ECP3530: Economics of Health — Florida Course Repo

Course Description

ECP3530 Economics of Health applies economic analysis to a sector that violates most of the assumptions a competitive market model depends on — and the interest of the course lies precisely in that mismatch. Health care involves radical uncertainty, information the buyer cannot evaluate, a third party paying most of the bill, entry restricted by licensure, and outcomes that societies are unwilling to allocate purely by ability to pay.

The course is offered at approximately six Florida institutions, including the University of West Florida, the University of Florida, the University of North Florida, the University of South Florida, Florida International University and Eastern Florida State College.

At the University of West Florida the course is titled Health Economic Policy and offered by the Department of Commerce in the College of Business. UWF states its purpose directly: to develop and strengthen the student's ability to use economic concepts and theories to analyse health care issues and to inform decision making and policy development, noting that the provision and production of health care have different characteristics and incentives from other consumer goods. The prerequisite is ECO 2023 — principles of microeconomics. The University of Florida titles the same number Health Care Economics.

UWF's title is worth noticing: "Health Economic Policy" rather than "Health Economics." It signals a course oriented toward informing policy rather than toward pure analysis, which is consistent with its stated purpose. The variation across the state runs along that axis — some versions are closer to applied microeconomics with health as the application, others closer to health policy analysis with economics as the toolkit. Both cover the same core; the emphasis differs, and the syllabus rather than the title is the guide.

The intellectual core of the course is a sequence of market failures, each of which explains an institutional feature of the health system. Uncertainty about when illness will strike explains why insurance exists. Asymmetric information between patient and physician explains licensure, professional norms and the agency relationship — and creates the possibility of supplier-induced demand. Moral hazard — that insured people consume more care than they would if paying directly — explains deductibles and co-payments. Adverse selection — that the people most eager to buy insurance are those most likely to need it — explains why voluntary insurance markets are unstable and why every system that achieves broad coverage uses some compulsion, subsidy or pooling mechanism. Externalities explain public funding for vaccination and communicable disease control.

Once those five are understood, most health policy debates become legible as arguments about which market failure to prioritise and what to trade away in addressing it. That is the course's genuine payoff, and it is available to a student regardless of their political starting point — which is worth saying, because this is a subject where students expect to be told what to think and a good course declines to.

Learning Outcomes

Required Outcomes

Apply microeconomic concepts — demand, supply, elasticity, marginal analysis, opportunity cost — to health care markets.
Explain why health care markets depart from the competitive model, and identify the specific market failures involved.
Analyse the demand for health and health care, including the distinction between health as a good and health care as an input to producing it.
Apply the Grossman model of health as a durable capital stock that depreciates and can be invested in.
Explain asymmetric information and the physician-patient agency relationship, and analyse supplier-induced demand and the evidence for it.
Explain moral hazard in health insurance, distinguish ex ante from ex post moral hazard, and analyse cost-sharing as a response.
Explain adverse selection, the death spiral in voluntary insurance markets, and the mechanisms used to counter it.
Analyse the structure and function of health insurance, including risk pooling, experience versus community rating, and the employment-based system in the United States.
Analyse the market for physician services, including licensure as an entry barrier, specialisation, and payment method effects on behaviour.
Analyse hospital markets, including non-profit objectives, competition, consolidation and market power.
Analyse the pharmaceutical market, including patents and the trade-off between innovation incentives and access, research and development costs, and pricing.
Explain provider payment mechanisms — fee-for-service, capitation, diagnosis-related groups, value-based arrangements — and predict the incentives each creates.
Describe the structure and financing of the U.S. health system, including Medicare, Medicaid, employer-sponsored insurance and the individual market.
Compare health systems internationally on cost, coverage, outcomes and organisation, and evaluate what the comparisons do and do not establish.
Explain the determinants of health care cost growth and evaluate proposed cost-control mechanisms.
Apply cost-effectiveness and cost-benefit analysis to health interventions, including the construction and interpretation of quality-adjusted life years.
Analyse health disparities and the economic and social determinants of health.
Evaluate a health policy proposal using economic reasoning, stating the trade-offs explicitly.

Optional Outcomes

Analyse long-term care markets and financing.
Analyse behavioural economics applications to health behaviour and insurance choice.
Analyse medical malpractice, liability and defensive medicine.
Analyse the economics of public health and prevention.
Analyse the health care workforce and labour market.
Conduct an empirical analysis using publicly available health data.
Analyse the economics of specific conditions or interventions.
Analyse health system consolidation and antitrust in health care.

Major Topics

Required Topics

Why health care is different. Arrow's foundational analysis of uncertainty and the welfare economics of medical care; the specific departures from the competitive model; why "just let the market work" and "markets have no role" are both inadequate as analyses.
Demand for health and health care. Health as distinct from health care; the Grossman model of health capital, depreciation and investment; derived demand; price elasticity of demand for medical care and the evidence from the major insurance experiments; income elasticity; the role of the physician as agent.
Asymmetric information. The patient's inability to evaluate quality or necessity; credence goods; licensure and certification as responses; professional norms; supplier-induced demand and the empirical difficulty of demonstrating it; quality measurement and reporting.
Insurance theory. Risk aversion and the value of pooling; expected utility and the demand for insurance; loading costs; moral hazard, ex ante and ex post, and the welfare loss it creates; deductibles, co-insurance and co-payments as instruments; adverse selection, the lemons problem applied to insurance, and the death spiral; risk adjustment, mandates, subsidies and open-enrolment restrictions as counters.
The insurance market in practice. Employer-sponsored insurance and its tax treatment; the individual market; managed care and its evolution; high-deductible plans and health savings accounts; network design and narrow networks; the uninsured and underinsured.
Physician services. Licensure and scope of practice as entry restrictions; the supply of physicians and the residency bottleneck; specialty choice and income differentials; payment method effects — fee-for-service and volume, capitation and under-provision, salary and effort; the physician workforce and its distribution.
Hospitals. The non-profit form and the objectives it implies; competition among hospitals and the medical arms race; consolidation and market power, and the evidence on its price effects; hospital payment, including diagnosis-related groups; uncompensated care and cost shifting; certificate-of-need regulation and its Florida history.
Pharmaceuticals. Patents and the innovation-access trade-off; the cost of drug development and the debate over the figures; pricing and price discrimination across markets; generics and biosimilars; pharmacy benefit managers and the flow of rebates; direct-to-consumer advertising.
Government programmes. Medicare — its parts, financing and payment systems; Medicaid — federal-state structure, eligibility, and the expansion decision, which Florida has not adopted; the Children's Health Insurance Program; the Veterans Health Administration; the Affordable Care Act's principal mechanisms and their interaction.
Cost growth. The decomposition of spending growth into price, quantity, intensity and demographics; technology as the principal driver in most analyses; administrative costs; the international comparison showing U.S. prices rather than utilisation as the main difference; cost-control mechanisms and their track records.
Economic evaluation. Cost-effectiveness, cost-utility and cost-benefit analysis; quality-adjusted life years, how they are constructed and what they assume; incremental cost-effectiveness ratios; discounting; the ethical objections to QALYs, particularly regarding disability; how other countries use these methods in coverage decisions and why the United States largely does not.
Comparative health systems. Beveridge, Bismarck, national health insurance and out-of-pocket models; the systems of Canada, the United Kingdom, Germany, the Netherlands, Switzerland, Japan and others; cost, coverage and outcome comparisons and their methodological limits; what is and is not transferable between contexts.
Health disparities and social determinants. The gradient between socioeconomic status and health; access barriers; racial and ethnic disparities and their measurement; rural health; the economic case for addressing upstream determinants.
Policy analysis. Identifying the market failure a policy addresses; efficiency and equity trade-offs; unintended consequences; the political economy of health reform and why concentrated interests defeat diffuse ones.

Optional Topics

Long-term care markets, insurance and Medicaid's dominant role in financing.
Behavioural economics: default effects, insurance plan choice, adherence and nudges.
Medical malpractice, liability regimes and defensive medicine.
Public health economics: vaccination, communicable disease, tobacco and alcohol taxation, obesity.
Health care labour markets and the nursing workforce.
Mental health and substance use treatment economics, including parity.
Health care antitrust and consolidation policy.
Global health economics and health in developing countries.

Resources & Tools

Health Economics and Policy by James Henderson (Cengage) — the most widely adopted text at this level and well matched to a policy-oriented course.
The Economics of Health and Health Care by Folland, Goodman and Stano (Routledge) — the standard alternative and more technical.
Health Economics by Bhattacharya, Hyde and Tu (Macmillan) — clear, current and unusually good on the theory of insurance markets.
Introduction to Health Economics by Guinness and Wiseman for the international and public health perspective.
Foundational reading: Kenneth Arrow's 1963 article on uncertainty and the welfare economics of medical care, which founded the field and is still assigned; the RAND Health Insurance Experiment findings and the later Oregon Health Insurance Experiment, which are the two best sources of causal evidence on what insurance coverage does.
Journals and policy sources: Journal of Health Economics, Health Affairs (the leading policy journal and highly readable), Health Economics, New England Journal of Medicine perspective pieces, JAMA Health Forum.
Data — free and excellent for student work:
- Centers for Medicare and Medicaid Services — National Health Expenditure Accounts, the authoritative source on U.S. health spending; provider and utilisation data.
- Agency for Healthcare Research and Quality — the Medical Expenditure Panel Survey (MEPS), the standard microdata source on health spending and utilisation.
- Kaiser Family Foundation — the single most useful free resource for this course; state-level data, employer health benefits surveys, and clear explainers of every major programme.
- OECD Health Statistics for international comparison; the Commonwealth Fund's international surveys.
- Congressional Budget Office analyses of health legislation; MedPAC and MACPAC reports.
- CDC and the National Center for Health Statistics.
Florida-specific: the Florida Agency for Health Care Administration (AHCA), which administers Medicaid and licenses facilities and publishes hospital and utilisation data; Florida Health Charts from the Department of Health; the Office of Insurance Regulation for market data; and KFF's state health facts pages for Florida.

Career Pathways

Health economics sits at the intersection of two large sectors — health care and analysis — and Florida has an unusually large amount of both.

Economists (SOC 19-3011) — health economists work in government, research organisations, consulting and academia; graduate credentials required in practice.
Medical and Health Services Managers (SOC 11-9111) — one of the fastest-growing management occupations, and this course's material on payment, cost and market structure is directly operational.
Financial and Investment Analysts (SOC 13-2051) — health system finance, and the health care coverage sector in equity research and private equity.
Management Analysts (SOC 13-1111) — health care consulting is a large practice area at every major firm.
Health policy analysts — state agencies, legislative staff, think tanks and advocacy organisations; Tallahassee employs these directly.
Actuaries (SOC 15-2011) — health actuarial work is a distinct and well-compensated track requiring the professional examination sequence, for which this course is useful preparation.
Insurance underwriters and product analysts (SOC 13-2053) at health plans.
Pharmaceutical and device industry roles in market access, health economics and outcomes research, and pricing — "HEOR" is a defined career track that recruits economists and is under-known to undergraduates.
Hospital and health system finance, strategy and contracting roles.
Public health (SOC 21-1091 and related) — programme evaluation and health economics within public health agencies.
Graduate study — MPH, MHA, master's in health economics or health policy, an MBA with health concentration, or a PhD in economics.

Florida's health sector is among the largest in the country and is growing for demographic reasons. Major systems including AdventHealth, Orlando Health, BayCare, Baptist Health, Tampa General, Cleveland Clinic Florida, Memorial Healthcare and Jackson Health employ substantial finance, contracting and strategy staff. The state has a large Medicare Advantage market and a correspondingly large managed care presence, with several plans headquartered or heavily operating here. Florida's older population also makes it the natural setting for long-term care, home health and hospice economics, a sector that is large and heavily Medicaid-financed. State-level policy work concentrates in Tallahassee at AHCA, the Department of Health, the Office of Insurance Regulation and legislative committee staff. And Florida's decision not to adopt Medicaid expansion makes the state a live case study in coverage policy that students can analyse with data rather than abstraction.

Special Information

Prerequisites

UWF requires ECO 2023 (Principles of Microeconomics) only. That is a modest and appropriate gate — the course develops its own applications from microeconomic foundations, and macroeconomics is not needed. Practice statewide is similar, with some institutions also requiring statistics or intermediate microeconomic theory.

Intermediate microeconomics is genuinely useful where it fits. The insurance material is expected utility theory, the moral hazard and adverse selection analysis is information economics, and a student who has met those formally will follow the arguments rather than accept them. It is not necessary — the course teaches what it needs — but the version taught to students who have it can go further.

Statistics matters for a different reason: health economics is an unusually empirical field, and much of the interesting work turns on identification — how researchers established a causal claim when they could not run an experiment. A student with statistics can read the evidence; a student without takes the conclusions on trust.

⚠ Course title variation across Florida

The statewide title is Economics of Health; the University of Florida titles ECP 3530 Health Care Economics; the University of West Florida titles it Health Economic Policy.

The UWF title signals a real orientation. "Health Economic Policy" describes a course aimed at informing policy and decision-making — which UWF's stated purpose confirms — while "Health Care Economics" suggests applied microeconomics with health as the domain. Both cover the same theoretical core; the difference is how much of the term goes to institutional and policy detail versus to formal analysis. Neither is more rigorous. Read the syllabus if you have a preference, and note that the health economics course serves two quite different audiences — economics majors wanting an application, and health services and public health students wanting the analytical toolkit — and instructors pitch accordingly.

Position in the curriculum

ECP3530 is an upper-division elective normally taken in the junior or senior year. The ECP prefix designates applied economics fields in the SCNS — labour, health, urban, environmental, public sector — distinguishing them from ECO (general and theory) and ECS (comparative systems). A student looking for applied field courses should search under ECP.

It is a common elective for economics majors and for students in health services administration, public health, nursing and pre-medicine. For students heading into any health profession, it is arguably the most useful non-clinical elective available, because the payment and incentive structures it explains will shape their working lives whether or not they ever think about them.

Articulation and transfer

ECP3530 carries the same SCNS number across Florida public institutions and SCNS equivalency governs transfer of the credit. As an upper-division course it does not appear in A.A. programmes and is taken after transfer — though Eastern Florida State College offers it within a bachelor's programme, so it is available outside the university system. The receiving department decides whether it satisfies a field requirement, which for an elective is rarely contentious.

Course format and workload

Three credit hours, approximately 45 contact hours, taught as lecture and discussion; online sections are common. Assessment typically combines examinations, problem sets, policy analysis papers, and often a research project using publicly available data. Expect six to nine hours a week outside class.

A project suggestion worth taking: the free data listed above makes genuine undergraduate analysis feasible — comparing Florida's uninsured rate or Medicaid enrolment against expansion states, examining hospital price variation using AHCA data, or analysing spending growth decomposition from the National Health Expenditure Accounts. That is real applied economics using real data, it is more interesting than summarising the literature, and it produces a portfolio piece.

⚠ Teaching a politically charged subject

Health policy is contested, and students arrive with commitments. Two things are worth stating.

First, the economic analysis is largely separable from the political conclusion, and the course's value depends on making that separation. That adverse selection destabilises voluntary insurance markets is a result, not an opinion; what to do about it — mandate, subsidise, pool, or accept the instability — involves value judgements about which economics alone cannot decide. A student who can state the trade-off precisely is doing the discipline's work, whatever conclusion they reach. Students of every political disposition should expect their assumptions examined rather than confirmed.

Second, the international comparisons are more informative than either side's use of them. Every developed country spends less per capita than the United States and covers more of its population; every one of those systems also involves trade-offs that its own citizens debate — waiting times, constrained choice, coverage limits, or tax burden. The honest framing is that different systems make different trade-offs rather than that one has solved the problem, and the analytically interesting question is which trade-offs a given population would accept.

⚠ What the course corrects

Several widely held beliefs do not survive the evidence:

The United States does not consume dramatically more health care than other rich countries. It pays substantially more per unit. Utilisation is broadly comparable; prices are not.
Administrative costs are real but do not account for most of the difference, though they are considerably higher than in single-payer systems.
Most cost growth over time is attributable to technology and intensity rather than to ageing or to any single villain.
Insurance affects utilisation substantially — the major experiments established this — and its effect on health outcomes is more modest and more concentrated among the poor and sick than either side of the debate usually acknowledges.
Preventive care is valuable but usually does not save money. Most prevention improves health at a cost, which is a good reason to do it — but "prevention pays for itself" is generally false and the course explains why.
Non-profit hospitals behave a great deal like for-profit ones in pricing and competitive conduct, which surprises students.

AI Integration

Health care is among the largest markets for AI deployment, and this course's analytical apparatus is well suited to evaluating it — better, in some respects, than a clinical course would be.

The economic questions are the ones the course teaches. Diagnostic and imaging systems, clinical decision support, administrative automation, revenue cycle management, prior authorisation processing and risk prediction are all being deployed at scale. The economically interesting questions are: who captures the savings, who bears the risk, and what does the payment system reward? A technology that reduces the cost of producing a service does not reduce spending if the payment system pays per service — it increases volume. That is a straight application of the payment-incentive material, and it explains why cost-saving technologies in health care have so often failed to save money.

Three applications where the course's specific concepts apply directly:

Risk prediction and adverse selection. Better prediction of individual health costs is, in insurance terms, a technology that undermines pooling — the more precisely a risk can be predicted, the less there is to pool. It improves risk adjustment where regulators use it and enables selection where insurers can act on it. The course's adverse selection material is exactly the right frame, and it explains why this is a regulatory question rather than a technical one.
Prior authorisation and utilisation management. Automated coverage determination reduces administrative cost for payers and shifts burden to providers and patients. The moral hazard rationale for utilisation management is genuine; whether automated denial at scale is a proportionate response is an empirical and normative question that has become a live policy dispute.
Administrative cost. The United States' administrative burden is one of the few areas where the international comparison is unambiguous, and automation of billing, coding and claims is a plausible target. Whether the savings reach patients depends on market structure, which the course teaches.

The evaluation question the course is uniquely equipped to ask: health economics has a mature framework for assessing whether an intervention is worth its cost — cost-effectiveness analysis, incremental ratios, QALYs — and most AI tools deployed in health care have not been evaluated that way. Accuracy on a validation dataset is not evidence of improved outcomes, still less of cost-effectiveness. Asking "what is the incremental cost per quality-adjusted life year gained?" of a diagnostic algorithm is the right question and it is very rarely answered.

For coursework, the limits are the ones this project has recorded across policy subjects. Language models are useful for explaining a concept, structuring an argument, and summarising a programme's design. They are unreliable on health policy specifics — misstating Medicaid eligibility rules, describing superseded ACA provisions, inventing spending figures, and reporting programme details that have changed. Health policy moves quickly and varies by state, and Florida's own decisions differ from the national default in ways a model will not reliably know.

Every figure and every programme detail in submitted work needs a citable primary source — and in this field the sources are outstanding and free: CMS for spending, MEPS for utilisation, KFF for state-level programme detail, and CBO for legislative analysis. There is no defensible reason to cite a model's recollection of Florida's Medicaid eligibility thresholds when AHCA publishes them.