This is a study of the present status and future direction of health care economics and its far-reaching ramifications. "Health Economics" provides exhaustive analyses of such major issues as cost-benefit, cost-effectiveness, quality enhancement, and technology assessment. Part 1 presents a basic overview of cost analysis, production functions, and provider cost behaviour. Part 2 considers economic models of physicians and hospital behaviour, and recent changes in methods for paying physicians. Part 3 focuses on employee cost sharing, HMOs, gatekeepers to contain utilization, and the use of case managers in long-term care. Part 4 looks at equity, social welfare, and the unique problems of urban medical centres. Part 5 focuses on consumer information, quality measurement, and health manpower policies for nonphysician providers. Cost-effectiveness and cost-benefit analysis is reviewed in part 6. The last part summarizes major future policy options and suggests a number of mixed strategies, including capitation. In short, "Health economics" aims to provide policy makers, health care providers, and students with the analytical tools needed to effectively balance efficiency and quality.