For Quiz 2

Question 1

We consume until marginal benefit = marginal cost… requires 2 kinds of information

Answer 1

1. impact of health care service on health
2. the value of health improvement (and treatment preferences)

Question 2

What are aspects of Patients’ information challenge?

Answer 2

Can’t learn more stuff because of sources of information, and experience

Question 3

How do we protect people from information asymmetry?

Answer 3

1. Licensure
2. Patient Physician Agency Relationship
   but don’t these create market power?

Question 4

Describe perfect agency

Answer 4

doctor there to give patient all information they need so they can make a decision and doctor should then implement that decision once patient has made it

Question 5

What are characteristics of health care?

Answer 5

uncertainty, informational asymmetry, derived demand, externalities, vulnerability

Question 6

What is supplier induced demand

Answer 6

demand that is influenced from care provider, for better or worse….

Question 7

How to describe supplier induced demand?

Answer 7

Effectiveness: did the service contribute positively to patient’s health status?
Agency: would the patient demanded the service if patient had the same information as the physician?

Question 8

PED

Answer 8

perfect inelasticity = 0
inelastic - 0 - -1
elastic - less than -1
perfect elasticity - - infinity

Question 9

What was the RAND HIE experiment and its issues?

Answer 9

Nixon asked RAND to explore issue of cost sharing….
health insurance gives protection against financial catastrophe when health care is needed, downside of insurance is induced wasteful over use of services and excess costs, cost sharing is a strategy for restraining costs

Question 10

What are the distributional effects of user fees based on income

Answer 10

at any level of health, the more wealthy are likely to gain, at any given level of wealth, the more healthy are more likely to gain

Question 11

what were main questions for RAND experiment

Answer 11

• how does price affect demand for/use of medical care?
• do demand elasticities vary for different health services (inpatient, outpatient…)
• Do health maintenance organizations really save money? if so, how and does this effect health?
• If insurance affects use of care, does it also affect health?

Question 12

In RAND were outpatient or inpatient less elastic?

Answer 12

inpatient were less elastic, outpatient and spending have clear gradient

Question 13

are inpatient and outpatient care complements or substitutes?

Answer 13

complements

Question 14

What are two factors that determine the degree of risk

Answer 14

• probability an event will occur
• size of potential loss or gain

Question 15

risk pooling works if uncertainty is…

Answer 15

unpredictable at the individual level, and quite predictable in a large group

Question 16

How to have effective risk pooling, it depends on

Answer 16

• size of risk pool
• presence of sufficiently independent risks
• independence between the expected loss and presence of insurance

Question 17

What is moral hazard and two aspects

Answer 17

Occurs when expected loss changes with presence of insurance…
- ex ante = insured take less care to avoid loss
- ex post = those affected seek more expensive care than if loss was not insured

Question 18

what are benefits of risk pooling

Answer 18

• price exists where risk averse individual is better off
• price > AFP is still worthwhile

Question 19

What are limitations of the standard model

Answer 19

• magnitude of gains and losses
  loss aversion
  risk reduction is the only source of welfare gain
  little influence on size of expected losses

Question 20

What is health care financing

Answer 20

activity of raising funds to pay for operation of health care system

Question 21

What is health care funding and remuneration?

Answer 21

activity of allocating those funds to alternative activities within the health care sector

Question 22

What are ways to interpret the two pure systems and which is better in that reserve?

Answer 22

technical - public… one payer
allocative - private - preferences

Question 23

What is Roemer’s law

Answer 23

A bed built is a bed filled

Question 24

What is a risk adjustment

Answer 24

process where insurers adjust premiums to reflect observable characteristics of an individual that are associated with expected health care costs

Question 25

What is the gatekeeper model

Answer 25

deliver model where primary care provider regulates access to specialist and diagnostic services, patients not permitted to access directly

Question 26

What is Grossman’s model for why people desire health?

Answer 26

• provides direct benefits and allows us to undertake activities that provide utility (benefits from consumption demand)
• allows us to work more, earn more, increase levels of consumption (provides benefits from investment demand)
• enables us to live longer to enjoy activities and consumption longer

Question 27

what is important when considering someone’s utility?

Answer 27

over a lifetime, people’s time preference is important

Question 28

5 characteristics of health care

Answer 28

1. demand for health care
2. externalities (physical or caring)
3. information asymmetry
4. uncertainty
5. vulnerability to the integrity of a person

Question 29

How did Labelle evaluate if supplier induced demand was bad or not?

Answer 29

effectiveness and agency