health Econ

According to John Nyman, classic economic theory overstates the degree of overconsumption of medical services by only considering ______. a. inefficient moral hazard b. pure premiums c. risk-averse consumers d. efficient moral hazard e. income effects

A

Medicare _______ covers hospital inpatient services, while _______ covers prescription drug benefits. a. Part A; Part B b. Part B; Part D c. Part B; Part A d. Part C; Part B e. Part A; Part D

A,D

An individual who is _______ would not choose to purchase health insurance. a. risk-averse b. self-employed c. unemployed d. risk-neutral e. risk-loving

risk-loving

An individual who is _______ would be indifferent to purchasing health insurance. a. risk-averse b. self-employed c. unemployed d. risk-neutral e. risk-loving

risk-neutral

_______ exist when the average total cost of providing insurance coverage decreases as a firm provides coverage for larger groups of people. a. Moral Hazard b. Asymmetric Information c. Rationality d. Scale Economies e. Adverse Selection

scale economies

If a price ceiling in a competitive market for physician services is effective, it will result in a market ______ of physician services due to the _______ price. a. surplus; lower b. surplus; higher c. shortage; higher d. shortage; lower e. none of the above

shortage, lower

Doughnut hole benefits refers to the system of coverage under _______. a. Medicare Part A b. Medicaid c. Medicare Part C d. Medicare Part D e. Medicare Part B

D

"Crowding out" due to an expansion of Medicaid requirements is best described by which of the following? a. A family chooses to remain covered under employer-sponsored private health insurance. b. An uninsured family chooses to enroll in Medicaid due to a low household income. c. A family newly eligible withdraws from an employer-sponsored private health insurance and enrolls in Medicaid. d. both b and c e. none of the above

C

According to John Nyman, the reduction in utility due to the payment of an insurance premium when healthy is less than the increase in utility from an equal income transfer when ill. Which of the following best explains why this is true? a. As incomes increase, people gain greater utility from additional income. b. When sick, people no longer behave rationally. c. As incomes decrease, people gain greater utility from additional income. d. When healthy, people are able to get more enjoyment from their income. e. John Nyman is incorrect.

C

Which of the following reasons might explain why managed care organizations might be able to lower healthcare costs with premiums similar to fee-for-service plans? a. The lower health care costs of managed care plans may be offset by higher administrative costs. b. Managed care organizations may set their premiums just below that of their competitors. c. Managed care organizations may compete with one another based on service offerings rather than price. d. Both a and c e. All of the above

E

A risk-averse individual will always prefer a certain amount of income over an expected amount of income of equal value. a. True b. False

True

Elimination of the tax-exempt status of employer-sponsored health insurance would most likely lead to a decrease in the purchase of health insurance. a. True b. False

True

When the demand for medical care _______, the real hourly wage for physicians should _______. a. increases; increase b. decreases; increase c. increases; stay the same d. increases; decrease e. decreases; stay the same

a

_______ occurs when high-risk individuals subscribe to an insured group of low-risk individuals. a. Moral Hazard b. Asymmetric Information c. Rationality d. Scale Economies e. Adverse Selection

adverse selection

Which of the following is a key difference between Medicare and Medicaid? a. eligibility requirements b. financing methods c. reimbursement methods d. benefits offered e. all of the above

all of the above

Which of the following reasons might explain why health insurance purchased as a group might be less costly than coverage purchased individually? a. Greater bargaining power b. Risk spreading over a larger number of people c. Lower marketing costs for the provider d. Both a and b e. All of the above

all of the above

If a price ceiling on physician services is going to be effective, it must be set ______ the competitive market equilibrium price to prevent the market from driving the price _______. a. below; up b. below; down c. equal to; up d. above; down e. above; up

below, up

_______ occurs when insurance companies structure plans that provide an incentive for healthier consumers to enroll while discouraging enrollment of higher-risk individuals. a. Moral Hazard b. Asymmetric Information c. Cherry-picking d. Guaranteed renewability e. Adverse Selection

cherry-picking

Insurance premiums determined by a _______ are based on the risk characteristics of the entire membership. a. loading charge b. experience rating c. staff model d. group model e. community rating

community rating

If there is an increase in the number of registered nurses and the demand for medical services remains unchanged, what should be expected to happen to the real hourly wage for registered nurses? a. The real hourly wage should increase. b. The real hourly wage should only increase if the demand for medical services is inelastic. c. The real hourly wage should only decrease if the demand for medical services is elastic. d. The real hourly wage should decrease. e. The real hourly wage should only increase if the demand for medical services is elastic.

d

_______ Medicaid reimbursement rates will _______ the opportunity cost of treating privately insured patients. a. Decreasing; increase b. Increasing; not affect c. Increasing; decrease d. Decreasing; decrease e. Decreasing; not affect

decrease, decrease

Consumer-driven healthcare attempts to _______ moral hazard costs by _______ out-of-pocket expenditures faced by consumers. a. increase; decreasing b. decrease; decreasing c. increase; increasing d. decrease; increasing e. None of the above

decrease, increasing

An increase in income tax rates _______ the opportunity cost of purchasing employer-sponsored health insurance. a. increases b. decreases c. does not affect d. eliminates e. transfers

decreases

_______ is a prospective payment system used by Medicare to reimburse hospitals for the provision of medical care. a. Resource-Based Relative Value Scale System b. Fee-for-service c. Diagnosis-Related Groups System d. Doughnut Hole System e. Capitation Payment System

diagnosis related groups system

To maximize profits, a dominant insurance provider will set the price for insurance such that the marginal revenue of providing coverage is _______ of providing coverage. a. greater than the marginal cost b. less than the average total cost c. equal to the marginal cost d. equal to the average total cost e. none of the above

equal to marginal cost

_______ occurs when consumers have less incentive to avoid risky behaviors. a. Ex post moral hazard b. Ex ante moral hazard c. Adverse selection d. Asymmetric information e. none of the above

ex ante moral hazard

A decrease in the demand for medical care will cause the real hourly wage of physicians to increase. a. True b. False

false

An increased HMO presence in insurance markets will likely increase premiums for consumers. a. True b. False

false

At the age of 65, individuals are automatically enrolled in Medicare Part B. a. True b. False

false

Collusion is most likely to occur within monopolistic competition. a. True b. False

false

Estimates of the income elasticity of demand for health insurance have found it to be an inferior good. a. True b. False

false

If the market price is greater than the marginal cost, a profit-maximizing firm will choose to produce less. a. True b. False

false

Medical care is a public good, as it is both non-rival and non-excludable. a. True b. False

false

Penalties levied on consumers for the purchase of "Cadillac" health insurance plans are meant to correct for the positive externalities associated with these plans. a. True b. False

false

People obtaining health insurance as part of a group are likely to pay higher premiums than those who acquire coverage individually. a. True b. False

false

Scale economies may serve as a barrier to entry in the private health insurance market by mandating a tiered benefit system. a. True b. False

false

The Diagnosis-Related Groups System is a prospective payment system used by Medicare to reimburse physicians for medical care. a. True b. False

false

The majority of financing for Medicaid programs comes from _______. a. the federal government b. state governments c. individual premiums d. charitable care e. none of the above

federal government

_______ is the principal catalyst for the provision of government intervention in the market for health insurance. a. Uncertainty b. Population growth c. Disease prevalence d. Imperfect information e. Health expenditure growth

imperfect information

Medicare Part A is financed primarily through _______. a. individual premiums b. state governments c. sales tax revenue d. charitable care e. payroll taxes

individual premiums

Individuals who have access to large-group coverage are _______ likely to fall victim of cherry-picking behavior because the total cost of health insurance is distributed among a _______ number of subscribers. a. less; larger b. more; larger c. less; smaller d. equally; similar e. equally; larger

less, larger

Though eligibility varies from state to state, _______ is a public insurance program intended to cover low-income individuals, children, and pregnant women. a. Medicare b. Medicaid c. charitable care d. Blue Cross e. Blue Shield

medicaid

_______ is the situation where insured individuals alter their behavior because they are no longer financially responsible for the full cost of their behavior. a. Moral Hazard b. Asymmetric Information c. Rationality d. Scale Economies e. Adverse Selection

moral hazard

Suppose a hospital agrees not to charge an insurer a higher price than any other insurer. This would be an example of a _______. a. exclusive dealing contract b. most favored nation clause c. tying contract d. price ceiling e. both a and b

most favored nation clause

The U.S. federal income tax is _______, and therefore provides incentives for higher income individuals to purchase _______ amounts of employer-sponsored health insurance. a. progressive; smaller b. regressive; larger c. regressive; smaller d. progressive; larger e. None of the above

progressive, larger

A _______ attempts to remove financial incentives of physicians to overuse by combining the insurer and provider functions of medical care. a. network model HMO b. PPO c. POS d. staff model HMO e. IPA model HMO

staff model HMO

_______ reasons that firm-size classes with expanding populations are more efficient than those with shrinking populations over time. a. Scale Economies b. Economies of Scope c. Survivor Theory d. Search Frictions e. none of the above

survivor theory

A price ceiling will increase the quantity of medical care produced in a monopoly market. a. True b. False

true

An increase in consumer income will lead to an increase in the quantity of medical care supplied. a. True b. False

true

Capitation payments made to physician group practices reduce the financial incentive for physicians to provide excessive medical services. a. True b. False

true

Government funding of medical schools is an example of a supply-side subsidy. a. True b. False

true

Health insurance mandates may result in market inefficiencies if the marginal cost of additional coverage exceeds the marginal benefit received. a. True b. False

true

If a physician is currently operating at full capacity, an increase in Medicare reimbursement rates could lead to decline in access for privately insured patients. a. True b. False

true

In the long-run, economic profits will be zero in monopolistic competition. a. True b. False

true

Increasing access to medical care for low income individuals and households through the expansion of Medicaid eligibility requirements could decrease the quality of medical care received by current Medicaid beneficiaries. a. True b. False

true

Individuals with higher annual incomes possess a greater incentive to purchase more comprehensive health insurance coverage. a. True b. False

true

The Resource-Based Relative Value Scale System might cause an oversupply of certain medical services if the fee is set too high. a. True b. False

true

Third-party payments provide incentives for the adoption of new technologies that may carry low benefits with high costs. a. True b. False

true

medicare and medicaid are both demand-side subsidies true fasle

true

Suppose a manufacturer of artificial hips required any medical care provider to purchase a specific set of surgical tools along with each artificial hip. This would be an example of a _______. a. exclusive dealing contract b. most favored nation clause c. tying contract d. price ceiling e. both a and b

tying contract

Suppose a government decides to subsidize flu vaccinations in an attempt to correct a market failure. Without this government intervention, the flu vaccination would most likely be ______ due to the presence of _______. a. over-consumed; negative externalities b. under-consumed; positive externalities c. over-consumed; positive externalities d. under-consumed; negative externalities e. none of the above

under consumed, positive