Schroeder
T/F Individuals make choices because they CAN and because they MUST
True, health economics studies how individuals make choices regarding their health in their allocation of scarce resources to satisfy their unlimited wants.
What was the difference between El Paso and McAllen, Texas?
El Paso charged less for the same amount of healthcare compared to McAllen
McAllen had an issue with self-referral (when a provider sends patient to facility where they have financial interest)
Medicare, Medicaid, and CHIP (Children's health insurance program)
Expected loss = amount of ____ times (x) probability of ____.
Describe the difference between tangible and intangible costs.
BONUS: List the types of tangible costs with examples
Tangible costs - physical cost requiring money (BONUS= Direct - physical cost for medical and nonmedical categories; Indirect - lost of productivity, time that could be spent doing something else
Intangible costs - "invisible costs", costs you cannot see but still affect you
Describe the causes and effects of medical licensing.
BONUS: How does this connect to insurance?
Cause: Civil War led to medical advances - found proper and improper treatments and needed to separate providers
Effects: more expensive healthcare, made it more difficult for women and minorities to get an education
BONUS: Licensing led to more expensive education and healthcare which led to insurance.
T/F More people are covered by Medicare than Medicaid.
BONUS: Which type of insurance makes up for largest share in US?
More people in the US are covered by MedicAID than Medicare.
BONUS: Private health insurance
What is the goal of the utility function?
To maximize utility, we value health and commodities
U(A) = x2 + 8x3 + 4x4
x3, because it had the highest factor.
Factor loadings denote relative value across the various component (within and across choices).
Calculate the premium if the average expected loss is $100 and the insurance company charges a loading fee of 10%?
$110
Premium = $100 + 0.1 ($100) = $110
BONUS: Define these terms.
Deductible and out-of-pocket max.
Deductible - patient pays full cost of covered services until deductible is met
Out of pocket maximum - amount patient spends where they no longer pay for covered services
Define the connection between the health production function and the intertemporal health model.
The amount produced during time t in the health production function = the amount invested during time t in the intertemporal health model
1 :) X 0
2 :) X X X
3 :) :) :) X X > : (half)
4 :) :) X :)
Which would be the opportunity cost of treatment 3?
Treatment 1.
The opportunity cost is the next "best" choice. But it does not mean that it is better.
What are the three aspects of imperfect information that we discussed?
1. The healthcare industry does not know pricing
-it is not straight forward, VERY expensive, no price transparency
2. Overall, uncertainly for patients and providers
-unaware of outcomes
3. Patients don't know if they are getting good service
-hard to get expert advice
What would a patient receiving a lab test that costs $1500 pay if they have a $500 deductible and $3600 out-of-pocket maximum?
$700
$500 (deductible) + $200 (20% of $1000= 1000(.20)= 200) = $700
Define moral hazard and why it can be considered "bad".
Moral hazard - insurance induced demand, changes in behavior based on the removal of risk, increased due to decreased prices
It can be considered bad because increased use will be passed on in the form of increased premiums, this could lead to an increase in uninsured individuals
Describe the commodity production function and what it means.
Zt= Z(Xt, TZt; E)
BONUS: T/F an example of a commodity is going to the movies with your friends.
Zt = amount of commodities produced at time t
Xt= goods purchased to produce commodity
TZt= time spent to produce commodities
E = endowment(s)
BONUS: False, the movie itself isn't the commodity, but the feelings associated such as enjoyment, is the commodity.
Can you match the country with its healthcare system below:
1 USA, 2 Britain,3 Japan, 4 Taiwan, 5 Germany
A. 11.1%GDP, everyone covered, low cost, higher taxes, no choices and more government control, HIGH MORAL HAZARD
B. 17.6GDP, very costly, majority of citizens have private health, 93% say their healthcare is not what it costs, very complex system, lacks transparency
C. 11.42%GDP, insurance generally pays 70% of medical costs, complete price transparency government sets prices (1 price for all)
D. 6.7%GDP, one government-run insurance company, smart card used (avoids fragmentation)
E. 12.8%GDP, cannot deny coverage based on pre-existing conditions, sickness fund (rich can opt out), free care for pregnant women, low pay for healthcare workers
1. USA --> B
2. Britain --> A
3. Japan --> C
4. Taiwan --> D
5. Germany --> E
Match the percentage with the correct health insurance coverage for the US (as of 2023)
1. Employer, 2. Medicare, 3. Medicaid, 4. individual, 5. Uninsured, 6. Other (military)
A. 1%
B. 6%
C. 15%
D. 8%
E. 21%
F. 49%
1. F, Employer 49%
2. C, Medicare 15%
3. E, Medicaid 21%
4. B, Individual 6%
5. D, Uninsured 8%
6. A, Other 1%
Referring to Grossmans Model, when is it not optimal to invest?
t -> T, current time is close to last time period
U(Ht) << U(Zt), utility of health is less than utility from commodities
()dHt >> It, deterioration of health is greater than investment of health
PM >> PX, price of healthcare is greater than price of commodities
It about 0, amount of health produced is equal to zero