Health Policy and Economics
Midterm Exam
Course Introduction
This course examines the intersection of health policy and economics, providing students with an understanding of how economic principles shape healthcare decision-making at individual, organizational, and governmental levels. Through analysis of key topics such as healthcare financing, insurance markets, regulation, behavioral economics, and healthcare reform, students will learn to evaluate the efficiency, equity, and effectiveness of health policies. The course also explores the impact of public and private sector actions on healthcare systems and outcomes, preparing students to critically assess current challenges and propose evidence-based policy solutions.
Recommended Textbook Health Care Economics 7th Edition by
Paul J. Feldstein
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18 Chapters
357 Verified Questions
357 Flashcards
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Page 2
Chapter 1: An Introduction to the Economics of Medical Care
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20 Verified Questions
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Sample Questions
Q1) In a competitive market,firms will continue to produce until marginal cost is equal to A)Price
B)Marginal revenue
C)Both a and b
D)Neither a and b
Answer: C
Q2) Demand curves are downward sloping because of
A)Increasing marginal cost
B)Diminishing marginal cost
C)Increasing marginal benefit
D)Diminishing marginal benefit
Answer: D
Q3) Supply curves are upward sloping because of
A)Law of increasing marginal cost
B)Law of diminishing marginal cost
C)Law of increasing marginal returns
D)Law of diminishing marginal returns
Answer: D
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Chapter 2: The Role of Government in Health and Medical Care
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) Which of the following statements is true about the medical care market?
A)Both patients and providers have perfect knowledge of prices in the market.
B)Both patients and providers have an incentive to minimize costs.
C)Medical resources are very mobile.
D)None of the above
Answer: D
Q2) Which of the following is not an "in kind" transfer?
A)$10 itunes gift card
B)$100 medical care tax credit
C)$100 in cash
D)All of the above
Answer: C
Q3) Find the equilibrium price and quantity in the private market.
Answer: We solve for the equilibrium price and quantity by finding where the MPC line intersects the MPB line.
MPB = MPC
1000-4Q=200
800=4Q
Q=200
P=MPB=1000-4(200)=1000-800=200
4
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Chapter 3: Health Policy and the Legislative Marketplace
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Sample Questions
Q1) Which of the following organizations would not support a bill expanding the supply of nurses to hospitals?
A)AMA
B)ANA
C)AHA
D)AAMC
Answer: B
Q2) Dental hygienists are considered compliments to dentist.Therefore,dentists would support legislation
A)Allowing dental hygienists to independently open dental offices.
B)Limiting the expansion of dental hygienists.
C)Requiring additional education to become a dental hygienist.
D)None of the above
Answer: D
Q3) Explain why the AMA supports a requirement of employer sponsored health insurance,but not a public health insurance option?
Answer: A large public health insurance company can impose monopsony power and force medical providers to accept lower prices for services than those that can be negotiated with smaller private firms.
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Page 5
Chapter 4: The Production of Health: the Impact of Medical
Services on Health
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Sample Questions
Q1) Suppose a hospital is currently producing 100 inpatient days per day with 20 physicians and 50 nurses.The hospital receives a grant to provide low-cost care.The grant includes funds to double the size of the nursing staff.After the grant,the hospital produces 150 inpatient days per day.What is the marginal product of nurses?
A)0 inpatient days
B)1 inpatient days
C)2 inpatient days
D)3 inpatient days
Q2) The cost-effectiveness of the H1N1 influenza vaccination was presented in a study in the October 5,2009,issue of the Annals of Medicine.In this study,authors use outside sources to estimate the probable benefits and cost of the influenza vaccine and find the following:
-The cost of vaccination (including lost work time)is $35.
-The cost of influenza illness (including lost work time)is $313.
-Influenza vaccination reduces the probability of getting influenza from 0.67 to 0.25. Perform a cost-benefit analysis of influenza vaccination.Does it favor vaccination?
Q3) Compare cost-utility analysis to cost-effective analysis.
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Page 6
Chapter 5: An Overview of the Medical Care Sector
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Sample Questions
Q1) Consider an increase in the demand for dentures.As the supply curve becomes _____ elastic,the change in quantity supplied becomes_______.
A)More;smaller
B)More;larger
C)Less;larger
D)None of the above
Q2) An increase in the demand for medical schools will
A)Increase the price of medical service
B)Increase the quantity of medical services
C)Both a and b
D)Neither a nor b
Q3) In an effort to control the size of hospitals,the government imposes a legal limit on the number of hospital beds that may be active.This policy will cause some hospitals to reduce the number of beds available.Explain how this policy change affects the three markets in the medical sector.
Q4) If the government would like to expand access to care,is it better to use a demand policy or a supply policy? Pay particular attention to the elasticity of each curve.
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Chapter 6: The Demand for Medical Care
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Sample Questions
Q1) Determining the quantity of medical services based on need instead of the market can lead to
A)An over provision of medical services
B)An under provision of medical services
C)Both a and b
D)Neither a nor b
Q2) Assume that the patient's out-of-pocket price for visiting a physician is $30 and that the time costs are equal to $50.Assume the elasticity of the medical service,with respect to the total price,was -2.0.If the out-of-pocket price dropped 50 percent,by what percent does the number of visits change?
Q3) Discuss the role of "time cost" on the demand for medical services.
Q4) After the introduction of Medicare and Medicaid,the increase in medical expenditures can be explained by a
A)Less than 25% increase in prices
B)25% to 50% increase in prices
C)50% to 75% increase in prices
D)Greater than 75% increase in prices
Q5) Discuss the role of physicians on patients' demand for medical services.
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Chapter 7: The Demand for Health Insurance
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Sample Questions
Q1) Which of the following types of reimbursement would hospitals support?
A)Indemnity benefit
B)Service-benefit
C)Both a and b
D)Neither a nor b
Q2) When an insurer promises to pay 30% of treatment costs,this amount is known as a
A)Deductible
B)Co-insurance
C)Stop-loss
D)Lifetime maximum
Q3) Suppose there are two types of people in an insurance market: high and low risks.The high-risk person is sick 10% of the time and the low-risk person is sick 5% of the time.The probability that any individual is high risk is 40%.Upon getting sick,an individual loses $10,000 in medical expenses.What are the actuarially fair premiums for the types?
Q4) Suppose the inverse demand for physician office visits is P = 1000 - 20Q.Now suppose an insurance policy provides a co-insurance rate of 50%.Graph the new demand function with health insurance.
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9
Chapter 8: The Supply of Medical Care: an Overview
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Sample Questions
Q1) Assume that the marginal productivity of an RN is 10 patients and the marginal productivity of an LPN is 2.5 patients.The wage of an LPN is $20 per hour.Find the equilibrium wage for RNs.
Q2) Hospitals compete mainly in a _________ market.
A)Product market
B)Quality market
C)Geographic market
D)Price market
Q3) In the short run,profits can
A)Exceed normal profit
B)Be equal to normal profit
C)Be below normal profit
D)All of the above
Q4) Suppose a hospital is interested in opening several outpatient clinics.Let n be the number of clinics.The marginal return from each clinic is R = 0.8-0.2n.If the current real interest rate is 10%,how many clinics will be opened up? If each clinic depreciates at a rate of 30%,how many clinics will be open?
Q5) If a hospital displays decreasing average costs on output,should the hospital be regulated even though it is more efficient?
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Chapter 9: Market Competition in Medical Care
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Sample Questions
Q1) Compare the quality difference in care between HMOs and traditional health insurance.
Q2) The failure of capitation payments is due to
A)Providers' inability to access risk
B)Providers' inability;risk-adjustment claims to insurers
C)Conflict with respect to the method;specialists of payment between primary care physicians and specialist.
D)All of the above
E)None of the above
Q3) Why didn't HMOs grow in the 1960s and 1970s?
A)They were relatively inefficient versus fee for service providers
B)There existed little demand for HMO services
C)State and county medical boards denied HMO access to hospitals
D)All of the above
E)None of the above
Q4) Explain how the lack of information to patients about plans and physicians leads to more market distortions.
Q5) Explain how the new payment system for hospitals instituted by the National Health Services of Britain affected hospital stay length,expenditures,and mortality.
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Chapter 10: The Market for Health Insurance: Its
Performance and Structure
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) A risk-averse consumer faces a 0.60 probability of health expenditures equal to $10,000 and zero expenditures otherwise.She can purchase a health insurance policy that will cover all her actual health costs for $6,000.It follows that
A)She will definitely not buy the health insurance policy
B)She will possibly buy the health insurance policy
C)She will definitely buy the health insurance policy
Q2) If the health insurance premium is equal to $2,000 and administrative fees are $500,then what is the benefit/premium ratio?
A).25
B).50
C).75
D)Cannot be calculated with the above information
Q3) Firms self-insure to
A)Save money on premiums.
B)Avoid state insurance regulation.
C)Create uniform benefit packages for employees who live in different states.
D)All of the above.
Q4) Do high concentration ratios have an effect on input prices?
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Q5) Explain why insurance companies may be hesitant to increase relative premiums.
Chapter 11: The Physician Services Market
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Sample Questions
Q1) Define defensive medicine and describe what Baicker,Fisher,and Chandra found as the cost of defensive medicine.
Q2) The rate of return on training for physicians in the United States,when compared to that for most other educational groups (college graduates,PhDs)
A)Lower
B)Similar
C)A bit higher
D)A lot higher
Q3) Physician-induced demand
A)Increases medical prices
B)Increases use of medical services
C)Both a and b
D)Neither a nor b
Q4) A specific opportunity cost of attending medical school is:
A)The tuition fee
B)The foregone income
C)The sleep deprivation and fatigue during arduous internships
D)All of the above
Q5) How did physicians accepting Medicare assignments cause price discrimination?
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Chapter 12: The Market for Hospital Services
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Sample Questions
Q1) The predominate organizational form for U.S.hospitals is not-for-profit.Why?
A)The profit motive corrupts human behavior
B)For-profit hospitals do not provide charity care
C)Private not-for-profit hospitals engage in most of the medical research
D)The not-for-profit form provides the most benefits to physicians
E)All of the above
Q2) You are a consultant and have been employed by a large inner-city hospital called City Hospital to estimate the demand for its services.Your research indicates that the income elasticity of demand for the target market is +0.50;the price elasticity of demand is -0.15;and the cross-price elasticity of demand with respect to the price of services at Rural Hospital,a near-by hospital,is +0.35.Answer the following questions.
If a hospital is experiencing economies of scale,
A)Its average cost curve is positively sloped as output increases
B)Its average cost curve is negatively sloped as output increases
C)It should reduce its output level to lower costs
D)Quality is falling as output is rising
E)Both b and c are true
Q3) What are the advantages of using the Herfindahl-Hirschman Index versus a concentration ratio?
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Page 14
Chapter 13: The Pharmaceutical Industry
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Sample Questions
Q1) Which drug type is expected to have a higher markup over cost?
A)Innovation drugs
B)"Me-too" drugs
C)Both have about the same markup
Q2) Describe methods used by brand-name pharmaceutical companies to delay the entry of generic drugs.
Q3) Pharmaceutical firms charge different prices in different countries after because
A)Government regulations are different between countries
B)Demand elasticities are different between countries
C)Both a and b
D)Neither a nor b
Q4) If the demand for Lipitor is P = 1000 - 10Q (MR = 1000 -20Q)in the United States and P = 500 -20Q (MR = 500 - 40Q)in Canada,at what price would Lipitor sell at in each country? Assume marginal cost is equal to $100.
Q5) For pharmaceutical drugs,R&D expenditures account for
A)Over two-thirds of expenses
B)Between one-third and two-thirds of total expenses
C)Less than one-third of expenses
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Chapter
and Policies
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18 Verified Questions
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Sample Questions
Q1) Policy intervention is needed to resolve a
A)Dynamic shortage
B)Static shortage
C)Both a and b
D)Neither a nor b
Q2) Which of the following is a normative statement?
A)Nonprofit hospitals are inefficient
B)Physicians should be more cost conscious
C)Government-sponsored health insurance will provide lower premiums
D)All of the above
Q3) Suppose a student is trying to decide if they should become a physician or an accountant.As an accountant,the student would earn $75,000 after four years of education.On the other hand,if the student decides to become a physician,they would need to attend school for 11 years.Each year of school costs $20,000 in both professions.As a physician,the student would earn $100,000.In both cases,the student only has 20 years to work and/or attend school.What should they do?
Q4) Explain how the current market for residencies is anticompetitive and how market competition would correct the current situation.
Page 16
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Chapter 15: The Market for Physician Manpower
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Sample Questions
Q1) Which action caused a barrier to entry into dentistry?
A)Flexner Report
B)Removal of antitrust protection
C)Gies Report
D)P4P
Q2) Physicians are believed to charge different patients different prices for the same service because they practice
A)Price discrimination
B)Charity
C)Both a and b
D)Neither a nor b
Q3) _____________ patients identified as victims of negligence filed a malpractice claim.
A)Less than 2% of
B)Between 2% and 5% of
C)Between 5% and 10% of
D)Greater than 10% of
Q4) Describe how physicians can use price-discrimination to serve both high- and low-income patients.
Q5) Describe how barriers to entry would decrease the quality of care.
Page 17
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Chapter 16: The Market for Medical Education: Equity and Efficiency
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Sample Questions
Q1) Income Contingent Loan Repayment Plans (ICLRP)have been proposed to encourage medical school graduates to
A)Locate to a rural area
B)Work with underserved populations
C)Locate to an urban area
D)None of the above
Q2) If medical schools are not using tuition to ration students,what mechanism is being used to ration students and to what end?
Q3) A new health reform bill proposes to reduce the shortage in primary care physicians by increasing the number of medical schools.This will lead to
A)An increase in the supply curve
B)An increase in the quantity demanded for medical school
C)Both a and b
D)Neither a nor b
Q4) Tuition and fees cover
A)100% of medical school cost
B)75% to 50% of medical school cost
C)50% to 25% of medical school cost
D)Less than 25% of medical school cost
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Chapter 17: The Market for Registered Nurses
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Sample Questions
Q1) Explain how the introduction of Medicare resolved the issues of "static shortages" in nursing.
Q2) Immigrants constitute ______ of the growth in nurses between 2001 to 2008.
A)1/10
B)1/5
C)1/3
D)1/2
Q3) Hospital diploma programs
A)Were used to ensure a supply of nurses
B)Have increased due to higher nurse mobility
C)Both a and b
D)Neither a nor b
Q4) According to Buerhaus,et.al,there will be nurse shortage in the near future due to A)Improve economic conditions
B)An aging of the nursing stock
C)Both a and b
D)Neither a nor b
Q5) What are the benefits and cost of a comparable worth-based wage determination system.
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Chapter 18: National Health Insurance: an Approach to the
Redistribution of Medical Care
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Sample Questions
Q1) Why is deficit financing politically appealing?
Q2) ____________ makes health insurance portable by allowing new employees to forego health screening if they had health insurance at their previous job.
A)HIPAA
B)CHIP
C)HSA
D)PPACA
Q3) Medicare expenditures can be reduced by
A)Reducing payments to the suppliers of Medicare services
B)Increasing the Medicare payroll tax
C)Making Medicare a defined contribution program
D)All of the above
Q4) What are the benefits and costs of an individual health insurance mandate.
Q5) Prescription drug coverage for the elderly is provided by
A)Medicare Part A
B)Medicare Part B
C)Medicare Part C
D)Medicare Part D
Q7) What are the problems with an employer health insurance mandate? Page 20
Q6) Explain how a comparative effectiveness board could reduce health care cost.
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Page 21