Health Econ Exam 1

Capitation a. creates pressures to provide fewer services. b. is a fixed payment determined in advance to pay for all medically-necessary care. c. shifts financial risk onto patients. d. Both a and b are correct.

d. Both a and b are correct.

Managed care a. combines the responsibilities of payer and provider of medical services. b. attempts to shift a portion of the financial risk onto providers. c. attempts to shift a portion of the financial risk onto patients. d. Both b and c are correct.

d. Both b and c are correct.

Which of the following is not a characteristic that makes medical care different from other commodities? a. Demand for medical care is irregular. b. Sellers have more information than buyers. c. Third-party payers abound. d. For-profit providers play a major role in delivering medical care. e. The transaction itself if filled with uncertainty.

d. For-profit providers play a major role in delivering medical care.

Which of the following would likely lead to the greatest improvement in health status of the population in the United States? a. Higher per capita incomes. b. More spending on public health, such as improved water supply and sanitation. c. More medical care spending overall. d. Improved lifestyles, including reductions in the use of tobacco, alcohol, and drugs.

d. Improved lifestyles, including reductions in the use of tobacco, alcohol, and drugs.

Insurance works best in situations where there is a. a high probability of a small loss. b. a low probability of a small loss. c. a high probability of a large loss. d. a low probability of a large loss. e. the level of probability and the size of the loss are irrelevant.

d. a low probability of a large loss.

Factors affecting medical care demand include a. health status b. demographic characteristics c. economic standing d. all of the above

d. all of the above

Firms self insure to: a. save money on premiums b. avoid state level insurance regulations c. create uniform benefit packages who live in different states d. all of the above

d. all of the above

Health insurance features that tend to reduce moral hazard include (Page 168) a. deductibles. b. coinsurance c. copayments d. all of the above

d. all of the above

Indemnity insurance a. reimburses for certain types of losses including fire and theft. b. is often experience-rated with premiums based on expected losses. c. is sometimes called "casualty insurance." d. all of the above.

d. all of the above.

Social insurance a. is the basis for most government redistribution programs. b. is usually community-rated with premiums based on ability to pay. c. requires mandatory participation to be effective. d. all of the above.

d. all of the above.

The health maintenance organization that contracts with individual physicians or group practices to provide care for a specified group of enrollees is called a. a group-model HMO. b. a staff-model HMO. c. a network-model HMO. d. an IPA.

d. an IPA.

(HW 5) The following diagram depicts the market for physicians' services that is originally in equilibrium at point a with demand and supply at D0 and S0. As physician supply increases from S0 to S1, a concurrent shift in demand from D0 to D1 (Page 170-171) a. may be the result of physician-induced demand. b. will cause overall spending on physicians' services to increase. c. will force physicians to limit the number of patients they see. d. both a and b. e. all of the above.

d. both a and b.

Insurers try to minimize moral hazard by a. only selling policies to individuals with high ethical standards. b. requiring advance payments of premiums. c. charging higher premiums to individuals than to groups. d. charging deductibles and coinsurance. e. refusing to sell insurance to individuals with chronic illnesses.

d. charging deductibles and coinsurance.

The opportunity cost of investing in a new lithotripter (a machine that pulverizes kidney stones with sound waves) is a. defined by the dollar cost of the equipment. b. the same for every health care provider. c. measured by the difference between the expected revenues from selling the services of the lithotripter and the invoice cost of the machine. d. defined by the next best use of the money invested in the equipment. e. impossible to calculate.

d. defined by the next best use of the money invested in the equipment.

Health care that actually harms the patient, such as an adverse reaction to a prescription drug is called (Page 55) a. morbidity-related response. b. defensive medicine. c. adverse selection. d. iatrogenic disease. e. moral hazard.

d. iatrogenic disease.

The concept quality-adjusted life year (QALY) (Page 159) a. is a multidisciplinary approach to measuring health status. b. has little application to medical decision making. c. is used extensively in the U.S. to evaluate health care programs. d. is used extensively to evaluate medical care resource allocation within government-run programs on fixed budgets, especially in Europe. e. none of the above.

d. is used extensively to evaluate medical care resource allocation within government-run programs on fixed budgets, especially in Europe.

Within the framework of economics, optimization means providing a good or service until a. total benefits are maximized. b. total benefits and total costs are equal. c. marginal benefits exceed marginal costs by the greatest amount possible. d. marginal benefits and marginal costs are equal. e. as long as total benefits are greater than total costs, any amount may be optimal under the right circumstances.

d. marginal benefits and marginal costs are equal.

In what ways is medical care different from other commodities? In what ways is it the same?

Demand for medical care is irregular, it is characterized by information problems, and it is subject to widespread uncertainty. The industry is dominated by not-for-profit providers and financed by third-party payers.

A physician's office expenses increase 10 percent, so she decides to raise the price of office visits. Assuming the demand curve for office visits does not shift, what will happen to the total number of office visits and practice revenues? a. Office visits and total revenue stay the same if demand is elastic. b. Office visits and total revenue rise if demand is inelastic. c. Office visits and total revenue fall if demand is inelastic. d. Office visits will fall and total revenue will rise if demand is inelastic. e. Office visits will rise and total revenue will fall if demand is elastic.

d. Office visits will fall and total revenue will rise if demand is inelastic.

Above is the formula for Incremental Cost-Effectiveness Ratio. If the Cost of A is less than the cost of B, and the effectiveness of A is greater than B, which option would we choose? a. A b. B c. The choice is not obvious, we would have to do a Cost Effectiveness Analysis

a. A

Moral hazard and adverse selection are both examples of: a. Asymmetric information b. Perfect information c. Externalities in consumption d. The principal-agent problem

a. Asymmetric information

Which of the following measures of effectiveness is not a surrogate measure? a. Hip fracture b. Blood pressure c. Cholesterol level d. Tumor size

a. Hip fracture

The intangible costs associated with reduced quality of life include a. Pain and suffering b. Lost productivity at work c. The cost of home remodeling to accommodate a physical handicap d. Potential income lost due to premature death e. All of the above are intangible costs

a. Pain and suffering

Nonexcludable and nonrival goods are known as a. Public goods. b. Private goods. c. Efficient goods. . d. Those which are the last to be purchased.

a. Public goods.

The direct costs in an economic evaluation include the all the following except a. pain and suffering b. hospitalization c. pharmaceuticals d. medical devices

a. pain and suffering

The highest incidence of those without health insurance occurs in which age category? a. under 18 b. 18-34 c. 35-44 d. over 65

b. 18-34

The highest incidence of those without health insurance occurs in which age category? a. Under 18 years of age. b. 18-34 years of age. c. 35-44 years of age. d. 45-64 years of age. e. Over 65 years of age.

b. 18-34 years of age.

Suppose the market for hospital outpatient treatment is in equilibrium when a price ceiling is set below the equilibrium price. What do you expect to happen? a. A surplus will develop. b. A shortage will develop. c. Quantity demanded will decrease. d. The number of outpatient visits will rise. e. The demand for outpatient procedures will fall.

b. A shortage will develop.

The top ten causes of death in the United States in 2010 included all of the following but a. Cancer b. AIDS c. Suicide d. Heart disease

b. AIDS

The 1974 federal legislation that exempted employers from certain state laws governing health insurance was a. COBRA b. ERISA c. CON d. HIPAA e. SCHIP

b. ERISA

Kindig and Stoddart (2003) defined population health as "Health outcomes of an entire population, including the distribution of such outcomes within a group of individuals." a. True b. False

b. False

Mortality factors measure disease burden. a. True b. False

b. False

Mortality is the effect of a disease or medical condition. a. True b. False

b. False

Not having health insurance equates to not having access to healthcare. a. True b. False

b. False

People with higher income are less likely to have better health outcomes and have higher mortality rate. a. True b. False

b. False

The RAND study found that demand was 95% higher for those with free medical care than for those who paid 50% out of pocket. a. True b. False

b. False

The US spends more on medical care by almost all measures than any other country in the world, and thus is the healthiest as ranked by the World Health Organization. a. True b. False

b. False

The two most popular metrics used to evaluate population-based health outcomes are life expectancy and infant mortality. a. True b. False

b. False

Whites have experienced an increase in life expectancy that is more than twice that of blacks. a. True b. False

b. False

Which ethnic group has the highest life expectancy in the U.S? a. Blacks b. Hispanics c. Whites

b. Hispanics

Which of the following might cause a market to produce a quantity that is less than optimal? a. A price ceiling above the market equilibrium price. b. Market control by a monopolist. c. A subsidy to low-income consumers. d. None of the above.

b. Market control by a monopolist.

Mid-1960s amendments to the Social Security Act created a. managed care. b. Medicare and Medicaid. c. major medical insurance. d. Blue Cross and Blue Shield.

b. Medicare and Medicaid.

Which of the following is not the World Health Organization (WHO) index to measure health system performance: a. Disability-adjusted life expectancy b. Morbidity c. Health disparities d. Responsiveness e. Fairness

b. Morbidity

Which of the following is the incidence and probability of illness or disability? a. Mortality b. Morbidity c. Quality of Life d. Metallica

b. Morbidity

The rate at which members of a group are newly diagnosed with a disease is called: a. Mortality rate b. Morbidity rate c. QOL

b. Morbidity rate

Who largely was against passing the ACA of 2010 a. Democrats b. Republicans c. Independents d. Everybody hated it

b. Republicans

Suppose the market for hospital outpatient treatment is in equilibrium when a price ceiling is set below the equilibrium price. What do you expect to happen? a. Surplus b. Shortage c. The # of outpatient visits will decrease d. The demand for outpatient procedures will fall

b. Shortage

Suppose the U.S. Drug Enforcement Agency steps up its efforts to control the illegal importation of cocaine into the United States. What is the likely effect on the market for illegal drugs in the United States? a. The price of cocaine and the quantity imported will both increase. b. The price of cocaine is likely increase and the quantity entering the country decrease. c. The price of marijuana, a cocaine substitute grown domestically, will fall. d. The policy will have the least impact on those individuals whose demand for drugs is elastic. e. Demand for drugs is highly inelastic and these policies have little or no effect on consumption.

b. The price of cocaine is likely increase and the quantity entering the country decrease.

Suppose the U.S. Drug Enforcement Agency steps up its efforts to control the illegal importation of Meth (We're on it) into South Dakota. What is the likely effect on the market for illegal drugs in South Dakota? a. The price of meth and the quantity imported will both increase. b. The price of meth is likely increase and the quantity entering the state will decrease. c. The price of marijuana, a meth substitute grown domestically, will fall.

b. The price of meth is likely increase and the quantity entering the state will decrease.

The health maintenance organization where the physicians are salaried employees of the HMO is called a. a group-model HMO. b. a staff-model HMO. c. a network-model HMO. d. an IPA.

b. a staff-model HMO.

One result of asymmetric information in health insurance markets is a. an optimal number of insurance policies sold. b. adverse selection. c. externalities in consumption. d. a low marginal benefit of additional information for the buyer of insurance.

b. adverse selection.

Premiums based on experience ratings a. are uniform across age groups. b. are based on the loss experience of the insured. c. vary depending on the income of the insured. d. are illegal in most states in the U.S.

b. are based on the loss experience of the insured.

When measuring effectiveness of a treatment, surrogate measures reflect clinical efficacy and include a. recurrence of the disease b. bone-mass density (BMD) d. hip fractures e. scores on standard evaluative exams such as EuroQol or SF-36

b. bone-mass density (BMD)

Charging higher prices for one category of patients in order to provide free or subsidized care to another group is called a. price discrimination. b. cost-shifting. c. categorical costing. d. reprehensible and unethical. e. creative accounting.

b. cost-shifting.

The "invisible hand" using Adam Smith's terminology refers to a. government control of the market. b. market forces working through the price mechanism. c. the money supply that serves to keep the economy working smoothly. d. the role of innovation in maintaining a steady rate of growth. e. "behind-the-scenes" policy making to influence how markets allocate scarce resources.

b. market forces working through the price mechanism.

Inoculation programs against certain diseases such as small pox, polio, and whooping cough create a. public goods. b. positive externalities in consumption. c. nonrival goods. d. nonexcludable goods.

b. positive externalities in consumption.

Steps in performing a cost-effectiveness analysis include all of these EXCEPT a. ranking the alternative treatment options b. prioritizing the alternative treatment options c. calculating the ICER between each treatment option and the next most expensive one d. eliminate treatment alternatives that are strictly dominated

b. prioritizing the alternative treatment options

The goal of health insurance is to a. redistribute income from the sick to the healthy. b. spread risk over a large group of people. c. equally distribute the probability of loss over a large number of people. d. collect sufficient premiums to cover all possible losses. e. equalize the availability of medical care across population groups.

b. spread risk over a large group of people.

Economists use the term "marginal" to describe costs and benefits a. that are minimal and hardly worth noting. b. that are incremental and thus relevant to decision making. c. that are noteworthy but not the most important. d. whose importance can be minimized through hard work. e. none of the above.

b. that are incremental and thus relevant to decision making.

Kaiser-Permanente, the nation's largest health maintenance organization, was founded a. to provide cost-effective medical care to Kaiser employees. b. to provide access to medical care to Kaiser workers in remote locations where medical services were in short supply. c. to slow the rate of growth in medical spending for Kaiser employees. d. as a group-model HMO.

b. to provide access to medical care to Kaiser workers in remote locations where medical services were in short supply.

Suppose the demand curve for medical care services is perfectly inelastic. What will the impact of a 10% price increase be on quantity demanded? a. Demand increases b. Demand decreases c. Demand stays the same

c. Demand stays the same

Which is true about the Affordable Care Act of 2010? a. It saved most people money on health insurance premiums b. It was largely bipartisan c. It allowed people with pre-existing conditions to be covered d. It was widely popular with the public

c. It allowed people with pre-existing conditions to be covered

Which is not one of the ten key economic concepts we discussed in class? a. Competition b. Market Failure c. Market Analysis d. Self-Interest

c. Market Analysis

One of the reasons that women live longer than men in most societies is that: a. Women exercise more than men b. Women eat healthier than men c. Men smoke more regularly than women

c. Men smoke more regularly than women

Analysts cite figures on the number of uninsured in the U.S. as low as 10 million and as high as 60 million. Which of the following is a true statement? a. The uninsured are all free riders. b. Most of the uninsured have health problems and are not able to get private health insurance. c. Most of the uninsured have some labor-force connection—either working or a dependent of someone who is working. d. The lack of health insurance means that the individual has virtually no access to medical care. e. Once you lose your health insurance it is extremely difficult to get reinsured.

c. Most of the uninsured have some labor-force connection—either working or a dependent of someone who is working.

(HW 5) The accompanying diagram depicts the relationship between health status and medical care spending for a particular country. Which of the following statements is true? (Page 153-154) a. At the current spending level of S1 on TP1, this society can get a greater improvement in health status by increasing spending to S2 than by shifting TP1 to TP2. b. S1 levels of spending may be described as spending on the flat-of-the-curve. c. Social pressures will move the health care system to spend S2. d. All statements are true.

c. Social pressures will move the health care system to spend S2.

The goal of health insurance is to: a. redistribute income from the sick to the healthy b. equally distribute the probability of loss over a large number of people c. spread risk over a large group of people d. equalize the availability of medical care across population groups

c. spread risk over a large group of people

According to recent public opinion polls, what percentage of Americans are satisfied with the quality of the medical care they receive? a. 15 percent. b. 40 percent. c. 65 percent. d. 70 percent. e. 90 percent.

d. 70 percent.

From 2001 to 2011 life expectancy for the total U.S population increased from: a. 75.3 - 79.0 years b. 77.2 - 81.4 years c. 78.7 - 81.4 years d. 77.2 - to 78.7 years

d. 77.2 - to 78.7 years

Economics is a. The study of human behavior b. Provides a systematic way of looking at a problem c. Provides rationale for the efficient allocation of scarce resources d. All of the above

d. All of the above

Which of the following is a way in which medical care differs from normal economics? a. Unpredictability of demand b. Barriers to entry c. Trust d. All of the above

d. All of the above

What measures would likely lower infant mortality rates in the United States? a. Reduced drug use among expectant mothers. b. Better nutrition. c. Delaying childbearing beyond the teen-age years. d. All of the above.

d. All of the above.

The optimal level of output may be defined as that level of output where a. average benefit exceeds average cost by the greatest amount. b. total benefit equals total cost. c. marginal benefit exceeds marginal cost by the greatest amount. d. the marginal benefit of the last unit purchased equals its marginal cost.

d. the marginal benefit of the last unit purchased equals its marginal cost.

Researchers use cost-of-illness studies to a. study the burden of a disease b. determine the low-cost option to treat a disease c. compare two or more treatment options when the medical outcome is identical d. increase public awareness of cost of treating certain diseases e. All of the above

e. All of the above

An inferior good a. has a negative income elasticity. b. is one where the demand curve shifts to the left when income goes up. c. exists only in theory. d. is a low-quality good. e. Both a and b are true.

e. Both a and b are true.

Which of the following statements is based on positive analysis? a. Individuals without health insurance have less access to physicians' services than those who have health insurance. b. The high cost of health insurance places U.S. firms at a competitive disadvantage with their foreign competitors. c. Employers should be required to provide health insurance for all full-time workers and their dependents. d. none of the above. e. Both a and b.

e. Both a and b.

Suppose the demand curve for medical care services is perfectly inelastic. What will happen to the equilibrium price and quantity if supply increases? a. Price and quantity will rise. b. Price will stay the same and quantity will rise. c. Price and quantity will fall. d. Price will fall and quantity will increase. e. Price will fall and quantity will stay the same.

e. Price will fall and quantity will stay the same.

According to economic theory what is the optimal percentage of GDP to be spent on medical care? a. 6 percent. b. 8 percent. c. 10 percent. d. 12 percent. e. There is no widely-accepted way to determine the optimal percentage.

e. There is no widely-accepted way to determine the optimal percentage.

Opportunity cost is a measure of a. foregone opportunities. b. value based on the alternative not chosen. c. value in terms of the cost of production. d. the difference between production cost and resource cost. e. both a and b.

e. both a and b.

With the graph on HW 3, what price do consumers want?

P1

With the graph on HW 3, what price do providers want?

P2

A major factor contributing to the growth in employee-based health insurance in the United States has been the tax free treatment of health insurance as an employee benefit. a. True b. False

a. True

A major factor driving health care reform debate is spending. a. True b. False

a. True

Health disparities exist in socioeconomic status in that higher income equals better health outcomes. a. True b. False

a. True

Mortality rate and morbidity are the most popular metrics used to evaluate population-based health outcomes. a. True b. False

a. True

Much of the increased spending is the result of supply side advances in medicine a. True b. False

a. True

Obesity prevalence in the United States is the highest in the developed world and has worsened since the 1960s. a. True b. False

a. True

QALY measures quality of life and extension in life years, and is measured from 0 to 1. a. True b. False

a. True

Teen moms are less likely to receive prenatal care and more likely to smoke. This leads to a higher infant mortality rate when compared to moms between 25-29. a. True b. False

a. True

The U.S has highest healthcare spending (overall spending, per capita spending, and % GDP) than any other developed countries a. True b. False

a. True

The dead-weight loss (Surplus Value) from an excise tax is the lost surplus that results from higher prices and lower output resulting from the tax. a. True b. False

a. True

The principle factor driving demand for healthcare is income. a. True b. False

a. True

People buy insurance: a. because they are risk adverse b. to defer consumption c. because of externalities d. to maximize their welfare

a. because they are risk adverse

Early in U.S. history health insurance was provided to cover a. income loss due disability or disease. b. hospital expenses. c. routine physicians' services. d. the catastrophic cost of medical care including hospitalization and physicians' services.

a. income loss due disability or disease.

A shortage of hospital beds will likely lead to a. an increase in the supply of hospital beds. b. a decrease in the demand for hospital beds. c. an increase in the price of a hospital stay. d. a decrease in the price of a hospital stay. e. none of the above.

c. an increase in the price of a hospital stay.

When a physician knows more about alternative treatments than her patients, we say that _______ exists. a. rational ignorance. b. perfect information. c. asymmetric information. d. moral hazard.

c. asymmetric information.

If health care spending is already on the flat-of-the-curve, it may not be possible to buy improved health status by increasing spending. In this situation, the best way to improve health status may be to a. increase the availability of government health insurance b. invest in biotechnology to determine the genetic factors that improve health c. improve life-style decisions by reducing smoking, alcohol consumption, and drug use d. improve access to medical care

c. improve life-style decisions by reducing smoking, alcohol consumption, and drug use

The dead-weight loss from an excise tax a. is greater if demand is perfectly inelastic. b. is caused by a shift in consumer preferences when the tax is raised. c. is the lost surplus that results from higher prices and lower output resulting from the tax. d. is of little concern to policy makers since all excise taxes are "sin" taxes. e. is the difference between consumer surplus and producer surplus.

c. is the lost surplus that results from higher prices and lower output resulting from the tax.

The direct costs in an economic evaluation include the all the following except a. hospitalization b. medical devices c. lost income due to disability d. All of the above

c. lost income due to disability

Self-insurance refers to: a. starting one's own insurance company b. buying insurance from a not for profit entity c. setting aside fund to pay for medical care expenses instead of buying insurance d. none of these e. both a and b

c. setting aside fund to pay for medical care expenses instead of buying insurance