Econ 352 Midterm #2

What are the three mechanisms are used to control utilization?

-Authorization review -Second opinion -Case Management

What are the top 3 causes of death?

1. Heart disease- 633,8422. 2. Cancer- 595,9303. 3. Chronic respiratory disease 4. Accidents 5. Stroke

How do we define good health?

A state of complete physical, mental, and social wellbeing, not merely the absence of disease of infirmity

How does price transparency play a role in the decision-making?

Decision making requires that consumers know the prices paid for services they buy

What are deductibles/coinsurance/copay?

Deductible - a fixed amount of health care costs per calendar year paid by a consumer before coverage begins (e.g. $2,000) Coinsurance - means that consumer pays some fixed percentage of the cost of specified medical treatment Copay - Fixed amount paid by the consumer (e.g. $20 every time you visit the doctor)

Why medical care is viewed as "an investment"?

Demand for medical care is based on desire to feel better, but also be more productive

What is the difference between HMO, PPO, CDHP (a.k.a. HDHP), POS?

HMO - $$ premium, $ OOP costs, Restricted flexibility (always need referral), limited network size, PPO - $$$ premium, $$ OOP costs, most flexible, large network size CDHP - $ premium, $$$ OOP costs, flexible, large network size

What is individual mandate?

Part of the ACA, requires people to purchase insurance or be provided insurance by an employer or qualify for medicare. if a person is not insured they must pay a fine or apply for a waver

How do the insurance risk-pools work?

Pools high risk people into pools with other high risk people, and charges premiums to reflect that risk.

How does U.S. compare in terms of infant health or teen pregnancy with other nations?

about average in infant health and way more teen pregnancies

Why do some companies choose to self-insure? Think of several reasons.

accurately predict medical expenses for the year

How can noneconomic determinants (e.g. health status itself or quality of care) affect the demand for medical care?

bad health status will demand more quality of care will determine whether or not they need to return

Which ethnic group seems to be at the biggest disadvantage when comparing "Age-Adjusted Mortality Rates"?

black males

What was the purpose of the health insurance early in U.S. history?

compensate workers for loss of income due to medical injury rather than to reimburse for medical expenses.

What was the primary objective to introduce HMOs?

cost saving

African American men are ten times less likely to have HIV than white men (True/False)

false

Closed panel HMOs have the least strict cost control features. (True or false?)

false

Patients who use preferred providers pay a higher coinsurance rate. (True or false?)

false

The rate of tuberculosis has increased substantially over the past couple of decades. (True/False)

false

What are good examples of traditional indemnity insurance contracts?

fire, theft, casualty, life, health

Which ethnic group has the highest high school drop-out rates and the largest percentage working in high-risk jobs?

hispanics

Which two ethnic groups have much higher teen pregnancy rates?

hispanics and blacks

What problems does a teen pregnancy impose on the healthcare system?

increase demand

Based on the study findings, is the demand for medical services more likely to be elastic or inelastic? What does it tell about how the consumers view medical care?

inelastic -often needed (and often needed fast, without the ability to shop for a better price (short time horizon!), and more likely very few substitutes exist for these services.

What do state level insurance regulations guarantee?

issue, renewability, restrictions on exclusions of pre-existing conditions, and modified community-related premiums

Why the economists assume that the demand for health care is a derived demand?

it is derived from the demand for health, We produce to produce and consume health.

Why do economists consider stock of health as a durable good? What does that mean?

lasts a lifetime, but depreciates with time.

How is income size related to health outcomes and mortality rate?

lower incomes have worse health outcomes and a higher mortality rate

What is capitation?

lump sum payments per enrollee, paid in advance to primary care physician to reduce utilization & cost

What are premiums depending on experience ratings based on?

people pay different premiums based on differences in their demographics, past health care utilization, medical status, and other factors.

What was the reason Kaiser-Permanente was founded?

provide medical care for geographically isolated areas of Northern California

Why do people enter into insurance contracts?

share the uncertainty of financial risk

How does the average medical spending among individuals with obesity-related diseases compare with a relatively healthy person's spending?

spend 41.5% more than a healthy person

Why do people often choose employee-based health insurance in the United States? What role does the tax treatment play in such health insurance acquisition?

tax-free benefits, incentive for overconsumption

Why there is a strong incentive to overconsume medical care after purchasing health insurance?

the insurance company is paying rather than out of pocket expenditures occuring

What does "fuzziness" of the demand for medical care imply?

the possible fuzziness of the demand for medical care is because of the uncertainty and the role of the physician.

Why paying a specific amount with early insurance policies was replaced to paying a percentage of the bill or covering the whole bill?

the size of the bill might be different each time so paying a percentage would be easier on the consumer

Why time costs matter when we consider the demand for medical care?

there is an opportunity cost with time and healthcare

How does having insurance change people's behavior? How does the insurance affect demand for healthcare?

they become more reckless, creates a higher demand for healthcare

What do concepts of moral hazard and adverse selection refer to? What are the ways that insurers can minimize moral hazard?

they refer to information problems -Balances the benefits of greater risk sharing with the costs of moral hazard -Make people responsible for more of their own care -requires higher deductibles and larger copays, and/or coinsurance. -Pools high risk people into pools with other high risk people, and charges premiums to reflect that risk.

Why were CDHP created?

to reduce inefficient moral hazard situation and reduce overconsumption (consumers are more accountable)

Why do people buy insurance?

to share or avoid risk

Deductibles, copays, and coinsurance function as tools reducing unnecessary overconsumption. (True or false?)

true

Lower social classes die at younger ages and are more susceptible to diseases. (True/False)

true

Managed care limits the patient's choice of provider through the use of gatekeepers, closed panels, and preferred providers. (True or false?)

true

The demand for medical services is based on need versus willingness to pay. (True or false?)

true

The higher the income, the better the health outcomes. (True/False)

true

The majority of population in U.S. is covered by private insurance. (True/False)

true

The percentage of people with health insurance coverage in 2018 was lower than the rate in 2017. (T/F)

true

The rate of Medicare coverage and the percentage of uninsured children under the age of 19 increased in 2018. (True/False)

true

The uninsured rate and number of uninsured increased in 2018. (True/False)

true

Using prospective payment (capitation) - lump sum payments per enrollee, paid in advance to primary care physician helps to reduce utilization and costs. (True or false?)

true

How does U.S. compare in terms of obesity rates with other developed nations?

we are the fattest!

In which ethnic group hypertension manifests the most?

whites and blacks

Which ethnic group teenagers are the "bigger" smokers?

whites and hispanics

What are the obesity-related illnesses?

• type 2 diabetes, • sleep apnea, • hypertension, • myocardial infarction, • stroke, • gallstones, • gout, • cancer, • osteoarthritis, • asthma, • acid reflux, etc.

What are the determinants of demand?

- # of buyers - Income - Prices of related goods - Tastes and Preferences - Expectations

Which ethnic group has the highest and which has the lowest life expectancy in the U.S?

- Hispanics - Blacks

What roles do income/education/environment/lifestyle/genetic factors play in better health pursuit?

- Income and education generally determine access to healthcare - environmental and lifestyle factors are linked to cancer (65% of all cancer) - Knowing your genetics can help one better prevent dieseases

What do the findings of RAND Health Insurance Study suggest?

- Individual demand responds to cost sharing - Demand was 50% higher for those with free medical care than for those who paid 95% out of pocket

What are the other social issues that increase health care spending?

- Obesity - Teen pregnancy (risk of low birth weight, preterm deliveries, and risk of infant mortality) - Gay and bisexual relations (with high prevalence of HIV infection)

What are the 3 primary reasons why workers lack insurance coverage?

- employer does not offer a health plan - employer offers a health plan, but employee is not eligible as a part-timer - employer offers a plan and employee is eligible, but employee does not purchase because it is too expensive, or can be insure through other ways (spouse etc)

How can marital status/literacy/lifestyle/individual profile variables affect the demand for medical care?

- married individuals demand less medical care - educated people tend to seek more medical care - Lifestyle (smoking drinking etc) increase demand - Individual profile (gender race age) play a role in demand

What does diminishing marginal utility for medical care mean?

-Each successive unit of medical care generates a smaller improvement in health -Each increase in health generates a smaller increase in utility

What are the four major factors why mortality declined in Europe and North America?

-Living standards -- (better nutrition & housing) advanced dramatically -Public Health -- authorities improved sanitary conditions in urban centers (water purification, disposal of sewage) -Certain diseases declined -- because of reduced exposure & increased natural immunity -Advances in medical science; improvements in surgery; obstetric & pediatric care; immunizations, etc.

What are the most commonly used measures of the quality of life? Are these perfect measures?

-Male and female life expectancy -Infant mortality

What might be the effect of increasing income on the demand for physician services? Do we consider the demand for medical services in general to be a normal good or inferior good? (Will the demand for these services increase or decrease, when income is increasing?)

-Shifts the demand for services out (at each price, the consumer is now willing and able to purchase more physician services) -normal good -increase

Why consumers (or producers) who have trouble gathering and understanding information are at a disadvantage? How easy is it to obtain quality information in health care markets?

-When they have trouble gathering and understanding information, their ability to make informed decisions is compromised -Quality of information in health care markets is poor, difficult to understand

What is the goal of health insurance? Which situations does the insurance work better in? When there is a low probability of a large loss? When there is a low probability of a small loss? A high probability of a large loss? When there is a high probability of a small loss? Is the size of the loss and probability relevant? Why?

-collect sufficient premiums to cover all possible losses - a high probability of a small loss

What are the common problems in the insurance market arising due to asymmetric information?

-consumer information problems -moral hazard -adverse selection

How does lack of insurance affect access to medical care? Does poor access result in poor health outcomes?

-does not affect access to medical care -yes

What is the role of medical services towards health? What is an iatrogenic disease? Is there such a thing as too much of medical services?

-facilitate the production of health. -Iatrogenic disease (injury/illness caused from medical treatment) -yes

What are the four basic model types of HMO's?

-group model -staff model -network model -IPA model

What are the safety net features for uninsured?

-it's illegal for a hospital emergency department to deny care to anyone requesting it -the hospital must provide medically appropriate screening, and then treat or stabilize and transfer to a facility which can treat -most of this care is financed from municipal budgets

What do consumers consider when they choose to purchase the insurance (or not)? What role does the degree of risk aversion play in that decision? Why?

-price of obtaining health insurance -individuals degree of risk aversion -perceived magnitude of the loss relative to income -information concerning the likelihood that an illness will actually occur

How big of a portion of income we spent on food, clothing, and shelter versus healthcare in 1875 compared to 1995?

74% down to 13%

How much of the population is uninsured in U.S.?

9.1%

Which ethnic group has the highest rate of homicides?

Black people

Which ethnic group has the highest rates of infant mortality? Why do you think that is?

Black people

Which population group is most susceptible to heart disease or stroke?

Black people

What are the major commercial insurance carriers in U.S.?

Blue cross and Blue shield

What do the terms coinsurance/copayment/deductible/moral hazard mean?

Coinsurance - means that consumer pays some fixed percentage of the cost of specified medical treatment copay - Fixed amount paid by the consumer (e.g. $20 every time you visit the doctor) deductible - a fixed amount of health care costs per calendar year paid by a consumer before coverage begins (e.g. $2,000) Moral hazard - Situation in which consumers alter their behavior when provided with health insurance

Which nation has the largest tobacco user percentage compared to other well-developed nations? Alcohol user percentage?

France

Can you tell the difference between a group, staff, network, and independent practice association (IPA) model?

Group - The HMO contracts with one or more medical groups to provide services to members. Staff - A type of HMO where all premiums are paid directly to the HMO, which hires physicians. The physicians are salaried and get predetermined bonuses Network - contracts with more than one physician group and may have contracts with a single group or multi-specialty groups as well as hospitals and other health care providers. IPA - are open panel plans because participation is open to all community physicians who meet the HMO's and IPA's selection criteria.

Which type of plan has increased in popularity in 2000s? (Table 8.1)

HDHP

Which type of plans was the most recent addition? (Table 8.1)

HDHP

Which plan requires obtaining referrals to go to the specialty doctor?

HMO

Which plan requires selecting primary care provider?

HMO

What is indemnity and social insurance? What are their distinctive features?

Indemnity - an insurance company agrees to compensate an insured individual for part of all of a loss of financial obligation due to medical services received. in return this individual might be paying premiums, copays, deductibles, etcSocial - are government-sponsored programs (funded through taxes etc)

What did mid-1960s amendments to the Social Security Act create?

Medicaid

What do mortality/morbidity mean and how are they measured?

Mortality - death rate of a given population Morbidity - Effects of diseases or medical conditions

What are the most popular metrics used to evaluate population-based health outcomes?

Mortality factors - life expectancy and infant mortality Morbidity factors -Measure disease burden, Expressed as disease prevalence or incidence rate

What are QALYs?

Quality Adjusted Life Year - used to quantify the health benefits generated by a particular treatment. - 1 year in perfect health after treatment = 1 QALY.

What does morbidity mean?

Rate in which a disease occurs. ex: the morbidity rate for lyme disease is increasing

Which particular model is Kaiser-Permanente?

Staff

Which nation has the largest percentage of the obese?

United States

In what ways can health generate utility?

We can work, play, enjoy life more when we are healthy. If you are sick you may not be able to work/produce. health of a society impacts productivity

Which ethnic group has the highest rate of drug-induced deaths or self-harm (suicide)?

White people

How can the environmental factors affect our health?

Workers might get seriously sick and productive days of work might be lost for many reasons, including environmental factors: •Stress levels at work •Environmental pollution •Exposure to harmful chemicals