For Quiz 2 Flashcards
We consume until marginal benefit = marginal cost… requires 2 kinds of information
- impact of health care service on health
- the value of health improvement (and treatment preferences)
What are aspects of Patients’ information challenge?
Can’t learn more stuff because of sources of information, and experience
How do we protect people from information asymmetry?
- Licensure
- Patient Physician Agency Relationship
but don’t these create market power?
Describe perfect agency
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
What are characteristics of health care?
uncertainty, informational asymmetry, derived demand, externalities, vulnerability
What is supplier induced demand
demand that is influenced from care provider, for better or worse….
How to describe supplier induced demand?
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?
PED
perfect inelasticity = 0
inelastic - 0 - -1
elastic - less than -1
perfect elasticity - - infinity
What was the RAND HIE experiment and its issues?
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
What are the distributional effects of user fees based on income
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
what were main questions for RAND experiment
- 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?
In RAND were outpatient or inpatient less elastic?
inpatient were less elastic, outpatient and spending have clear gradient
are inpatient and outpatient care complements or substitutes?
complements
What are two factors that determine the degree of risk
- probability an event will occur
- size of potential loss or gain
risk pooling works if uncertainty is…
unpredictable at the individual level, and quite predictable in a large group
How to have effective risk pooling, it depends on
- size of risk pool
- presence of sufficiently independent risks
- independence between the expected loss and presence of insurance
What is moral hazard and two aspects
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
what are benefits of risk pooling
- price exists where risk averse individual is better off
- price > AFP is still worthwhile
What are limitations of the standard model
- magnitude of gains and losses
loss aversion
risk reduction is the only source of welfare gain
little influence on size of expected losses
What is health care financing
activity of raising funds to pay for operation of health care system
What is health care funding and remuneration?
activity of allocating those funds to alternative activities within the health care sector
What are ways to interpret the two pure systems and which is better in that reserve?
technical - public… one payer
allocative - private - preferences
What is Roemer’s law
A bed built is a bed filled
What is a risk adjustment
process where insurers adjust premiums to reflect observable characteristics of an individual that are associated with expected health care costs
What is the gatekeeper model
deliver model where primary care provider regulates access to specialist and diagnostic services, patients not permitted to access directly
What is Grossman’s model for why people desire health?
- 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
what is important when considering someone’s utility?
over a lifetime, people’s time preference is important
5 characteristics of health care
- demand for health care
- externalities (physical or caring)
- information asymmetry
- uncertainty
- vulnerability to the integrity of a person
How did Labelle evaluate if supplier induced demand was bad or not?
effectiveness and agency
