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Review Questions
Introduction
1. a. Briefly describe how much Americans spend
on health care. Discuss the trend in spending, what do we spend it
on, what sources fund the spending, and do Americans spend too much or
too little on health care?
b. Why do Americans spend
so much on health care?
c. Do Americans get good
value for their health care dollars?
Economic Evaluation of Health
Care
2. a. Describe Cost-of-Illness Analysis.
What questions does it provide answers for? What kinds of information
do you need to conduct such an analysis? Give an example.
b. Describe Cost-Minimization
Analysis. What questions does it provide answers for? What kinds
of information do you need to conduct such an analysis? Give an example.
c. Describe Cost-Benefit Analysis.
What questions does it provide answers for? What kinds of information
do you need to conduct a cost/benefit study? What are the likely
problems that may be encountered? Give an example.
d. Why is the question "what is
a life worth" a key question in Cost-Benefit analysis? How does one
estimate the value of a life? Discuss.
e. Environmental factors
are important determinants of public health. Explain how cost-benefit
analysis could be used to find the optimal level of air pollution, if the
objective is to reduce loss of life due to air pollution. What kinds
of information would the study need. What problems might your study
encounter?
f. Describe Cost-Effectiveness
Analysis. What questions does it provide answers for? What
kinds of information do you need to conduct such an analysis?
Give an example.
g. Why is it important to adjust
for quality of well-being differences after medical treatments? Describe
how such adjustments are made with examples.
h. Explain how cost-effectiveness
analysis could be used to assess whether or not routine mammograms should
be provided to women between the ages of 40 and 50, assuming that the expected
benefit is a reduction in the mortality rate of women. What problems
might your study encounter?
i. What's the difference between
cost-effectiveness analysis and cost-benefit analysis? Is one easier
to apply than the other? Is one superior to the other? How
so?
Health Care Production
3. Health production studies analyze the impact of various
activities on an individual’s or society’s health. What do such studies
suggest are the most important factors that influence the health of children,
the nonelderly and the elderly? Is expanding medical care the best
way to improve health?
4. Assume that most health production function studies estimate
the following elasticities:
i. the elasticity of adult
mortality with respect to medical care spending is -.1
ii. the elasticity of adult mortality
with respect to increased safety regulation spending is -.2
iii.the elasticity of adult mortality
with respect to increased crime control spending is -.3
NOTE: these elasticities
show that a 1% increase in medical care spending leads to a .1% decrease
in mortality, a 1% increase in safety spending leads to a .2% decrease
in mortality and a 1% increase in crime control spending leads to a .3%
decrease in mortality. If the total amounts currently
spent on medical care, safety compliance and crime control are $1000, $300
and $500 billions, respectively:
a. find the incremental
cost effectiveness ratios for increased medical care spending, safety regulation
and crime control, i.e., calculate their marginal cost/marginal benefit
ratios. Interpret the ratios.
b. which kind of spending
is most effective in reducing mortality?
c. should any of the
above spending levels be increased or decreased? Why or why not?
Health Care Demand
5. a. Is the desire for medical
care driven by "necessity" or economic factors? What factors influence
the demand for medical care? Discuss the evidence.
b. Can
demand analysis improve the utilization level of medical care? How
so?
d. How do we
measure the demand for medical care? How are demand studies conducted?
What are the data requirements? Explain fully.
e. Is medical
care demand like the demand for other products in that the consumer has
the most influence over the decision? Why or why not?
Policy implications for efforts to control costs?
6. a. Discuss what a demand elasticity
measure shows. How are they computed?
b. One important elasticity
is the price elasticity of demand. Explain what it measures, and
how it is computed? Show. Compare and contrast elastic and inelastic
demand. What are the determinants of the price elasticity of demand?
How so?
c. If demand is price elastic,
how will total revenues to a firm change if prices are increased or decreased?
What if demand is inelastic? Why would firms want to make their customers
more inelastic?
d. Explain the role of time
costs in determining consumer demand. How do time costs effect the
price elasticity of demand? Why must time costs be accounted for when deciding
questions of access for "free" public services?
e. For persons who have
no health insurance today, what increase in use would you expect for hospital
care, physician services and dental care if Congress passes some kind of
national health insurance plan covering 80 percent of all medical care
costs. Link to the available evidence concerning the relevant price
elasticities.
7. Given the following demand elasticities:
hospitalization price elasticity
-.2
hospitalization income elasticity
+1.0
hospitalization travel time elasticity
-.1
hospitalization wait time elasticity
-.2
What will happen to hospital admissions if:
a. if hospital prices increase by 10%?
b. if a recession occurs and incomes
decrease by 10%?
c. if hospital closings increase
the travel time to a hospital by an average 10%?
d. if the amount of time spent
waiting for admission decreases by 10%?
Health Insurance
8. a. Why do people want to buy insurance?
b. Why do private
insurers typically not insure events with either extremely low or extremely
high probabilities, and those events with small costs?
c. Can we measure the adequacy
of health insurance coverage by the percent of medical care expenses that
are covered? If insurance policy B covers more medical care but is
otherwise identical to policy A, can we say that B is a better policy?
Explain.
d. Compare community
rating to experience rating. Which rating system is more desirable?
Why so? Should the government mandate that all insurers practice
one or the other? Why so?
e. Discuss adverse
selection. Can a competitive insurance industry operate efficiently
in the presence of adverse selection? When and why so?
f. Discuss moral hazard.
What are the implications for efficiency?
g. How do insurers
limit the effects of moral hazard and adverse selection?
h. Discuss the tax
advantages accruing to workers and employers from providing health insurance.
Should health insurance benefits be tax exempt?\
9. a. How many people lack health insurance
in the United States? For how long? What are their characteristics?
b. Why are people uninsured
in the US?
c. What are the effects
of having such large numbers of uninsured people?
10. Insurance companies usually would like to assess premiums
on an experience-rated basis, with high cost groups paying high premiums,
and low cost groups paying low premiums. Sometimes, govt. policy
has forced insurers (e.g. EmpireBlueCross/BlueShield) to utilize community
rating as a rate setting device, forcing uniform premiums for all clients.
Such uniform rates are designed to insure that high cost clients will be
more able to afford insurance. Analyze the welfare aspects of this
policy, i.e., is it "fair" to all parties? What might happen if new
insurance competitors enter the market and are allowed to offer policies
to the existing clients of established insurers? What would competition
do to the rates paid by each group, and to the profits of the established
and new insurers? Would it make much of a difference if the new competitors
were required to practice community rating also?
Managed Care Insurance
11. a. What's the difference between traditional indemnity
health insurance and managed care insurance?
b. Broadly speaking,
what are the 3 types of managed care insurance?
c. How quickly has
managed care replaced traditional health insurance, and why so?
Which type(s) have grown the quickest?
d. How do managed
care organizations (MCOs) decrease health care costs? Describe how
managed care effects providers' incentives, fees and overall utilization.
How about patient incentives?
e. How have MCOs impacted
health care costs, utilization and quality? What's likely to
happen in the future?
f. What regulations
have been imposed as managed care insurers have grown and what have they
done to the cost of health insurance and access to it? Why have politicians
responded in the way they have? Implications for the future?
g. Describe
how consumer-directed healthcare plans (CDHP) work. How important
have they become and why are they increasing their market share?
What are the concerns with CDHC plans?
Structure of the Private
Health Insurance Sector
12. a. Describe the industrial organization
perspective of why industries differ in terms of production and allocation
efficiency and equity.
b. Is the US
private health insurance market a competitive one? Why so?
c. How profitable
are US private health insurers? What are some of the problems in
measuring their profits?
d. What is happening
to the market share of private health insurers? Why so?
Physicians
13. a. What has been happening to the number
and compensation of physicians in the US? Does the US
have an adequate number of physicians?
b. Explain the
supplier-induced demand (SID) hypothesis of medical care demand.
Why would MDs be more able to induce demand for their services than other
kinds of service providers (like lawyers, accountants, etc.)? What
are the implications for efforts to contain medical care costs?
Hospitals
14. a. The hospital sector has changed dramatically
in the past 30 years. Discuss the changes in beds, costs, admissions,
occupancy and length of stay that have occurred, and why they have occurred.
b. How could
nonprofit ownership contribute to over investment in hospital capital and
escalating hospital charges?
c. Should nonprofit
hospitals be exempt from the antitrust provisions of the Sherman Act?
Does hospital competition increase or decrease costs? What role do
managed care insurers play?
Pharmaceuticals
15. a. Discuss US Pharmaceutical prices and
profits. Do US drugmakers make excess profits?
b. Should the
US limit what Rx makers can charge for their products, like other countries?
Medicare & Medicaid
16. a. Briefly describe the size and scope of
the Medicare program. How is it financed?
b. Is the financing
of the Medicare insurance program equitable?
c. Why is the
Medicare insurance program nearing insolvency? Evaluate the proposed
reforms to make the program solvent, taking into account how Medicare health
care spending is distributed across enrollees.
d. Briefly describe
the size and scope of the Medicaid program. How is it financed?
e. Does the
Medicaid program ensure access to medical care for the poor? Why
or why not?
Regulation
17. a. Does the US health care system operate
efficiently?
b. Has government
regulation induced the system to operate more efficiently?
c. Discuss how
Medicare has changed the way they compensate hospitals and physicians,
i.e., diagnostic related groups (DRGs) and resource based relative value
scales (RBRVS). Have they improved efficiency?
d. Managed care
insurance has not stopped the health cost spiral. Discuss the Demand
Side and Supply Side market failures that continue to prevent the health
care market from operating efficiently.
e. Discuss the
provisions of the new health care bill signed by President Obama on March
23, 2010. Which provisions will increase access to care? Which
provisions will reduce the cost of care? Which provisions will provide
financing for care?
f. Will the
new health care bill improve the efficiency and equity of the US health
care system?
Foreign Health Care Systems
18. a. Discuss the similarities and differences
between the US health care system and those of Canada, Germany, France
and the UK. Whose system works better/worse in terms of efficiency
and equity?
b. Do the experiences
of these other countries provide any insight on how the US health care
system could be improved?
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