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