care Act Young Adult Mandate.” Journal of Health Economics 39: 171-87. • Part 2 o ACA Expansion • Courtemanche, C., Marton, J., and Yelowitz, A., 2016. “Who Gained Insurance Coverage in 2014, the First Year of Full ACA Implementation?” Health Economics, 25(6): 778-784. • Courtemanche, C., Marton, J., Ukert, B., Yelowitz, A., and Zapata, D., “Impacts of the Affordable Care Act on Health Insurance Coverage in Medicaid Expansion and Non- Expansion States,” Journal of Policy Analysis and Management, 2017, 36(1): 178-210. • Frean, M., Gruber, J., Sommers, B. 2017. “Premium Subsidies, the mandate, and Medicaid expansion: Coverage effects of the Affordable Care Act.” Journal of Health Economics, 53: 72-86. • Kaestner, R., Garrett, B., Chen, J., Gangopadhyaya, A. and Fleming, C., 2017. “Effects of ACA Medicaid Expansions on Health Insurance Coverage and Labor Supply.” Journal of Policy Analysis and Management, 36: 608-642. • Courtemanche, C., Marton, J., Ukert, B., Yelowitz, A., and Zapata, D., “Early Effects of

the Affordable Care Act on Health Care Access, Risky Health Behaviors, and Self- Assessed Health,” Southern Economic Journal. • Part 3 o Massachusetts Reform • Courtemanche, Charles J., and Daniela Zapata. 2014. “Does Universal Coverage Improve Health? The Massachusetts Experience.” Journal of Policy Analysis and Management 33 (1): 36-69.

Module 9: Behavioral economics

• Part 1 o Marton, J., Yelowitz, A., and Talbert, J., “Medicaid Program Choice, Inertia and Adverse Selection,” Journal of Health Economics, 2017, 56(1): 292-316. o Ericson, K.M.M., 2014. Consumer inertia and firm pricing in the Medicare part D prescription drug insurance exchange. American Economic Journal: Econ. Policy 6 (1), 38-64. o Handel, B.R., Kolstad, J., 2015. Health insurance for ‘humans’: Information frictions, plan choice, and consumer welfare. American Economic Review 105 (8), 2449-2500. o Handel, B.R., Kolstad, J., 2015. Getting the Most from Marketplaces: Smart Policies on Health Insurance Choice, Brookings Institution. o Saurabh Bhargava, George Loewenstein, Justin Sydnor; Choose to Lose: Health Plan Choices from a Menu with Dominated Option, The Quarterly Journal of Economics, Volume 132, Issue 3, 1 August 2017, Pages 1319-1372 o Abadie, Alberto and Sebastien Gay, 2006. “The impact of presumed consent legislation on cadaveric organ donation: A cross-country study,” Journal of Health Economics, 25(4): 599- 620.

Midterm Grades

for Undergraduate Students (Senate Rules 6.1.3.A) Mid-term grades will be posted in myUK by the deadline established in the Academic Calendar.

Excused Absences (Senate Rules 5.2.4.2) Senate Rules 5.2.4.2 defines the following as acceptable reasons for excused absences: (a) significant illness, (b) death of a family member, (c) trips for members of student organizations sponsored by an educational unit, trips for University classes, and trips for participation in intercollegiate athletic events, (d) major religious holidays, (e) interviews for graduate/professional school or full-time employment post-graduation, and (f) other circumstances found to fit “reasonable cause for nonattendance” by the

Instructor

of record. Students should notify the professor of absences prior to class when possible.

If a course syllabus requires specific interactions (e.g., with the instructor or other students), in situations where a student’s total EXCUSED absences exceed 1/5 (or 20%) of the required interactions for the course, the student shall have the right to request and receive a "W," or the Instructor of Record may award an “I” for the course if the student declines a “W.” (Senate Rules 5.2.4.2.1)

(If an attendance/interaction policy is not stated in the course syllabus or the policy does not include a penalty to the student, the Instructor cannot penalize the student for any unexcused absences.)

Verification of Absences (Senate Rules 5.2.4.2.A, B, C, and E) Students may be asked to verify their absences in order for them to be considered excused. Senate Rule

  1. 2.4.2 states that faculty have the right to request appropriate verification when students claim an excused absence due to: significant illness; death in the household, trips for classes, trips sponsored by an educational unit and trips for participation related to intercollegiate athletic events; and interviews for full-time job opportunities after graduation and interviews for graduate and professional school. (Appropriate notification of absences due to University-related trips is required prior to the absence when feasible and in no case more than one week after the absence.)

Religious Observances (Senate Rules 5.2.4.2.D) Students anticipating an absence for a major religious holiday are responsible for notifying the instructor in writing of anticipated absences due to their observance of such holidays. Please check the course syllabus for the notification requirement. If no requirement is specified, two weeks prior to the absence is reasonable and should not be given any later. Information regarding major religious holidays may be obtained through the Ombud’s website or calling.

Make-Up Work (Senate Rule 5.2.4.2) Students missing any graded work due to an excused absence are responsible: for informing the instructorof Record about their excused absence within one week following the period of the excused absence (except where prior notification is required); and for making up the missed work. The instructor must give the student an opportunity to make up the work and/or the exams missed due to the excused absence, and shall do so, if feasible, during the semester in which the absence occurred. The instructor shall provide the student with an opportunity to make up the graded work and may not simply calculate the student's grade on the basis of the other course requirements, unless the student agrees in writing.

Accommodations Due to Disability If you have a documented disability that requires academic accommodations, please see me as soon as possible during scheduled office hours. In order to receive accommodations in this course, you must

provide me with a Letter of Accommodation from the Disability Resource Center (DRC). The DRC coordinates campus disability services available to students with disabilities. Visit the DRC website, email the DRC, contact them by phone at, or visit their office on the corner of Rose Street and Huguelet Drive in the Multidisciplinary Science Building, Suite 407.

Non-Discrimination Statement and Title IX Information UK is committed to providing a safe learning, living, and working environment for all members of the University community. The University maintains a comprehensive program which protects all members from discrimination, harassment, and sexual misconduct. For complete information about UK’s prohibition on discrimination and harassment on aspects such as race, color, ethnic origin, national origin, creed, religion, political belief, sex, and sexual orientation, please see the electronic version of UK’s Administrative Regulation 6:1 (“Policy on Discrimination and Harassment”). In accordance with Title IX of the Education Amendments of 1972, the University prohibits discrimination and harassment on the basis of sex in academics, employment, and all of its programs and activities. Sexual misconduct is a form of sexual harassment in which one act is severe enough to create a hostile environment based on sex and is prohibited between members of the University community and shall not be tolerated. For more details, please see the electronic version of Administrative Regulations 6:2 (“Policy and Procedures for Addressing and Resolving Allegations of Sexual Assault, Stalking, Dating Violence, Domestic Violence, and Sexual Exploitation”). Complaints regarding violations of University policies on discrimination, harassment, and sexual misconduct are handled by the Office of Institutional Equity and Equal Opportunity (IEEO), which is located in 13 Main Building and can be reached by phone at. You can also visit the IEEO’s website.

Faculty members are obligated to forward any report made by a student related to IEEO matters to the Office of Institutional Equity and Equal Opportunity. Students can confidentially report alleged incidences through the Violence Intervention and Prevention Center, Counseling Center, or University Health Services.

Academic Integrity

  • Prohibition on Plagiarism (Senate Rules 6.3.1) Per University policy, students shall not plagiarize, cheat, or falsify or misuse academic records. Students are expected to adhere to University policy on cheating and plagiarism in all courses. The minimum penalty for a first offense is a zero on the assignment on which the offense occurred. If the offense is considered severe or the student has other academic offenses on their record, more serious penalties, up to suspension from the University may be imposed.

Plagiarism and cheating are serious breaches of academic conduct. Each student is advised to become familiar with the various forms of academic dishonesty as explained in the Code of Student Rights and Responsibilities. Complete information can be found on the Academic Ombud page. A plea of ignorance is not acceptable as a defense against the charge of academic dishonesty. It is important that you review this information as all ideas borrowed from others need to be properly credited.

Senate Rule 6.3.1 (see current Senate Rules) states that all academic work, written or otherwise, submitted by students to their instructors or other academic supervisors, is expected to be the result of their own thought, research, or self-expression. In cases where students feel unsure about a question of plagiarism involving their work, they are obliged to consult their instructors on the matter before submission.

When students submit work purporting to be their own, but which in any way borrows ideas, organization, wording, or content from another source without appropriate acknowledgment of the fact, the students are guilty of plagiarism.

Plagiarism includes reproducing someone else's work (including, but not limited to a published article, a book, a website, computer code, or a paper from a friend) without clear attribution. Plagiarism also includes the practice of employing or allowing another person to alter or revise the work, which a student submits as his/her own, whoever that other person may be. Students may discuss assignments among themselves or with an instructor or tutor, but when the actual work is done, it must be done by the student, and the student alone.

When a student's assignment involves research in outside sources or information, the student must carefully acknowledge exactly what, where and how he/she has employed them. If the words of someone else are used, the student must put quotation marks around the passage in question and add an appropriate indication of its origin. Making simple changes while leaving the organization, content, and phraseology intact is plagiaristic. However, nothing in these Rules shall apply to those ideas, which are so generally and freely circulated as to be a part of the public domain.

Please note: Any assignment you turn in may be submitted to an electronic database to check for plagiarism.

academic integrity- Prohibition on Cheating (Senate Rules 6.3.2) Cheating is defined by its general usage. It includes, but is not limited to, the wrongfully giving, taking, or presenting any information or material by a student with the intent of aiding himself/herself or another on any academic work which is considered in any way in the determination of the final grade. The fact that a student could not have benefited from an action is not by itself proof that the action does not constitute cheating. Any question of definition shall be referred to the University Appeals Board.

academic integrity- Prohibition on Falsification/Misuse of Academic Records (SR 6.3.3) Maintaining the integrity, accuracy, and appropriate privacy of student academic records is an essential administrative function of the University and a basic protection of all students. Accordingly, the actual or attempted falsification, theft, misrepresentation or other alteration or misuse of any official academic record of the University, specifically including knowingly having unauthorized access to such records or the unauthorized disclosure of information contained in such records, is a serious academic offense. As used in this context, "academic record" includes all paper and electronic versions of the partial or complete permanent academic record, all official and unofficial academic transcripts, application documents and admission credentials, and all academic record transaction documents. The minimum sanction for falsification, including the omission of information, or attempted falsification or other misuse of academic records as described in this section is suspension for one semester.