PART ONE Answer with True, False or Uncertain and explain 5 points each 1) It is not necessary to use discounting in an economic evaluation as long as all costs have been adjusted for inflation 2) Age effects related to a cost of a particular illness are easily measured as long as you have a well structured panel data set 3) Charge data overestimate the true costs of providing care 4) Cost of illness estimates are never similar when using a prevalence approach as when using an incidence approach PART THREE 15 points Suppose you have opened an MRI clinic and you are able to purchase a new MRI machine for $1 million You plan to see 2000 patients per year, and you have determined that your MRI machine at that rate of use should last 10 years Given a 5 interest rate, use an annuity calculation to estimate the annual cost of an MRI per patient Suppose you could use the machine for 3 years and then sell it for $500,000 What would your annual cost per patient be in that case Suppose you know that inflation is going to be 10 per year and that you will use the machine for 3 years and then be able to sell it for $800,000 (note that the $800,000 is measured in units of dollars 3 years from now) What then is your annual cost per patient and is your answer in dollars today or dollars three years from now 15 points 3) Consider the following table relating to overhead costs of a medical hot line clinic Category Total Maintenance Administration Clinic Workers Square feet 10,000 2000 2000 6000 Paid Hours 400 60 40 300 Direct Costs $800 Month $100 Month $2,000 Month Suppose that a drug hotline in a clinic processes 10,000 calls per year at a direct cost of $24,000 per year The clinic also generates Maintenance and Administrative Costs Given the table above, estimate the total (per month) per call costs of the drug hotline portion of the clinicincluding overhead costsusing the simultaneous allocation method for the overhead Allocate maintenance costs using square feet, and administration costs using paid hours Does this estimate reflect the marginal cost of the program or the average cost

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PART ONE Answer with True, False or Uncertain and explain. 5 points each. 1) It is not necessary to use discounting in an economic evaluation

PART ONE

Answer with True, False or Uncertain and explain. 5 points each.

1) It is not necessary to use discounting in an economic evaluation as long as all costs have been adjusted for inflation.

2) Age effects related to a cost of a particular illness are easily measured as long as you have a well-structured panel data set.

3) Charge data overestimate the "true" costs of providing care.

4) Cost of illness estimates are never similar when using a prevalence approach as when using an incidence approach.

PART THREE

15 points

Suppose you have opened an MRI clinic and you are able to purchase a new MRI machine for $1 million. You plan to see 2000 patients per year, and you have determined that your MRI machine at that rate of use should last 10 years.

Given a 5% interest rate, use an annuity calculation to estimate the annual cost of an MRI per patient.
Suppose you could use the machine for 3 years and then sell it for $500,000. What would your annual cost per patient be in that case?
Suppose you know that inflation is going to be 10% per year and that you will use the machine for 3 years and then be able to sell it for $800,000 (note that the $800,000 is measured in units of dollars 3 years from now). What then is your annual cost per patient and is your answer in dollars today or dollars three years from now?

15 points

3) Consider the following table relating to overhead costs of a medical hot-line clinic:

Category	Total	Maintenance	Administration	Clinic Workers
Square feet	10,000	2000	2000	6000
Paid Hours	400	60	40	300
Direct Costs		$800/Month	$100/Month	$2,000/Month

Suppose that a drug hotline in a clinic processes 10,000 calls per year at a direct cost of $24,000 per year. The clinic also generates Maintenance and Administrative Costs. Given the table above, estimate the total (per-month) per call costs of the drug hotline portion of the clinicincluding overhead costsusing the simultaneous allocation method for the overhead.Allocate maintenance costs using square feet, and administration costs using paid hours. Does this estimate reflect the marginal cost of the program or the average cost?