HM820 - Class 1 (Moral Hazard))

Question 1

Moral Hazard

Answer 1

A transaction that involves a hidden action that only one side can observe. AKA the decision maker is not the one to bear the cost (boat to Australia with prisoners)

Question 2

RAND Study Takeaways (comparing free health care to deductibles)

Answer 2

1. The high-deductible group used 25 percent less healthcare than the free-care group
2. Deductibles seem to reduce both effective and ineffective care with high deductibles
3. Deductibles did not hurt health for general populations (or help)
4. BUT deductibles DO hurt high risk patients

Question 3

Is demand for healthcare elastic or inelastic

Answer 3

elastic (sensitive) - on both ends usage drops (high and low priced healthcare). There is a curve

Question 4

Effective Healthcare

Answer 4

Care/treatments that works (good efficacy and safety)

Question 5

In-effective Healthcare

Answer 5

Care/treatments don’t work (as well as competitor products/care when applicable (Jublia toe fungus example was ineffective))

Question 6

What are the four main elements of Value based Insurance Design (VBID)

Answer 6

1. Lower copayments for effective
   consumption.
2. Higher copayments
   for ineffective
   consumption.
3. Lower copayments
   for people with
   chronic conditions.
4. Lower copayments
   after certain events.

Question 7

VBID vs Deductibles

Answer 7

Deductibles across the board is like using a Blunt instrument.
VBID is a more nuanced and effective tool than straight deductibles for everyone

Question 8

What is the Offset Effect within healthcare and what is an example of this within healthcare

Answer 8

Saving money somewhere in the system (example: fewer drugs and outpatient visits) to partially offset costs elsewhere (example: increases in hospitalizations). Example: California health plan.

Question 9

What is Value Based Insurance Design (VBID)?

Answer 9

Lower copayments for effective care, raise copayments for in-effective care. It’s a solution to the offset effect.

Question 10

What are the two types of Medicare plans that cover drugs

Answer 10

1. Standalone Part-D Drug Plans: Those plans cover only the enrollee’s drug costs, with other expenses (inpatient, outpatient) covered by Part A and Part B.
2. Medicare Advantage Drug Plans: Those plans cover all of an enrollee’s medical costs, both drug-related costs and all other costs.

Question 11

What are Standalone Part-D Drug Plans

Answer 11

Those plans cover only the enrollee’s drug costs, with other expenses (inpatient, outpatient) covered by Part A and Part B.

Question 12

What is Medicare Advantage Drug Plans

Answer 12

Those plans cover all of an enrollee’s medical costs, both drug-related costs and all other costs.