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the economics of health and health care

Questions and Answers of The Economics Of Health And Health Care

1.10 Informal care provided by children and other family members is a substitute for LTC for parents. Describe some potential social and demographic changes that may reduce the availability of such
1.9 Nonprofits are dominant in the hospital industry, while for- profits dominate the nursing home industry. Develop some possible explanations for this difference.
1.8 Explain how excess demand for nursing home beds may persist over long periods. How can the hypothesis be tested?
1.7 Use the “Quality of Care” subsection to discuss and explain why hospitals may fail to provide some effective and widely accepted procedures.
1.6 Hospital costs have grown following the growth of private and public insurance. Describe other factors that could account for some of the growth.
1.5 Explain why a relatively small number of adults (about 7.5 million in 2020) have long- term care coverage.
1.4 Suppose that the Medicare rate of hospital reimbursement is reduced. Explain why the costs may not be shifted to other patients in the short run.
1.3 Some critics argue that hospitals have engaged in a medical arms race where they try to outcompete one another with costly new technologies and amenities that have questionable health benefits.
1.2 Even nonprofit hospitals must earn a “profit.” Evaluate this statement.
1.1 Explain why it is often claimed that hospitals compete for doctors rather than patients.What are some of the implications of this phenomenon, assuming that it is true?
1.Describe the consequences of hospital consolidation
1.Describe the effects of changes in hospital competition on the costs and quality of care
1.7 In Table 15.4, the market penetration for managed care rises from 40 to 50% between Periods 1 and 2 and stays at 50%. Suppose, instead, that it fell from 8 to 30% and stayed at 30%.a What would
1.6 A single HMO entices all the consumers in Exercise 5 to join its plan, which also requires a 10% copayment. Assume that all the physicians in Exercise 5 agree to participate in the plan.a Explain
1.5 Draw standard market supply and demand curves for physician office visits. Assume that the demand D1 is with FFS insurance (purchased in a competitive insurance market) so that the equilibrium
1.4 Consider the discussion on adverse selection into HMOs and FFS care, as noted through equation (15.2) and Figure 15.3. Suppose that, on average, FFS clients bought $2,000 in services (sF = 2000)
1.3 Consistent with Figure 15.1, assume that the FFS price was $100 per visit and the average patient made eight visits per year. A competing managed care organization came in and charged $80 per
1.2 In Exercise 1, if the firm must act as a perfect competitor, in the long run what will happen to equilibrium price and equilibrium output?
1.1 Consider an HMO with a demand curve of the following form: Q = 100 – 2P. Suppose that its marginal and average costs were $20. If the firm maximizes profits, determine its price, output, and
1.15 There are concerns that Medicare Advantage plans have received excess payments on behalf of their enrollees. Explain the basis for these concerns
1.14 Some critics argue that providers do not have sufficient financial incentives to provide quality care. Describe some of the existing safeguards.
1.13 Discuss the ways that managed care organizations can influence the adoption of new technologies.
1.12 Managed care plans often contract with physicians on a FFS basis. Describe mechanisms that plans may adopt to limit overutilization.
1.11 If traditional FFS leads to demand inducement, what constrains the HMO from underproviding care?
1.10 Why is the growth of managed care a relatively recent phenomenon? Describe governmental policies and practices that have encouraged managed care organizations and inhibited them.
1.9 What features of managed care organizations tend to inhibit or discourage people from joining? What features tend to attract people? Discuss the advantages and disadvantages of managed care
1.8 If everyone chose to join an HMO, would average HMO expenditures per case tend to rise or fall? Would national health expenditures tend to rise or fall?
1.7 After a large increase in membership, HMO enrollments flattened in the late 1980s and many HMOs suffered financial difficulties. How could this be explained according to what is known about the
1.6 Why do some critics argue that managed care organizations provide lower- quality care than FFS plans? Evaluate this possibility from a societal perspective.
1.5 Discuss ways that managed care organizations may be able to reduce costs of care to their clientele.
1.4 Why is selection bias such an important issue in measuring HMO performance?
1.3 How do the economic profits (rents) that may be earned by some groups of providers enable MCOs to limit expenditures? What role does the price elasticity of demand play in this process?
1.2 What are the principal differences among HMO, PPO, and POS plans?
1.1 What are the key elements that distinguish managed care from FFS plans?
1.•Describe the managed care backlash and assess whether consumers “voted with their feet”
1.•Explain selection bias and the challenges it creates in assessing the performance of managed care
1.•Compare the performance of managed care with fee- for- service plans
1.•Describe individual and plan characteristics that influence an individual’s choice of HMO vs. a fee- for- service plan
1.•Explain the social inefficiency (underutilization) that may be associated with HMOs
1.•Distinguish between fee- for-service and managed care, and between the major types of managed care plans
1.•Describe the rationale for HMOs and other managed care plans
1.9 Suppose that Charlie’s Pizzeria in Kalamazoo, Michigan, employs 10 employees at a wage level of $15 per person. All other costs (ovens, rent, advertising, return to capital) total$50 per hour,
1.8 Consider two workers, Robert and Steve. Both of them work for the same employer, and each earns $15 per hour. Steve is taxed at the 15% marginal rate. However, Robert is married, and due to his
1.7 Consider the market labor demand LD and labor supply LS, where W is the market wage.Demand: LD = 1,000 − 20W Supply: LS = −200 + 400W a What is the equilibrium market wage? What is the
1.6 Consider a difference- in- difference model of job lock. The research finds the following probabilities:a Interpret each element of this matrix in terms of the probability of changing jobs.b Does
1.5 Using Figure 14.2, indicate the wage and employment impacts of a health insurance policy that costs $2 per hour to the workers and is worth exactly $3 per hour to the workers. Why do your answers
1.4 Using Figure 14.2, consider an insurance policy that provides free “purple aspirin” to all workers. This benefit provides no conceivable advantage (workers don’t care whether their aspirin
1.3 Using Figure 14.2:a Calculate an initial labor market equilibrium (wages and employment) determined by the demand and supply of labor.b Indicate the wage and employment impacts of a health
1.2 Using Figure 14.2:a Calculate an initial labor market equilibrium (wages and employment) determined by the demand and supply of labor.b Indicate the wage and employment impacts of a health
1.1 Using Figure 14.1, illustrate the probability that someone will obtain insurance for treatment for a A hangnail.b A broken arm.c A “bad hair” day.d Viral meningitis.
1.8 Suppose a household does not carry health insurance. Can we conclude that this reflects failure of insurance markets? Why or why not?
1.7 What is job lock? Would you expect job lock to increase or decrease if employer- based health insurance were to be replaced by government- provided health insurance?
1.6 According to the ACA, adults with preexisting conditions became eligible to join a temporary high- risk pool, which will be superseded by the health care exchange in 2014. To qualify for
1.5 Blue Cross plans typically have practiced community rating. If other insurance firms are seeking healthier patients at reduced rates, what impact will this have on Blue Cross net revenues? Why?
1.4 Suppose that a company pays its workers $20 per hour and provides an additional $2- perhour worth of fringe benefits, including a basic health insurance policy. Discuss the firm’s reaction to a
1.3 Suppose your health insurance allows you, a worker, to buy whatever prescription drugs you wish for $5 per prescription. In contract negotiations it is proposed to change this benefit to“10–
1.2 In 1986, the US federal income tax system changed marginal tax rates so that the top federal marginal rate fell from 50 to 33%. From what you know about how fringe benefits are negotiated, what
1.1 Suppose each person’s health expenditures can be predicted with certainty by both the insured and the insurer. What are the implications for insurance markets? Explain the prevalence of
1.• Discuss the prevalence of uninsured workers, and how certain policies have either alleviated or exacerbated the problem
1.Explain the differential impacts of community rating and experience rating
1.Explain “compensating differentials” related to health benefits
1.Explain the shift to “high deductible” health insurance
1.Discuss why some medical conditions are insured and others are not
1.12 Consider the discussion in the text about Elizabeth’s breast cancer treatment. Using Figure 13.11, calculate the net welfare benefits if mu = 20,000, mc = 40,000, and mi = 44,000.To aid in the
1.11 Suppose, in Exercise 9, that the coinsurance rate was raised to 50%.a Calculate the new equilibrium price and quantity. (Hint: How does the demand curve shift?)b Calculate the deadweight loss
1.10 Suppose that the market demand for medical care is summarized by the demand function:Qd = 200 − 2p and the market supply is summarized by the supply function:Qs = 20 + 2p a Calculate the
1.9 Suppose that the market demand for medical care is summarized by the demand function:Qd = 100 − 2p and the market supply is summarized by the supply function:Qs = 20 + 2p a Calculate the
1.8 In Exercise 7, if the insurance company pays Fred’s entire loss, what will Fred’s expenses be?How much will the company pay? Will it continue to offer him insurance at the actuarially fair
1.7 Suppose, if ill, that Fred’s demand for health services is summarized by the demand curve Q = 50 – 2 P, where P is the price of services. How many services does he buy at a price of$20?
1.6 We have discussed the role of utility functions in the purchase of insurance.a Suppose Edward’s utility function can be written as: U = 20Y where U is utility and Y is income per month. What is
1.5 Examine Exercise 4.a Show the gains from insurance, if any, in Exercise 4a.b (Difficult) Show the cost of insurance in Exercise 4b.
1.4 Here are some exercises using Figure 13.1.a Draw a utility- of- wealth curve similar to Figure 13.1 for consumers who are not riskaverse.How would its shape differ from Figure 13.1?b Draw a
1.3 A standard roulette wheel has an array of numbered compartments referred to as “pockets.”The pockets are red, black, or green. The numbers 1 through 36 are evenly split between red and black,
1.2 Suppose that rather than flipping a coin, one rolls a die. If the value is 1, 2, 3, or 4, the player wins $1. If it is 5 or 6, the player loses $1. Calculate the expected return.
1.1 Suppose that Nathan’s employer provides a health insurance policy that pays 80% of $1 over the first $100 spent. If Nathan incurs $1,000 in expenses, how much will he pay outof-pocket? What
1.9 From Nyman’s arguments, do all increased expenditures become welfare enhancing? Give examples of some that enhance welfare. Give examples of others that do not.
1.8 Because health insurance tends inevitably to cause moral hazard, will the population necessarily be overinsured (in the sense that a reduction in insurance would improve welfare)? Are there
1.7 Some brokers (called viatical brokers) offer cash settlements in advance to people with terminal diseases who have life insurance, paying them in advance of their death. Is this practice ethical?
1.6 The game show Deal or No Deal, popular throughout the world, provides many elements of risk and expected value. Discuss the ways that the decision as to whether to “take the money” or to
1.5 If only risk- averse people will buy health insurance, why do many people who buy health insurance also buy lottery tickets (an activity more consistent with risk- taking, especially since most
1.4 Describe the benefits to society from purchasing insurance. Describe the costs. Define and discuss the welfare gains from changes in insurance coverage.
1.3 The deductible feature of an insurance policy can affect the impact of moral hazard.Explain this in the context either of probability of treatment and/ or amount of treatment demanded.
1.2 What does the term moral hazard mean? Give examples.
1.1 Discuss the difference between cardinal and ordinal utility. Why is cardinal utility necessary for the analysis of risk and insurance?
1.Explain the concept of moral hazard
1.Explain models of insurance
1.4 In the Akerlof example, the individuals are treated as indifferent to risk. What would you expect to see in these markets if individuals wanted to avoid risk? What if there were some“risk
1.3 Give three examples of asymmetric information in which the health consumer has information that is unavailable to the health provider. Give three concrete examples in which the health provider
1.2 Consider the agency relationship in malpractice cases under a contingency fee system. The plaintiff (party that sues) typically pays his or her attorney about one- third of any monetary damages
1.1 Suppose that in the Akerlof example, there are only eight cars ranging in quality from 1 4 to 2(i.e., there is no complete lemon). Hence, the mean quality level is 1.125. Determine whether the
1.12 Describe several features of the ACA that are designed to minimize adverse selection. Why might some of those measures not end up working very well?
1.11 According to some analysts, the success of the ACA was dependent on having most young and healthy adults comply with the individual mandate to buy insurance. What was expected to happen had
1.10 According to clinical research, nearly one- half the care provided in the United States falls short of recommended treatment protocols. Discuss how imperfect and asymmetric information
1.9 Is it possible to have a situation where higher costs, as measured by the resources used to provide care, do not produce higher quality?
1.8 Various commentators have suggested that only about 20% of all health care services have been subject to rigorous, controlled investigation, that is, care based on what is commonly called
1.7 Why don’t physicians guarantee their work, as do many auto repair shops?
1.6 Stigler argued that the variation in fees increases as buyer information decreases. Suppose you observe that each seller in a market is charging an identical price. What potentially conflicting
1.5 What is a reputation good? What are examples of reputation goods outside the health care sector? Show what Pauly and Satterthwaite predict will happen to the demand curve for health services as a
1.4 The used- car market has a variety of sources that provide information on the quality and prices of used cars. Are similar avenues of information available to health consumers? What kind of
1.3 The use of professional and independent buyer- agents to help individuals purchase automobiles or houses is becoming a more common phenomenon. Given the conflict of interest facing the physician-

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