Unit 3 Flashcards
what is the range of PED
0 to minus infinity
what does PED = in perfect inelasticity
0
what does PED = in inelastic demand
because 0 and -1
what does PED = in unitary elasticity
-1
how does PED = in elastic demand
less than -1
what does PED = in perfect elasticity
minus infinity
what is the range of price elasticities for primary care
-0.1 to -0.7
what is the range of price elasticities for dental services
-0.5 to -0.7
what is the range of price elasticities for nursing home services
-0.7 to -2.4
what are the other elasticities of demand
income elasticity and time price elasticity
what affects income elasticity of demand
inferior goods, necessities and luxuries
what is the RAND HIE
the RAND health insurance experiment
what is the main benefit of health insurance
to give protection against financial catastrophe when health care is needed
what is the downside of insurance
is induced wasteful over-use of services and excess costs
what is a strategy for restraining costs
cost sharing
what is a concern about cost sharing
it delays in seeking initial care may result in more costly long-term care and worsen health
what did the RAND corporation become after the science experiment
an insurance company
how many people were involved in the RAND experiment
7791
what were the randomized groups in the RAND experiment
free care, co insurance at 25%, 50%, 90%; 0% inpatient care, 95% coinsurance for outpatient; and health maintenance organization
how long were subjects followed
3-5 years
what was found in the RAND experiment
the more insurance on hand, the more health care dollars they spent, and the more they visited hospitals
what is reduced by cost sharing
spending
what is a complement
if a price of one good go up, you consume less of both
what is a substitute
if price of one good goes up you consume more of the other one
are inpatient and outpatient care complements or substitutes
complements
in what terms did free care give better health
blood pressure control, vision, oral health, serious symptoms
what were the benefits from cost sharing
reduced participants’ worry about health, and had fewer restricted activity days
what were the effects of the free care plan in the RAND HIE
it was beneficial for medical screening and one health habit, but worse for some health habits like diet and exercise
what was pinned down from the RAND HIE
the true values of price elasticities
what are two factors that determine the degree of risk
probability that an event will occur, and size of potential loss of gain
what is risk pooling
individuals in a group each contribute a small amount to the pool
what is the effect of pooled contributions
they compensate for losses
when does risk pooling work
if uncertainty is unpredictable at the individual level and quite predictable in a large group
can be health be pooled?
only risks like the financial risks of ill health that can be traded, can be pooled
what does the effective risk pooling depend on
size of pool risk, presence of sufficiently independent risks, and independence between the expected loss and the presence of insurance
when does moral hazard occur
the expected loss changes with the presence of insurance
what are the two aspects to moral hazard
insured take less care to avoid the loss, and those affected seek more expensive care than if the loss was not insured
give a moral hazard example
the implementation of naloxone laws led to a 14% increase in opioid related mortality, because when you have a safety net, you are more reckless with your health
what is the goal of the economic model of demand
it seeks to maximize expected utility
what is the equation for economic model of demand
U=U(W)
what are the benefits of insurance in regards to risk pooling
price exists where risk averse individual is better off
what is AFP equal to
the expected loss of the insured loss
what is AFP
actuarially fair premium
what are the limitations of the standard model
magnitudes of gain and losses; loss aversion; risk reduction is the only source of welfare gain; and little influence on the size of expected losses
what does over consumption lead to
welfare loss
what is Pauly suggest in his analysis of moral hazard
that cost sharing strategies are the solution
what are the supply side approaches for moral hazard
the gatekeeper model, managed care, capacity control and financial incentives
what is the default position of health insurance
demand curve when the patient faces the full cost
what is full coverage health insurance
patient pays $0 of the cost of each visit
what is coinsurance health insurance
fixed cost of each visit, example 75%
what is indemnity insurance health insurance
insurer pays a fixed $ for each purchased service
what is fixed co payment health insurance
patient pays a fixed $, insurer pays the rest
what are two concepts that negatively affect health insurance
adverse selection, and cream skimming
what does uncertainty and risk aversion lead to
insurance which can lead to significant welfare gains
what does moral hazard lead to
significant welfare losses
what did the RAND HIE find for cost sharing
in general had no adverse effects on participant health
what were the three basic question posted by RAND HIE
how does cost sharing or membership in an HMO affect use of health services compared to free care; how does cost sharing or membership in a HMO affect appropriateness and quality of care received; and what are the consequences for health
what is the leading cause of personal bankruptcy in the U.S.
unpaid medical bills
