Instructors’ Manual and Test Bank
to accompany
Health Economics and Policy, 6th Edition
James W. Henderson
Baylor University 2026
Introduction
With public policy as its unifying thread, this book’s focus is the U.S. health care system in
transition. The technical tools of economics are important, but they are not treated as ends to
themselves. Instead, I employ theory as a way of preparing to address policy questions.
Each chapter begins with a case-like discussion introducing an issue related to the chapter
content. Other discussion material is provided in features called “Issues in Medical Care
Delivery.” They summarize important studies in medical research, epidemiology, public health,
and other fields as they relate to the economics of health care delivery. Another feature found in
most chapters is the “Profiles” of individuals who have made significant contributions to health
economics. Many of them are economists; some are physicians; all have had a profound impact
on how we view health, health economics, and health policy.
The “Back of the Envelope” inserts are meant to show the economic way of thinking, using
graphs. These and similar graphical presentations are frequently used by economists in informal
settings. They might represent scribbles on the back of a paper napkin that are used to make a
point during lunch with colleagues. Topics include: how to calculate a rate of return, the notion
of elasticity, the welfare implications of subsidies, the impact of employer mandates, cost-benefit
calculations, and the cost effectiveness of disease prevention, among many others. Developing
the ability to use models in this way is an important goal of this book.
,Goals and Objectives
The primary goals of this course are to enable the student to:
1. Recognize the relevance of economics to health and medical care and apply economic principles
to related health issues.
2. Understand the mechanisms of the health care delivery system within the broad social, political,
and economic contexts.
3. Explore the changing nature of health and medical care and the implications for medical
practice, medical education and research, and health policy.
4. Analyze public policy in health and medical care from an economic perspective.
To accomplish these goals, the student should be able to:
1.1 Explain the usefulness of economics in understanding matters of life, death, disability, and
suffering.
1.2 Identify and describe the various factors that influence the demand for medical care.
1.3 Summarize the major arguments concerning how practitioners influence the supply of medical
care.
2.1 Explain the observed patterns in the quantity and price of medical care.
2.2 Identify and analyze the relevant issues in health care financing and delivery.
2.3 Describe the implications of an aging population on the market for medical services.
3.1 Identify the factors that influence the supply of physicians and demonstrate how they affect
the price and quantity of medical care.
3.2 Outline the major issues determining the supply and demand for medical manpower: nurses,
technicians, dentists, pharmacists.
3.3 Explain how the increase in medical malpractice suits has impacted on the market for medical
services.
,3.4 Explain the role of medical research and medical technology in the quantity and quality of
medical care and the price paid for it.
4.1 Identify and analyze the reasons for the increasing popularity of national health insurance
worldwide.
4.2 Explain and analyze the roles of government, family, and religion in health care.
4.3 Explain the relation between medical care for the elderly and other aspects of aging.
4.4 Summarize the economic, political, and moral implications of recent changes in
reimbursement schemes (PPOs and DRGs) on health and the quality and accessibility of
medical care.
4.5 Describe and critique the quality and quantity of uncompensated medical care.
4.6 Evaluate the efficacy of alternative delivery systems, primarily HMOs, in containing medical
costs.
Suggested Course Content:
There is a mid-term exam and a comprehensive final exam in the course I teach at Baylor. The
mid-term exam counts 30 percent toward the final course grade. The final counts 30 percent. Two
critical review papers are required and count 20 percent. Class participation and structured
discussions count for the remaining 20 percent.
• Structured Discussion—On six occasions the class is assigned a discussion topic that
can easily be translated into a specific pro-or-con format. In a 15 week semester, there
is a discussion scheduled every 2-3 weeks. Each discussion counts 10 percent of your
course grade. Class attendance and discussion for non-participants will count 5 percent
of your course grade. The following steps are recommended in preparing the class for
a structured discussion.
1. The class is assigned a discussion topic that can easily be translated into a specific
pro-or-con format. Each student is required prepare five pro and five con arguments
, on the discussion topic. Each argument must be supported with evidence comprised
of an economic theory, a concept, or a study.
2. On the day of the class discussion, students bring their arguments to class and divide
into two groups. Each group is assigned either the pro or con side of the argument.
Each group meets for 15 minutes to choose their strongest arguments. (To save class
time this step could be assigned for group work outside of class.)
3. For the next 45 minutes, taking turns each side presents an argument with its
supporting evidence. If time permits allow a challenge from the alternate side and
even a short rebuttal. Repeat the process with pro and con alternating. Keep a record
of all discussion.
4. Dropping the assigned advocacy roles, during the remaining time the entire class
examines the arguments, expresses opinions, and reflects on the issues.
5. Students are required to prepare individual essays on the discussion topic stating their
own opinions and providing supporting evidence.
• Critical review papers—The goal in this assignment is to write a paper that can be
understood by the typical student in the class. Grades are determined by how well the
student accomplishes the assigned tasks. More specifically, I look for:
• style and presentation that is clear, well-organized, and free from
misspellings, grammatical errors, faulty punctuation, and other mechanical
problems that obscure the meaning (20 percent);
• an internal structure that is consistent with the article you are reviewing. This
will likely include information provided in the article: an introduction, a
purpose statement, a discussion of the previous research in the topic area, a clear
statement of the testable hypotheses and issues, and a summary-conclusion that
includes a statement of the current status of the issue and implications for the
future (20 percent).
to accompany
Health Economics and Policy, 6th Edition
James W. Henderson
Baylor University 2026
Introduction
With public policy as its unifying thread, this book’s focus is the U.S. health care system in
transition. The technical tools of economics are important, but they are not treated as ends to
themselves. Instead, I employ theory as a way of preparing to address policy questions.
Each chapter begins with a case-like discussion introducing an issue related to the chapter
content. Other discussion material is provided in features called “Issues in Medical Care
Delivery.” They summarize important studies in medical research, epidemiology, public health,
and other fields as they relate to the economics of health care delivery. Another feature found in
most chapters is the “Profiles” of individuals who have made significant contributions to health
economics. Many of them are economists; some are physicians; all have had a profound impact
on how we view health, health economics, and health policy.
The “Back of the Envelope” inserts are meant to show the economic way of thinking, using
graphs. These and similar graphical presentations are frequently used by economists in informal
settings. They might represent scribbles on the back of a paper napkin that are used to make a
point during lunch with colleagues. Topics include: how to calculate a rate of return, the notion
of elasticity, the welfare implications of subsidies, the impact of employer mandates, cost-benefit
calculations, and the cost effectiveness of disease prevention, among many others. Developing
the ability to use models in this way is an important goal of this book.
,Goals and Objectives
The primary goals of this course are to enable the student to:
1. Recognize the relevance of economics to health and medical care and apply economic principles
to related health issues.
2. Understand the mechanisms of the health care delivery system within the broad social, political,
and economic contexts.
3. Explore the changing nature of health and medical care and the implications for medical
practice, medical education and research, and health policy.
4. Analyze public policy in health and medical care from an economic perspective.
To accomplish these goals, the student should be able to:
1.1 Explain the usefulness of economics in understanding matters of life, death, disability, and
suffering.
1.2 Identify and describe the various factors that influence the demand for medical care.
1.3 Summarize the major arguments concerning how practitioners influence the supply of medical
care.
2.1 Explain the observed patterns in the quantity and price of medical care.
2.2 Identify and analyze the relevant issues in health care financing and delivery.
2.3 Describe the implications of an aging population on the market for medical services.
3.1 Identify the factors that influence the supply of physicians and demonstrate how they affect
the price and quantity of medical care.
3.2 Outline the major issues determining the supply and demand for medical manpower: nurses,
technicians, dentists, pharmacists.
3.3 Explain how the increase in medical malpractice suits has impacted on the market for medical
services.
,3.4 Explain the role of medical research and medical technology in the quantity and quality of
medical care and the price paid for it.
4.1 Identify and analyze the reasons for the increasing popularity of national health insurance
worldwide.
4.2 Explain and analyze the roles of government, family, and religion in health care.
4.3 Explain the relation between medical care for the elderly and other aspects of aging.
4.4 Summarize the economic, political, and moral implications of recent changes in
reimbursement schemes (PPOs and DRGs) on health and the quality and accessibility of
medical care.
4.5 Describe and critique the quality and quantity of uncompensated medical care.
4.6 Evaluate the efficacy of alternative delivery systems, primarily HMOs, in containing medical
costs.
Suggested Course Content:
There is a mid-term exam and a comprehensive final exam in the course I teach at Baylor. The
mid-term exam counts 30 percent toward the final course grade. The final counts 30 percent. Two
critical review papers are required and count 20 percent. Class participation and structured
discussions count for the remaining 20 percent.
• Structured Discussion—On six occasions the class is assigned a discussion topic that
can easily be translated into a specific pro-or-con format. In a 15 week semester, there
is a discussion scheduled every 2-3 weeks. Each discussion counts 10 percent of your
course grade. Class attendance and discussion for non-participants will count 5 percent
of your course grade. The following steps are recommended in preparing the class for
a structured discussion.
1. The class is assigned a discussion topic that can easily be translated into a specific
pro-or-con format. Each student is required prepare five pro and five con arguments
, on the discussion topic. Each argument must be supported with evidence comprised
of an economic theory, a concept, or a study.
2. On the day of the class discussion, students bring their arguments to class and divide
into two groups. Each group is assigned either the pro or con side of the argument.
Each group meets for 15 minutes to choose their strongest arguments. (To save class
time this step could be assigned for group work outside of class.)
3. For the next 45 minutes, taking turns each side presents an argument with its
supporting evidence. If time permits allow a challenge from the alternate side and
even a short rebuttal. Repeat the process with pro and con alternating. Keep a record
of all discussion.
4. Dropping the assigned advocacy roles, during the remaining time the entire class
examines the arguments, expresses opinions, and reflects on the issues.
5. Students are required to prepare individual essays on the discussion topic stating their
own opinions and providing supporting evidence.
• Critical review papers—The goal in this assignment is to write a paper that can be
understood by the typical student in the class. Grades are determined by how well the
student accomplishes the assigned tasks. More specifically, I look for:
• style and presentation that is clear, well-organized, and free from
misspellings, grammatical errors, faulty punctuation, and other mechanical
problems that obscure the meaning (20 percent);
• an internal structure that is consistent with the article you are reviewing. This
will likely include information provided in the article: an introduction, a
purpose statement, a discussion of the previous research in the topic area, a clear
statement of the testable hypotheses and issues, and a summary-conclusion that
includes a statement of the current status of the issue and implications for the
future (20 percent).
