Chapters 3 & 5—“DO MORE MEDICAL EXPENDITURES PRODUCE BETTER

HEALTH” & “RATIONING MEDICAL SERVICES”

ASSIGNMENT TWO

1. If the objective of an organization, such as a managed care firm, is to increase its

enrollees’ health, then the organization should spent more money on
A. medical services.
B. prevention.
C. changing its enrollees’ lifestyle.
D. Cannot tell without further information

2. A health production function

A. examines the relative contribution of each factor that affects health to
determine the most cost-effective way to improve health.
B. is an economic phrase that has little relevance to healthcare.
C. examines which health inputs are most effective in improving health.
D. examines the relative cost of each input used to decrease neonatal infant
mortality.

3. As more is spent on a health input, the marginal (additional) improvement in health

A. increases at an increasing rate.
B. increases at a decreasing rate.
C. is constant.
D. None of the above

4. If everyone agrees that additional lives could be saved if more infants were admitted to
neonatal intensive care units (NICUs), then
A. NICUs should be given the highest priority for additional funding to decrease
neonatal infant mortality rates.
B. NICU funding should be the same as funding for other approaches to reduce
neonatal infant mortality rates.
C. NICU funding should be based on which programs achieve the largest decrease
in neonatal infant mortality.
D. NICU funding should be based on which program has the lowest cost per life
saved.

5. Studies into the various factors that improve life expectancy have found that the
marginal contribution of medical care is
A. relatively high.
B. fairly constant over time.
C. relatively low.
 D. unknowable.

6. The medical care people receive today is far superior to treatments received 30 years
ago. Does that mean that the medical care system is more efficient today than in the past?
A. Yes, because people have shorter lengths of stay in the hospital and live longer
B. No, because people use too much medical care because their insurance pays for
most of their care
C. No, because payments to hospitals and physicians do not provide them with
appropriate efficiency incentives
D. B and C

7. According to the study by Corman and Grossman, what factors were most important in
lowering the neonatal infant mortality rate for whites since 1965?
A. Increased availability of NICUs and abortion
B. Increased educational levels and subsidized nutritional programs
C. Family planning services for low-income women and increased availability of
NICUs
D. Subsidized obstetric services and abortion

8. What is the leading cause of death in the United States?

A. Cardiovascular disease
B. Homicide
C. Cancer
D. Accident

9. Since 1970, there has been a rapid decrease in mortality from heart disease. What has
been the main contributor to this decrease?
A. Improvements in medical technology, such as coronary bypass surgery,
coronary care units, and angioplasty
B. Development of new treatment techniques
C. Prevention (including new drugs to control hypertension and high cholesterol)
and changes in lifestyle (such as smoking cessation, exercise, and diet)
D. Increased insurance coverage

10. When government medical expenditures are analyzed, is it appropriate to conclude

that the main objective of such expenditures is to improve health and decrease mortality
rates?
A. Yes, because many more people—such as those who are low income and the
aged—are provided with subsidized coverage
B. No, because very large subsidies are provided to the politically important aged
and do not improve health levels as much as if those funds were spent in other
ways and on other population groups
 C. No, because an important role of government is to assist those with low income
who cannot afford to buy medical services
D. B and C

11. Why must every country have a system for rationing medical services?
A. Health professionals believe they should be the ones to decide how much care
is appropriate.
B. Government tries to protect patients who are generally uninformed as to what
care is necessary.
C. Insufficient resources are available to provide all the services that people need.
D. Physicians are likely to overprescribe when they are paid fee-for-service.

12. What is the likely consequence when all medical services are provided free to
everyone?
A. The government will find it is too expensive and thus limit expenditures.
B. Shortages of services will occur, and patients will have to wait longer times to
receive care.
C. Patients with high income will skip the queue and seek care in another country.
D. All of the above

13. When rationing occurs by ability to pay,

A. those with high income have greater access to care than those with low
income.
B. everyone receives the same amount of medical services.
C. shortages are more likely to occur than when medical services are free to all.
D. waiting lines for receiving medical care are greater for those with high income.

14. What is the relevant price that a patient faces when going to a physician?
A. The amount the insurer pays the physician
B. The out-of-pocket price the patient pays the physician
C. The amount the physician charges the insurer
D. The out-of-pocket price and any travel costs and waiting time incurred by the
patient

15. When determining how much medical care they use, consumers, on average, decide
according to
A. what they believe their medical care needs are.
B. the out-of-pocket price of the service.
C. what their physician recommends.
D. the additional benefit of the service as compared to the additional cost of that
service.
16. The patient’s marginal benefit curve
A. shows the additional benefit the patient receives from an additional visit.
B. shows the average benefit the patient receives from all his physician visits.
C. is the same for all patients of a certain age.
D. is constant for all of the patient’s visits to the physician.

17. The price sensitivity of a patient is greater for

A. all physicians than for a single physician.
B. a single physician than for all physicians.
C. all HMOs than for a single HMO.
D. emergency services than for a routine office visit.
 
18. Price sensitivity is affected by
A. how good a substitute one physician is to another.
B. the physician’s fee.
C. how long the physician has practiced in the community.
D. whether the physician is young or old.

19. Moral hazard means this:

A. It is unethical for patients to overuse medical services.
B. Having insurance causes the patient to use fewer necessary services.
C. Having insurance changes the patient’s behavior.
D. Having insurance results in the marginal benefit of an additional visit equaling
the full cost of that visit.

20. Insurers attempt to control moral hazard by

A. increasing patient cost sharing.
B. changing physician incentives away from fee-for-service to capitation.
C. requiring the patient to receive a physician’s referral before seeing a specialist.
D. All of the above

SHORT ESSAYS

1. Why does the United States spend an ever-growing portion of its resources on
medical services, although they are less cost-effective than other methods in
improving health status?

The U.S. tends to spend more on health care and medical services, as it 
uses expensive and top notch medical technology equipment, and health care
goods prices are costly. Sometimes, doctors prefer to identify more medical
imaging tests, including MRIs, CT scans, PET exams for patients , particularly el
derly people who are politically active and important. This is always the case, 
doctors will propose that elderly patients attend specialties in order to understand 
or examine the issue in greater detail.Typically professionals have to have acces
s to all the available advanced facilities which are more costly in terms of fees
and can administer expensive medications as well.
It is known that an average US adult 
uses more prescription drugs than adults in other countries. In the U.S., prescripti
on drugs are the most expensive that older people mostly consume than other ag
e groups. Often elderly people would need most expensive surgeries and proced
ures like bypass surgery, hip replacement etc.The government pays for much of t
he medical costs of the elderly.Nearly all Americans aged 65 or older are eligible 
for Medicare, the health insurance program of the federal government. Few senio
rs also apply for Medicaid, a government insurance system which primarily target
s families and individuals with low  incomes.
Medical care is paid subsidized by the system of taxes. Because of
the health care policy choice patients use more emergency facilities. Good health 
insurance coverage offers low deductibles and small copayments, and people 
would only be liable for low out-of pocket charges when they visit the hospital
or a specialist.The policy will aim to concentrate on increasing health of all ages, 
encouraging a healthier lifestyle, which will concentrate especially on low-income 
communities who are unable to access insurance care and in effect 
decrease mortality.

2. What is moral hazard, and how does its existence increase the cost of medical
care?
A moral hazard is a scenario where, because everyone else pays the bill, there is 
no reason to think about the costs.Health care is also responsible for creating a s
ocial hazard by encouraging individuals to indulge in more risky behaviour. 
Chances of moral hazard insurance benefits are more so because, usually, once 
a person has protection and assumes that in the case of any accidental loss of
policy cover emergency care, they continue to overuse medical services because 
the person does not have to pay any time they go to doctor. This problem is addr
essed most of the time with private insurance, because insurance companies 
would impose co-payments and other controls to address the excessive use of
medical services. Whereas those incentives will disappear in government
insurance. Moral danger can be managed by-HMOs, user  reports, raised co-
pays and deductibles, prior hospitalization authorisation.Government should pay 
bills and bargain rates while having as much flexibility as in a competition.