HSPM 412
Which of the following statements about the Beveridge model is (are) FALSE? a. All citizens automatically receive insurance coverage through the government. b. The government runs hospitals and clinics. c. The government decides how many doctors and specialists will be working at each hospital. d. Single-payer health insurance is financed through taxes rather than premiums, so individuals don't need to pay anything to enroll. e. None of the above statements is FALSE.
None of the above statements is FALSE.
Which of the following statements about prospective payments is (are) FALSE?
Prospective payment schemes create incentives for physician-induced demand.
Total subsidy
Q social * X
In a 2010 article published in Health Affairs, Lawrence Baker reports that after orthopedists and neurologists acquired their own imaging equipment (and could start billing for MRI scans), they ordered substantially more MRI procedures. These findings provide empirical evidence of ______ in health care markets. a. physician-induced demand b. defensive medicine c. discrimination by physicians d. perfect agency
a. physician-induced demand
Producer surplus is the difference between a seller's cost to produce a good and the amount a seller is actually paid for it (market price) and is represented by the area ______. a. below the demand curve and above market price b. above the supply curve and below market price c. above the demand curve and below market price d. below the supply curve and above market price
b. above the supply curve and below market price
Assume that the demand for MRI scans is less elastic than the demand for Band-Aids. If (in the market graph below) the demand for MRI scans is represented by demand curve D2, the demand for Band-Aids is best represented by ______. a. demand curve D3 b. demand curve D1 c. either demand curve D1 or demand curve D3 (there's not enough information to say for sure) d. demand curve D2
b. demand curve D1 (Because demand for MRI scans is less elastic than the demand for Band-Aids, we expect the demand curve for MRI scans (D2) to be more vertical than the demand curve for Band-Aids. Therefore, the demand for Band-Aids is best represented by demand curve D1.)
According to the ______, health disparities exist because the rich have more resources available to invest in health. a. Fuchs hypothesis b. direct income hypothesis c. allostatic load hypothesis d. thrifty phenotype hypothesis
b. direct income hypothesis
According to a 2013 study, high-risk patients should avoid seeking treatment at hospitals associated with medical schools (aka "teaching hospitals") whenever possible. a. true b. false
b. false
Hospital admission rates in the United States increased dramatically between 1990 and 2010. a. true b. false
b. false
If you receive inpatient care at a hospital that participates in your health plan's provider network, all the doctors who care for you while you're in the hospital will also be in network. a. true b. false
b. false
Moral hazard will occur if and only if at least one of the following three conditions is present: price distortion, information asymmetry, or price sensitivity. a. true b. false
b. false
The Oregon Medicaid study is an example of a natural experiment. a. true b. false
b. false
The amount of social loss depends only on the extent of price distortion (i.e. the fullness of the insurance contract). a. true b. false
b. false
A(n) ______ shows combinations of the two goods that give the individual the same utility. a. production possibilities frontier (PPF) b. indifference curve c. illness avoidance function d. marginal efficiency of capital (MEC) curve
b. indifference curve
We expect the demand for preventive care (like the flu vaccine) to be ______ than the demand for emergency room care. a. less elastic (less price sensitive) b. more elastic (more price sensitive) c. more elastic (less price sensitive) d. less elastic (more price sensitive)
b. more elastic (more price sensitive)
which of the following is the best definition of the term "health insurance premium?" a. the best type of health insurance you can buy b. the amount health insurance companies charge each month for coverage c. a bonus you get at the end of the year of you stay covered
b. the amount health insurance companies charge each month for coverage
According to the Coase theorem, resources will be used efficient to maximize social welfare, even in the face of externalities, provided ______.
both a and b are satisfied -property rights are well defined -transaction costs or bargaining costs are sufficiently low
Suppose that under your health insurance policy, hospital expenses are subject to a $1,000 deductible and $250 per day copay. You get sick and are hospitalized for 4 days, and the bill (after insurance discounts are applied) comes to $6,000. How much of that hospital bill will you have to pay yourself? a. $0 b. $1,000 c. $2,000 d. $4,000
c. $2,000
Based on the production possibilities frontier (PPF) and indifference curves below, Rob's optimal combination of goods is: a. 25 birds and 80 crabs b. 5 birds and 60 crabs c. 15 birds and 70 crabs d. We don't have enough information to make this choice on Rob's behalf.
c. 15 birds and 70 crabs (The optimal combination of birds and crabs is identified at the point where Rob's PPF is tangent to (touching but not intersection) one of his indifference curves. Rob enjoys the highest possible level of utility when he traps and consumes 15 birds and 70 crabs.)
The market for lemonade is initially in equilibrium. Temperatures soar during the month of July. At the same time, Harris Teeter runs a promotion on lemons, lowering the price from $1.79 to $0.99/lb. How will the changing market conditions affect the EQUILIBRIUM PRICE of lemonade? a. Equilibrium price will decrease b. Equilibrium price will increase c. The change in equilibrium price is ambiguous (we don't have enough information to be certain) d. There will be no change to equilibrium price
c. The change in equilibrium price is ambiguous (we don't have enough information to be certain)
A peanut shortage causes the price of peanuts - along with the price of peanut butter - to increase by 40%. As a result, we expect demand for jelly to ______ . a. decrease (the demand curve will shift outward) b. The price of peanut butter has nothing to do with the demand for jelly. c. decrease (the demand curve will shift inward) d. increase (the demand curve will shift inward) e. increase (the demand curve will shift outward)
c. decrease (the demand curve will shift inward)
Imagine two individuals are identical in every way EXCEPT for the fact that Individual A is much better at producing health than Individual B. According to the ______, we expect Individual A to have ______ compared to Individual B. a. direct income hypothesis; expanded PPF and higher optimal level of health H* b. thrifty phenotype hypothesis; a shrunken PPF and higher optimal level of health H* c. efficient producer hypothesis; an expanded PPF and higher optimal level of health H* d. efficient producer hypothesis: an expanded PPF and lower optimal level of health H*
c. efficient producer hypothesis; an expanded PPF and higher optimal level of health H*
Summers in Columbia are (famously?) HOT. During a heat wave, we expect that the demand for lemonade will ______. a. increase (the demand curve will shift inward) b. decrease (the demand curve will shift outward) c. increase (the demand curve will shift outward) d. decrease (the demand curve will shift inward)
c. increase (the demand curve will shift outward)
Economics is the study of the allocation of _____ to satisfy ______. a. unlimited resources; unlimited wants b. unlimited wants; limited resources c. limited resources; unlimited wants d. limited resources; limited wants
c. limited resources; unlimited wants
The Grossman model predicts that an individual with a higher ______ will optimally choose a higher level of health. a. discount factor δ b. cost of capital (r + γ) c. market interest rate r d. rate of health depreciation γ
c. market interest rate r
When demand for a good is ______, insurance coverage will result in more social loss. a. less price sensitive (i.e. when the demand curve appears more horizontal) b. less price sensitive (i.e. when the demand curve appears more vertical) c. more price sensitive (i.e. when the demand curve appears more horizontal) d. more price sensitive (i.e. when the demand curve appears more vertical)
c. more price sensitive (i.e. when the demand curve appears more horizontal)
Which of the following is the best definition of the term "annual health insurance deductible?" a. the amount that is deducted from your paycheck each year to pay for your policy b. the amount of health expenses you can subtract from your income on your yearly tax return c. the amount of covered health care expenses you must pay ourself each year before your insurance will begin to pay
c. the amount of covered health care expenses you must pay ourself each year before your insurance will begin to pay
Which of the following best describes the "health insurance formulary?" a. the form you send to your insurance company when you need to have a medical bill paid b. the name for permission you must get from your insurance company before surgery will be covered c. the list of prescription drugs your health plan will cover
c. the list of prescription drugs your health plan will cover
A negative externality occurs when a [x] spills over.
cost
Suppose your health plan covers lab tests in full if you go to an in-network lab, but only pays 60% of allowed charges if you go out of network. You forget to check and go get your blood test at a lab that turns out to be out of network. The lab bills you $100 for the blood test. Your health insurance allows only a $20 charge for that test. How much would you have to pay out of pocket for that lab test? a. $0 b. $40 c. $80 d. $88
d. $88
The economics of health and health care is different from the economics at work in other, smaller markets because ______. a. the demand for health care is highly uncertain b. health insurance is ubiquitous (very common) c. health is contagious d. ALL OF THE ABOVE
d. ALL OF THE ABOVE
The market for lemonade is initially in equilibrium. Temperatures soar during the month of July. At the same time, Harris Teeter runs a promotion on lemons, lowering the price from $1.79 to $0.99/lb. How will the changing market conditions affect the EQUILIBRIUM QUANTITY of lemonade? a. The change in equilibrium quantity is ambiguous (we don't have enough information to be certain) b. Equilibrium quantity will decrease c. There will be no change to equilibrium quantity d. Equilibrium quantity will increase
d. Equilibrium quantity will increase
Which of the following statements about price rationing is (are) FALSE? a. Price rationing can answer two fundamental questions that every economy faces: "How much health care should be produced?" and "Who should get it?" b. Price rationing helps markets allocate resources efficiently; scarce resources will go to those individuals willing and able to pay the most for them. c. Price rationing can deprive low-income people of valuable care d. Price rationing can reduce the amount of wasteful medical procedures by dissuading low-benefit patients from waiting in the queue e. None of the above statements is FALSE
e. None of the above statements is FALSE
price elasticity of demand
e= % change quantity demanded/% change price (price elasticity of demand will always be negative.)
price elasticity of demand using the midpoint method
e=(Q2-Q1)/(Q2+Q1) over (P2-P1)/(P2+P1)
In the presence of ______, the market equilibrium (without intervention) will fail to reach an efficient outcome.
either a positive externality or a negative externality (In the presence of externalities - positive or negative - private welfare and social welfare tend to diverge: what is good for one person's private welfare is not necessarily good for the overall social welfare.)
Sometimes, costs or benefits may spill over to a third party not directly involved in the transaction. These spillover costs and benefits are called [x].
externalities
An ICER value indicates which of two treatment options is better.
false
In employer-sponsored health insurance in the U.S., employers pay the largest share of the costs of health insurance.
false
Medical experts are ideal candidates for providing estimates of the quality weights associated with various health states.
false
The imposition of federally mandated maternity benefits had no effect on the mean wages of female workers.
false
The primary source of funding for the Medicare program is from premiums assessed on the elderly population, which is the primary population enrolled in the program.
false
The primary sources of funding for Medicaid are payroll taxes (paid by workers),and premiums, deductibles, and copayments (paid by patients).
false
The take-up rate of health insurance among people with good jobs (that is full-time jobs that have lasted longer than a year) has declined in recent years, and this is an important reason for the increase in uninsurance rates over those same years.
false
Under the Bismarck model, health care is a good provided by the government and paid for with tax revenue, just like schools or libraries.
false
he price of curing Hodgkin's disease has risen substantially between 1950 and 2000.
false (In the 1950s, the price of a cure was effectively infinite, but now it is finite (if expensive).
The Dartmouth Atlas research project finds that health care spending varied widely between different American cities in the early 2000s, and that Medicare enrollees in high-spending cities were a lot healthier as a result.
false (The Atlas does show wide variation in spending levels, but it also finds that more expensive treatment did not tend to result in better outcomes.)
If Medicare patients in Boston are paying more per capital for a hip replacement than Medicare patients in Boise for the same procedure, but health outcomes are exactly equal, then this is evidence that Boston is wasteful in their health spending.
false (There could be an alternative explanation: Boston may have a lower health production function than Boise does and therefore may need to spend more money in order to reach the same level of health as Boise)
If rapidly increasing medical care expenditures can be explained by ______, then this trend does in fact harm health care
increases in price P
When demand for a good is less price sensitive (i.e., when the slope of the demand curve is more vertical)
insurance results in less social loss
When demand for a good is more price sensitive (i.e., when the slope of the demand curve is more horizontal)
insurance results in more social loss.
Because it undermines the core tenet of social solidarity, Beveridge countries use ______ sparingly.
price rationing
Government can play a role in encouraging positive externalities by ______ goods or services that generate spillover benefits.
providing subsidies for
Universal public (single-payer) insurance is associated with each of the following EXCEPT ______.
reduced equity
The Bismarck model has three defining features: ______.
regulated private health care provision universal insurance community rating
By placing a monetary value on each QALY, we implicitly create a(n) ______.
set of indifference curves
Government can play a role in reducing negative externalities by ______ goods when their production generates spillover costs.
taxing
Adverse selection is not an issue in health care systems that follow the Beveridge model because all citizens are automatically enrolled in free public insurance.
true
Barriers to care erected by managed care organizations, such as requiring patients to visit gatekeeper physicians prior to seeking specialist care, can increase consumer welfare
true
If people paid full prices for health care, we would not need to measure QALYs and the value of a life year because customers would make socially optimal decisions on their own.
true
In the U.S. Medicare program, by statute, the government is not permitted to take cost-effectiveness criteria into account when deciding whether to cover new medical technologies.
true
Medicare Part D, which was implemented in 2006, is the federal insurance program for the elderly in the US that provides for prescription drug coverage.
true
Nearly half of expenditures on health care in the US are government financed.
true
The compulsory nature of insurance enrollment in Bismarck systems prevents the worst of adverse selection because it guarantees that there are always healthy people paying into the system to subsidize care for the sick.
true
The terms "demand" and "supply" refer to the behavior of people as they interact with one another in a market: [A] represents the behavior of buyers and [B] represents the behavior of sellers.
A: Demand B: Supply
The set of policies that comprise the ______ model reflect two major values: solidarity and economic liberty.
Bismarck
A primary cause of increasing uninsurance in the U.S. over the past decade is that more employers are deciding to stop providing health insurance coverage entirely.
false
The Beveridge model has three defining features: ______.
-public health care provision -free care -universal, single-payer insurance
______ refers to the process of choosing an optimal treatment among all potentially cost-effective ones given a certain monetary value for each unit of health effect.
Cost-Benefit Analysis (CBA)
In YEAR 0, the price of health care ph = $1.50, while the price of other goods pc = $1.50. At these prices, you demand 30 units of health care and 35 units of other goods. In YEAR 1, health care becomes cheaper at ph = $1, while other goods become more expensive at pc = $2. Calculate the Laspeyres price index, that is the amount of money you need to buy the YEAR 0 bundle in YEAR 1, divided by the money you paid for it in YEAR 0.
1.025
An individual faces healthy-state income IH, sick-state income IS, and a known probability of illness p = 1.0. Given this information, what is the individual's expected income E[I] this year? Income is UNCERTAIN: E[I]= pIs + (1-p) Ih Income is CERTAIN: E[I]= Is Income is UNCERTAIN: E[I]= pIh + (1-p) Is Income is CERTAIN: E[I]= Ih
Income is CERTAIN: E[I]= Is
Under the Bismarck model of managed competition, multiple nonprofit insurance funds offer health insurance in a nationwide market that is constrained by four major rules.
Insurers charge different premiums to different customers based on their individual risk of needing health care.
Net present value formula
NPV= I0+ δ I1+ (δ^2) (I2)
Which of the following statements about the illness avoidance function is (are) TRUE? a. The downward slope of the illness avoidance function reflects a key feature of the Grossman model: health is an input to the production of productive time (as health H improves, TS falls and the individual has more productive time TP available). b. In the Grossman model, there are diminishing marginal returns to productive time from health. An examination of the illness avoidance function shows TS falls as health improves, but the effect of better health on TS also shrinks as health improves. c. A careful examination of the illness avoidance function shows that there is a point on the x-axis () such that the individual is sick for the entire period (), with no time left to work, play, or even seek medical care. d. The illness avoidance function illustrates the relationship between health levels H and the marginal efficiency of health capital.
a, b, and c (The illness avoidance function illustrates the relationship between health levels H and the marginal efficiency of health capital.)
Which of the following statements about the marginal efficiency of health capital (MEC) curve is (are) TRUE. a. An examination of the MEC curve shows that the total increase in lifetime utility, which is the "return" or benefit of an investment to increase health, depends on the individual's starting level of health H. The marginal lifetime returns to health are high at low levels of health and low at high levels of health because of the diminishing marginal returns to health. b. The MEC curve highlights the role that health plays as an investment good in the Grossman model. c. The highest returns to health are available when the individual is dying (H = Hmin). At this point on the MEC curve the return to a marginal investment in health is infinte. d. In order to guarantee the same rate of return as the market investment opportunity, health must pay a return of at least the market interest rate (r) plus the rate of depreciation of health due to aging ().
a, b, and d
Which of the following statements about fair insurance contracts is (are) TRUE? a. A fair insurance contract is defined by the equation r = pq. b. The price of a fair insurance (i.e., the premium r) is equal to the expected payout. c. A fair insurance contract reduces (but does not eliminate) the financial uncertainty faced by the individual. d. A fair insurance contract is defined by the equation q < IH - IS. e. The purchase of a fair insurance contract has no effect on the individual's expected income E[I]. f. Under a fair insurance contract, final income is state dependent. g. Under a fair insurance contract, the individual faces no financial uncertainty.
a, b, and e
Models of information asymmetry predict ______. a. market collapse (without an inducement to keep low-risk types in the market) b. advantageous selection c. bulk markups d. a positive correlation between risk and coverage
a, c, and d
Which of the following statements about partial insurance contracts is (are) TRUE? a. A partial insurance contract reduces (but does not eliminate) the financial uncertainty faced by the individual. b. The price of a partial insurance (i.e., the premium r) is equal to the expected payout. c. The purchase of a partial insurance contract has no effect on the individual's expected income E[I]. d. A partial insurance contract, by defintion, represents a "fair bet". e. A partial insurance contract is defined by the equation q < IH - IS. f. Under a partial insurance contract, the individual faces no financial uncertainty. g. A partial insurance contract is defined by the equation r = pq. h. Under a partial insurance contract, final income is state dependent.
a, e, and h
Which of the following statements about indifference curves is (are) FALSE? a. A set of Indifference curves shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed. b. Typical indifference curves are downward sloping and bowed toward the origin. c. When comparing bundles of goods that lie on the same indifference curve we say the consumer has no preference for one over another. d. A set of indifference curves can be used to summarize and represent consumer preferences.
a. A set of Indifference curves shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed.
The market for lemonade is initially in equilibrium. Temperatures soar during the month of July. All else equal, how does the heat wave affect the equilibrium price and quantity of lemonade? a. Both equilibrium price and equilibrium quantity will increase b. Both equilibrium price and equilibrium quantity will decrease c. Equilibrium price will decrease and equilibrium quantity will increase d. Equilibrium price will increase and equilibrium quantity will decrease
a. Both equilibrium price and equilibrium quantity will increase
Which of the following statements about the production possibilities frontier in the Grossman model is (are) TRUE? a. In the Grossman model, consumption points with high Z and low H are not attainable and should not be included on the frontier (PPF on the right). b. In the Grossman model, an individual who devotes all his resources to Z will have no H (Point P in the PPF on the left).
a. In the Grossman model, consumption points with high Z and low H are not attainable and should not be included on the frontier (PPF on the right).
SELECT THE BEST ANSWER FROM THE CHOICES BELOW: Peanut butter and Jelly are typically consumed ______ and as such are though of as ______ goods. a. TOGETHER; complement b. EITHER/OR; complement c. TOGETHER; substitute d. EITHER/OR; substitute
a. TOGETHER; complement
Monitoring programs limit moral hazard by ______. a. confronting information asymmetry b. reducing the extent of price distortion c. reducing price sensitivity d. increasing price sensitivity
a. confronting information asymmetry
An individual who is relatively PATIENT will have a ______ discount factor δ and a ______ discount rate r. a. high (i.e. δ close to 1); low b. low (i.e. δ close to 0); low c. low (i.e. δ close to 0); high d. high (i.e. δ close to 1); high
a. high (i.e. δ close to 1); low
Is a health insurance premium something you must pay every month, regardless of whether you use health care services, or do you only have to pay your health insurance premium during months when you use health care services? a. must pay every month, regardless of whether you use services b. only have to pay in months when you use health care services
a. must pay every month, regardless of whether you use services
The RAND HIE provides empirical evidence of adverse selection in health insurance because ______. a. researchers 1- found that families with the highest anticipated health expenditures were significantly more likely to state that they would choose to purchase the supplementary insurance AND 2- were not able to predict HIE participants anticipated expenditures using observable demographic and economic characteristics b. researchers were not able to predict HIE participants' anticipated expenditures using observable demographic and economic characteristics c. researchers found that demand for inpatient care is less sensitive to price than outpatient care d. researchers found that demand for inpatient care is less sensitive to price than outpatient care BUT failed to find a mortality difference between the two treatment groups e. researchers found that families with the highest anticipated health expenditures were significantly more likely to state that they would choose to purchase the supplementary insurance f. evidence from the RAND HIE shows that, as patient cost-sharing increases, the number of episodes of outpatient care decreases sharply
a. researchers 1- found that families with the highest anticipated health expenditures were significantly more likely to state that they would choose to purchase the supplementary insurance AND 2- were not able to predict HIE participants anticipated expenditures using observable demographic and economic characteristics (Remember, information asymmetry will not occur without information asymmetry.)
Which of the following best describes a "health plan provider network?" a. the hospitals and doctors that contract with your health plan to provide services for an agreed-upon rate or fee schedule b. the computer system doctors and hospitals use to submit bills to insurance companies c. a website where consumers can find information about the best doctors
a. the hospitals and doctors that contract with your health plan to provide services for an agreed-upon rate or fee schedule
Which of the following best describes the "annual out-of-pocket limit" under a health insurance policy? a. the most you will have to pay in deductibles, copays, and coinsurance for covered care received in network for the year b. the most your insurance policy will pay for covered services in a year c. the most you will have to pay for premiums in a year
a. the most you will have to pay in deductibles, copays, and coinsurance for covered care received in network for the year
According to the efficient producer hypothesis, health disparities exist because better-educated individuals are more efficient producers of health than less-educated individuals. a. true b. false
a. true
Adverse selection may occur only in the presence of information asymmetry. a. true b. false
a. true
Each theory to explain socioeconomic health disparities outlined in Chapter 4 of the BHATTACHARYA textbook has supporting (empirical) evidence. a. true b. false
a. true
If your health insurance or health plan refuses to pay for a service that you think is covered and your doctor says you need, you can appeal the denial and possibly get the insurance company to pay the claim. a. true b. false
a. true
The RAND HIE finds that higher co-insurance rates lead to lower levels of both effective and ineffective medical utilization. a. true b. false
a. true
Based on Robinson Crusoe's PPF (below), the combination of goods (30 birds, 80 crabs) is ______. a. unattainable b. efficient c. attainable and efficient d. attainable but inefficient
a. unattainable
Private insurance mandates reduce the problem of ______ at the cost of ______.
adverse selection; choice (personal liberty)
Researchers studying real world insurance markets have reported ______. a. evidence of a positive risk-coverage correlation b. no evidence of a positive risk-coverage correlation c. evidence of a negative risk-coverage correlation
all of the above
Several reasons have been outlined for why adverse selection is not omnipresent (i.e. a serious problem in all markets for health insurance), including _____. a. insurance customers misperceive their own risk b. customers do not act on their private information c. insurers can accurately observe consumers' risk d. Less risky people are more risk-averse, wealthier, or better able to understand the benefits of insurance
all of the above
Which of the following statements about differentiated product oligopoly is (are) TRUE? a. Under a differentiated product oligopoly, firms wield some market power. b. Differentiated product oligopoly is a model of competition in which there are few firms as a result of barriers that restrict entry and in which the products supplied by firms are not perfect substitutes for each other. c. Economists model the hospital market as a differentiated product oligopoly. d. Differentiated product oligopoly markets fall somewhere between perfectly competitive markets and monopolies.
all of the above are true
Ex ante moral hazard refers to ______. a. behavior changes that occur after an insured event happens (i.e. while you are sitting in the clinic or hospital) and make recovering from that event more expensive b. behavior changes that occur before an insured event happens and make that event (i.e. you ending up in the clinic or hospital) more likely c. risks that people with health insurance take with their health that similar uninsured people do not d. the fact that people with health insurance choose more expensive treatments than similar people who are uninsured
b and d
The ______ model best describes hospital-physician relationships in most hospitals in the United States. a. Physicians as Owners b. Physician's Workbench c. Cost-shifting d. Physicians as Direct Employees
b. Physician's Workbench
