The economics of health care policy syllabus hks sup-572, hsph hpm-227ab, fas economics 1460 fall semester 2017

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Joseph P. Newhouse
Course Assistant: Annabelle Fowler (

Section Meetings on selected Fridays at 10:15, T275, HKS
August 30 - Introduction, Costs, and Financing (Class 1)
September 1 - Health Care Financing and the Labor Market, Incidence, the Theory of the Demand for Health Care and for Health Insurance (Class 2)
September 6 - Empirical Studies of the Demand for Health Care (Class 3)
September 11, 13, and 18 - Reimbursement Policy: Traditional Medicare (TM), Parts A and B (Classes 4-6)
September 20 - The Theory and Consequences of Selection in Health Insurance Markets with Individual Choice; Behavioral Economics and Health Care (Class 7)
September 25 - Medicare Part C and Risk Adjustment (Class 8)
September 27 - Medicaid and Long Term Care (Class 9)
October 2 - Commercial Health Insurance Markets and the Affordable Care Act (Class 10)
October 4 - Administrative Costs, Minimum Loss Ratios, and Antitrust (Class 11)
October 11, 16, and 18 - Testimony 1 (Classes 12-14)
October 23 – Pharmaceuticals and Medicare Part D (Class 15)
October 25 - Variations (Class 16)
October 30 – Quality of Care (Class 17)
November 1 - Restructuring the American Health Care Delivery System (Class 18)
November 6 - Comparative Effectiveness Analysis (Class 19)
November 8 - Malpractice (Class 20)
November 13 - Workforce and a Wrapup (Class 21)
November 15, 20, and 27 - Testimony 2 (Classes 22-24)
November 29 - In class exam (Class 25)

Although many of the readings are short, this course nonetheless has a long reading list and a heavy workload. In addition to the reading, there are slides for each class session, and for most sessions there are many slides. Overall, the workload is heavier than the typical HKS course, but – though this may be small consolation – it is less than a graduate level course in FAS. To try to help you, I have annotated the reading list to let you know my rationale for putting the reading on the syllabus so that you can read for the main points.
The reward for doing the required reading and working through the slides is that you should be qualified for any policy analytic job in the health care sector that does not require the research tools of a Ph.D. Also, the syllabus appears long in part because I have included a considerable amount of optional reading.

The required reading is in bold. You can download almost all the reading through the Harvard library system (; the URLs are listed in the syllabus. National Bureau of Economic Research (NBER) working papers can be downloaded free if you go to the NBER website ( through a Harvard account. I have assigned portions of three books, Free for All?, Pricing the Priceless, and Incentives and Choice in Health Care. They are all on reserve in the HKS library. If you prefer to purchase them, the first two are in paperback. A modest amount of additional material is on the course website through CANVAS. Some of the items that I have placed on the course website such as “How to Think Like an Economist” are not called out on the syllabus but are just on the website as resources for you if you want to peruse them.
For each class session I will post slides on CANVAS the week prior to the class. I expect you to have gone through the slides and the required reading for each class before the class. Both the reading and the slides have embedded questions, many of which we will talk about in class. I will not discuss each slide in class; there isn’t time to do that anyway.
A course requirement is to answer the following three questions and send your answers to me and to Annabelle Fowler by noon of the day before the class:

  1. What in the reading or the slides did you find most interesting? Briefly say why.

  2. What in the reading or the slides did you find most puzzling?

  3. What policy issue or issues did you feel most worthy of discussion in class?

I have tried to make the slides as self-explanatory as possible. In many cases I have added explanatory material in the footer or in the notes below the slide if you use Normal View; in those cases I have put an * in the title or the body of the slide to alert you. I have tried to spell out acronyms in the footer or in the notes. Although I will try to avoid them, I will no doubt occasionally lapse into acronyms in class; if you don’t understand them, raise your hand; you will be doing your classmates a favor. Although I will try to hit some key points at the beginning of each class, I will try to devote a substantial amount of class to your requests for issues to discuss.
In addition to the requirement to submit answers to the three questions before each class, a second requirement of the course is to prepare “testimony” on two different occasions, one in the middle of the semester and the other at the end of the semester. You should write 1250 words or less, roughly five double-spaced pages, taking a position for or against a policy position that is relevant to the policy domains we covered in earlier class sessions. Thus, for the first testimony take up a question that is related to one of the first eleven class sessions. Do not venture into topics in the second half of the course because not all of your fellow students will have the relevant background to critically evaluate your ideas. For the second testimony anything the course covered is fair game. Although almost all of the course material is about the US health care system, I encourage international students to write about analogous issues in their home countries. Similar problems to those in the US can be found in almost all the OECD countries and increasingly in middle income countries.
In addition to writing your own testimony, everyone will read ten testimonies of other students and prepare one question per testimony for each author (“the witness”), who will answer selected questions about his or her testimony in class. In class you will have one minute (perhaps more if there are few enough students) to summarize the main point of your testimony and then we will turn to questions from the class that you will answer. Annabelle Fowler and I will select the specific questions to be answered. Depending on time available, there may not be enough time in class to answer all the questions that you receive. There will be an opportunity in class for give and take between the persons asking and answering the questions and others as well if someone else wants to follow up, and I encourage you to follow up.
Come prepared with respect to the questions you have posed to your classmates so that you do not waste time by fumbling around trying to find your question. Do NOT read your either your questions or your answers; it is fine to have a few notes with you when you come to the front of the class to summarize your testimony and answer questions, but the time in class should be a conversation between two (or more) people, not reading from a prepared text. At an actual hearing in the US Congress, witnesses summarize their written testimony, usually in one or two minutes (Cabinet members have more leeway but they do not read their statements either), and then just respond to questions that they do not necessarily know in advance, though they certainly may have anticipated them. I have posted examples of previous students’ testimonies on the course website. For more professional (and longer than you are expected to write) examples of testimony, you can see testimony that MedPAC has prepared at At the top of the MedPAC home page is a box titled “Documents.” Click on the menu in the “Documents” box and select “Congressional Testimony.”
Most policy makers neither want nor expect testimony to be laden with footnotes or citations.  You should respect their expectations, and not make your testimony look like a law review article (i.e., with as much space taken up with footnotes as with text).  That said, for the purposes of this class you must still respect the scholarly standards of attribution and citation.  That is, any words, data, or substantial ideas you take from someone else must be credited to the original author through a standard scholarly citation.  Any substantial borrowing from others that is not so credited is plagiarism, which is one of the few ways you can get yourself expelled from Harvard.  This is not hypothetical; it has unfortunately happened in this class. Please resolve this tension as follows: Write your testimony along the lines of the examples, i.e., without extensive footnoting or citation.  BUT… add to the back of the formal memo a page of documentation, giving the sources of key information you have used in your memo.  Document your sources in sufficient detail that a reader (e.g., you, if 3 months after writing the memo you are called upon by your boss to document your data sources) could locate and recover your key sources.  Treat this documentation as an annex that would not necessarily be included in the memo handed in to the decision maker, but that would be appended to the of the “file copy.”  Such documentation is required for this class.  It’s also a good practice when you leave this classroom for the world outside. The examples of prior testimony on the website are from a time before I asked for documentation, so they do not have the extra page.


Finally, there will be an in-class examination during the last class of the semester. I have posted several prior final examinations on the course website.

Your grade will depend upon:

  1. Your participation in class discussion (I expect you to be in class on time) and the questions that you submit for each class session (50%);

  2. The two testimony exercises, including the quality of your questions for others and your answers to the questions on your own testimony (16+% each), and;

  3. The in-class examination in the final class session (16+%).

I use the Kennedy School suggested grading curve as a guideline – around 40 percent A’s or A-’s – but this is not rigid.
Annabelle Fowler will conduct a review session on several Fridays. Although these sessions are optional, prior students have found them very helpful and I recommend that you attend. Although Annabelle will review material from that week’s classes, you should submit any topics or questions you would like covered to her beforehand. If she doesn’t receive any questions, she has the option to cancel the session.

This course has several objectives:

  1. To enable you to think critically about health care policy. This is the course’s primary aim. Note that I slipped in the word “care” between “health” and “policy;” there is a large literature around health policy as well, especially around the socioeconomic determinants of health and promoting healthy behaviors, but there is not time to go into those topics; most of you, if not all of you, will likely think the reading list is already too long. The course will also not deal with classic public health issues, such as food and water safety. Henceforth, I will just use the shorthand of health policy rather than health care policy. I put this aim first, because of a quote from Eric Hoffer that I find apt: “In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” And the years since the passage of the Affordable Care Act in 2010 have certainly been a time of change in US health policy.

  1. To acquaint you with past analytical efforts in health policy, primarily by economists, who, however, often are writing for non-economists (since when they write for other economists in economics journals the technical level may be too high for non-economists and it is important to reach non-economists since they play an important role in formulating health policy). This goal is intended to accomplish several things:

    1. To teach you some of what is known and not known about health policy;

  1. To show you how the economic theory and econometric methods you have covered in other classes have been applied to issues of health policy and so to reinforce that learning; and

  2. To show you the connection between policy analysis and actual policy. Although there may not always seem to be an obvious connection, the manner in which issues appear on the policy agenda often is influenced by analysis, frequently with a substantial lag. Of course, there is also a reverse flow; what appears on the analysis agenda is certainly influenced by policy, though sadly by the time the analysis is done it is sometimes too late. A good policy analyst, like a good stock market analyst, is always trying to guess where things will be in a few years; both types of analysts are often wrong.

3. To acquaint you with some of the relevant political and legislative history of American health policy issues. The issues we deal with in this course - the demand for medical care; pricing and reimbursement; the quality and organization of care, including tort law; and the health care workforce - all have legislative and political histories, frequently long histories. Several of the optional books listed near the beginning of the syllabus (below) describe not only the history of American medical care generally but also the history of several of the policy issues that the course takes up, especially those around financing.
4. To distinguish where within the health care sector the market seems to work reasonably well and where it does not work so well and what the public policy options are for improving outcomes in those domains where it does not work so well. For many reasons medical care does not resemble a classic textbook competitive market that is economically efficient, but incentives, including non-monetary incentives, are always important. You will have to decide where market failures are more tolerable and where government failures are more tolerable. Reasonable persons can and do differ on this issue.
5. I would also like to think you will learn something about the difference between higher and lower quality research since many of you are likely to be consumers of research at some point in your career. Toward that end I devote a few classes in the first part of the course primarily to research methods, and I emphasize methods at several points in the course; the purpose of these classes is to make you a better consumer of research.
6. Finally, some of you at some point in your careers are likely to work on health policy in the US. As mentioned above, this course should prepare you for jobs of an analytical nature that do not require the research tools of a Ph.D.
Rules of Classroom Conduct
I will follow the HKS rules for classroom conduct:
1. Be on time. Class starts at 8:40 am. At that time you should all be in your seats and ready to start class.

2. Bring your name card. It not only helps me learn your names but also helps your fellow students know who made a particular comment.

3. Laptops, tablets, and smartphones are NOT to be used in class. Since you can print off the slides in advance, there should be no need for access to electronics during class.

4. No side conversations. This is distracting to me and to your fellow students. If you have a question, please raise your hand. Although you will have asked questions in what you submit before the class, some questions will inevitably occur to you during class. Feel free to ask; if you don’t understand something, the chances are good someone else doesn’t either.

5. Eat responsibly. Try to minimize the impact on others. Drinks are allowed.

6. Please leave during class for emergencies only. If you have to leave during class, please try

to create a minimal disruption. If you must arrive late or leave early for a particular class, please

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