Healthcare Economics Exam 1

The insurance market consists of high-risk patients, who average $50,000 in spending per year, and low-risk patients, who average $500 per year. Low-risk patients represent 90 percent of the population. What would average spending be?

$5450

It costs 5,000 to produce 10 visits and 6,000 to produce 20. At a volume of 20, what is the average cost and the marginal cost?

Average cost is $300 and marginal cost is $100

Which is not a challenge that affects healthcare managers more than other managers?

Competition

A clinic faces a demand equation of Visits = 400 ˗ 3*Price.

To sell 250 visits, the price should be $50.

A change in the price of competing product will shift demand.

True

An insurance plan that pays physicians on the basis of their charges is called

a fee for service (FFS) plan

Agency is likely to have the most effect on the demand for

follow-up visits for an acute illness

If a technician's wage rose, the incremental cost of a lab test would

rise

Which of the following would result in lower costs?

-Lower price inputs -using fewer inputs per unit pf output -increasing efficiency

A factor that would increase the demand for physician visits for allergies would be

-an increase in pollen. -a reduction in the co-payment from $25 to $20. -an increase in the price of over-the-counter allergy medicines.

It is important to distinguish between average and incremental cost

-because manager need incremental cost data to make decisions about contracts -because average and incremental cost are often quite different -because most management decisions are incremental

Price elasticities of demand are especially useful for managers

-because managers can use elasticities to make revenue forecasts. -because managers have some flexibility in setting prices. -because managers can use price elasticities to simulate the effects of changing prices.

Private insurers are testing

-bundled payments -accountable care organizations -medical homes

The demand for medical care is especially complex because

-consumers may have poor information about costs and benefits of care. -providers often have a significant influence on what consumers buy. -he price of care depends on insurance coverage.

Geisinger's version of a medical home

-lowered costs -improves patient satisfaction -improved clinical outcomes

Different payment systems are important because

-they create different incentive systems for consumers, providers, and they lead to different patters of care

Which of the following statements is an example of normative economics?

A well-designed insurance plan should have some consumer co-payments

A patient who is correctly diagnosed, who receives the correct treatment, and whose treatment is delivered properly will never experience harmful side effects

False

Americans are more likely to be admitted to a hospital than most Europeans

False

Forecasts need not consider the plans of competitors.

False

Increasing patients co-payments from 20 to 25 should increase visits

False

Which of the statements is/are true?

If her reputation is important, an agent has incentives to treat her principal fairly.

Which of the following is true?

Incremental cost is the same thing as marginal cost

An example of case-based payment would be

Medicare diagnosis-related groups (DRGs)

An insurer sold 100,000 policies at $6,800 and paid for all care. Ten percent of its customers were high risk ($50,000 in annual spending) and 90 percent were low risk ($500 in annual spending). What are its revenues and medical costs?

Revenues will be $680,000,000 and costs will be $545,000,000.

Which of the following statements is/are true?

Technology advances always reduce the cost of producing a product.

Which of the following statements is true?

The uninsured often have problems accessing appropriate care.

An inefficient firm has costs that are higher than the quality of its product warrants.

True

An inefficient provider will have difficulty competing with efficient rivals.

True

Days of hospital care per 1000 people have fallen by more than 50 percent since 1980

True

Forecasting errors can reduce profits.

True

Forecasts combine history and judgment.

True

Health Maintenance Organization (HMO) patients use less care than comparable fee-for service (FFS) patients

True

Hospitals had limited incentives to reduce readmission prior to the Affordable Care Act.

True

Insure consumers are more apt to use healthcare services than uninsured consumers

True

Kelly Dental Care, which produces 10,000 visits per year, has lower average costs than Malone Dental Care, which produces 2,500 visits per year. This suggests that there are economies of scale in dental care.

True

Latex gloves come in cases of 100. Last month, ABA's sales rose from 200 gloves to 400; and CCG's sales rose from two cases to four. Both examples represent a 100 percent increase.

True

Most estimates of the income elasticity imply that consumption of medical products increases with income.

True

Most of the time, the opportunity cost of an input will be what you pay for it

True

Multiple trails of accountable care organizations are under way

True

Not-for-profit organizations are often harder to run than for-profit firms.

True

Prices that private insurers pay hospitals very widely even within markets

True

The term managed care refers to preferred provider organizations (PPOs) and health maintenance organizations (HMOs).

True

To detect trends in sales, analysts usually use regression analysis.

True

sales forecasts are applications of demand theory

True

The naïve forecast is

a last period's value

Hospital spending in the U.S

all of the above

The health insurance industry appears to be changing as

all of the above

A factor that might influence a sales forecast would be

change in rivals' prices, demographics, and prices for complements

Rational decision making involves

choosing the option that best helps you realize your goals, given your resources

The demand for medical care is usually inelastic because

consumers perceive that there are few good substitutes for medical care.

In a point-service (POS) plan

cost sharing is higher for non network providers

The percentage change in the quantity demanded associated with a 1 percent change in the price of a related product is the

cross-price elasticity

A scarce resource

has multiple uses

The price elasticity of demand is ˗0.20. Demand is

inelastic

A study that concluded that the U.S. should adopt a single-payer health system is an example of

normative economics

The main idea of demand is that

sales increase at lower prices

When the market has not changed too much and the data are good enough, the preferred forecasting technique is

seasonalized regression

ADC makes latex-free tubing for blood pressure instruments

so this is both an input and output

A policy change that would reflect the input view of healthcare would;d be

subsidizing construction of neighborhood walking trails

Optometrists' visits are complements for contact lenses. So,

the cross-price elasticity of optometry fees and contact lens sales will be negative.

Moral hazard is

the incentive to use additional care that having insurance creates

Why would a health system want to participate in a bundled payment trial?

to gain experience with a new system

A surgeon charges 5000 for a procedure. His contract with your insure sets an allowed fee of 80 percent of charges. You are responsible for 25 percent of the allowed fee.

you pay 1000