Module 3

Question 1

Derived demand

Answer 1

Demand for healthcare is derived from our demand for health

Question 2

Utility function (contributes to making personal happy)

Answer 2

Usually more of things increases utility (non-satiation). But in HC, it’s actually less HC + more H increases utility

Question 3

Over-utilization of HC - Medical Concept

Answer 3

When healthcare occurs but does not improve health or harms health

Question 4

Over-utilization of healthcare - Economic concept

Answer 4

Cost of care exceeds benefit (individual or society)

Question 5

Health production function graph

Answer 5

Rapidly diminishing return (upside down J.

Don’t actually double health when you double input

Question 6

Iatrogenic illness

Answer 6

Illness Caused by healthcare

Using more healthcare than HC* (equilibrium) can be harmful to health

Question 7

Health Insurance effect on equilibrium quantity and market pice

Answer 7

Lowers price that we personally pay, but increases demand and quantity consumed. (Right bottom on left, then entire demand and equilibrium shifts to right top)

Question 8

Prior purchase

Answer 8

Insurance is something you purchase at beginning of period before you use it (if you do)

Question 9

Actuarially Fair Insurance

Answer 9

Premium equal to expected HC costs

Question 10

Health Insurance costs beyond HC are

Answer 10

Admin costs, Profit, and variability

Question 11

Loading factor

Answer 11

Amount of money beyond expected costs/actuarially fair to offset HC variability

Question 12

Risk Pooling

Answer 12

Group of people who’s risks are pooled to calculate premiums

Question 13

Risk aversion

Answer 13

People don’t like risking things. Willing to pay to decrease their risk bc it increases their utility

Question 14

Community rating

Answer 14

Everyone in community put into same insurance pool, pay the same premium, and low cost people subsidize high cost