For courses in Health Economics, Public Health, and Health Care Policy. This clear, step-by-step best-selling introduction to the economics of health and health care thoroughly develops and explains economic ideas and models to reflect the full spectrum of the most current health economics literature. It uses core economic themes as basic as supply and demand, as venerable as technology or labor issues, and as modern as the economics of information.

This is the fourth edition of a book that was conceived in 1990 and first published in 1993. To indicate how much the world of health economics has changed, the first edition made a single reference to "managed care," and that was in the context of monopoly power in the provision of health care. This book was first written to assist health economics instructors in developing a clear, step-by-step understanding of health economics for their students. We also believe that it is important for instructors to demonstrate what health economics researchers are doing in theory and in empirical work. The book synthesizes contemporary developments around a set of basic economic principles, including maximization of consumer utility and economic profit, wishing to make these principles accessible to undergraduate students, as well as to graduate students. Rather than organizing the book around the institutions specific to the health care economy, we have used core economics themes as basic as supply and demand, as venerable as technology or labor issues, and as modern as the economics of information. Moreover, we have sought to improve accessibility to the book for the wide range of health services students and practitioners whose knowledge of economics may be more limited. We have followed the philosophy that students must have a working knowledge of the analytical tools of economics and econometrics to appreciate the field of health economics. Some students may be ready to plunge directly into "The Production of Health" (Chapter 4) upon completion of the introductory Chapter 1. However, Chapter 2 ("Microeconomic Tools") and Chapter 3 ("Statistical Tools") allow the students and their teachers to develop or to review the needed analytical concepts before tackling the core subject matter. In Chapters 2 and 3, students with as little as one semester of microeconomics may review and study how economists analyze problems, using examples that are relevant to health economics. No calculus is needed. Consistent with an emphasis on clarity of exposition, this book makes extensive use of graphs, tables, and charts. Discussion questions and exercises are provided to help students master the basics and to prompt them to think about the issues. Features on up-to-date applications of theory and policy developments are also included, as well as the occasional tidbit containing purely background information. Finally, we caution that some of the chapters, such as those on insurance, although devoid of advanced mathematics, may still require considerable effort. No painless way is available to appreciate the scope of the contributions that scholars have made in recent years. More advanced students of the health care economy who wish to be challenged further can utilize a comprehensive references section, with more than 800 sources, so that their (and our) work can be enriched through referral to the original sources. WHAT'S CHANGED IN THE FOURTH EDITION? It is critical that this textbook contains the most current knowledge and addresses the needs of our readers. As with previous editions, almost every chapter is revised to incorporate significant developments in the field. In response to the instructors and students who use this book, we have made some changes in its organization. Our newly arranged Part IV identifies key players in the health care sector, with special reference to nonprofit firms (Chapter 13), hospitals (Chapter 14), physicians and labor (Chapter 15), and the pharmaceutical industry (Chapter 16). The section on social insurance and governmental actions, Part V has been moved forward to begin with Chapter 17 on equity and need, looking at governmental regulation (Chapters 18 and 19), social insurance (Chapter 20), and finishing with comparative systems and health care reform (Chapter 21). Our new Part VI examines special topics. Chapter 22 continues from the previous edition, lo