MHA710 Exam 3 Actual Exam Style V2 |
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which of the following best describes the concept of moral hazard in the context of health
insurance?
A. The tendency of individuals with higher health risks to seek insurance coverage more
than healthy individuals.
B. A situation where physicians provide more services than necessary because they are
paid on a fee-for-service basis.
C. The inability of an insurance company to distinguish between high-risk and low-risk
patients during the application process.
D. A change in behavior that occurs when an individual is insulated from the full cost of a
service, leading to increased consumption.
Answer: D
Rationale: Moral hazard occurs when the presence of insurance lowers the marginal cost
of healthcare to the consumer, encouraging higher utilization. This behavioral shift can lead
to economic inefficiency as the cost of the extra care may exceed the benefit derived. It is a
fundamental challenge for insurers who use deductibles and copayments to mitigate this
effect.
,2. In economic evaluation, what is the primary difference between Cost-Effectiveness
Analysis (CEA) and Cost-Utility Analysis (CUA)?
A. CEA measures outcomes in monetary terms, while CUA measures them in natural units.
B. CEA is only used for private sector decisions, whereas CUA is used exclusively by
government agencies.
C. CUA incorporates both the quality and quantity of life, typically using Quality-Adjusted
Life Years (QALYs).
D. There is no functional difference between the two methods as they both use the same
denominator.
Answer: C
Rationale: Cost-Utility Analysis is a specialized form of CEA that adjusts life years gained
by a quality weight to produce QALYs. This allows for a comparison across different types
of health interventions that affect morbidity and mortality differently. Standard CEA, by
contrast, usually focuses on a single clinical outcome like millimeters of mercury reduced
or years of life saved.
3. Which market structure is characterized by a few large firms having significant control over
the market price and high barriers to entry?
A. Oligopoly
B. Monopolistic Competition
C. Perfect Competition
, D. Monopoly
Answer: A
Rationale: An oligopoly consists of a small number of sellers who are interdependent in
their pricing and output decisions. High barriers to entry, such as massive capital
requirements or regulatory hurdles, prevent new competitors from easily entering the
market. This structure is common in the pharmaceutical industry and among large regional
hospital systems.
4. What does the term ‘Adverse Selection’ refer to in the health insurance market?
A. Insurers choosing only the healthiest patients to cover to maximize profits.
B. An imbalance of information where high-risk individuals are more likely to purchase
insurance than low-risk individuals.
C. Patients choosing the most expensive doctors because they have insurance.
D. The process by which the government selects which insurance plans are allowed in the
marketplace.
Answer: B
Rationale: Adverse selection happens when consumers have more information about their
own health status than the insurer does. This leads to a situation where the insurance pool
becomes disproportionately filled with sick individuals, driving up premiums. If left
unchecked, this cycle can lead to a ‘death spiral’ where healthy individuals drop out of the
plan entirely.
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which of the following best describes the concept of moral hazard in the context of health
insurance?
A. The tendency of individuals with higher health risks to seek insurance coverage more
than healthy individuals.
B. A situation where physicians provide more services than necessary because they are
paid on a fee-for-service basis.
C. The inability of an insurance company to distinguish between high-risk and low-risk
patients during the application process.
D. A change in behavior that occurs when an individual is insulated from the full cost of a
service, leading to increased consumption.
Answer: D
Rationale: Moral hazard occurs when the presence of insurance lowers the marginal cost
of healthcare to the consumer, encouraging higher utilization. This behavioral shift can lead
to economic inefficiency as the cost of the extra care may exceed the benefit derived. It is a
fundamental challenge for insurers who use deductibles and copayments to mitigate this
effect.
,2. In economic evaluation, what is the primary difference between Cost-Effectiveness
Analysis (CEA) and Cost-Utility Analysis (CUA)?
A. CEA measures outcomes in monetary terms, while CUA measures them in natural units.
B. CEA is only used for private sector decisions, whereas CUA is used exclusively by
government agencies.
C. CUA incorporates both the quality and quantity of life, typically using Quality-Adjusted
Life Years (QALYs).
D. There is no functional difference between the two methods as they both use the same
denominator.
Answer: C
Rationale: Cost-Utility Analysis is a specialized form of CEA that adjusts life years gained
by a quality weight to produce QALYs. This allows for a comparison across different types
of health interventions that affect morbidity and mortality differently. Standard CEA, by
contrast, usually focuses on a single clinical outcome like millimeters of mercury reduced
or years of life saved.
3. Which market structure is characterized by a few large firms having significant control over
the market price and high barriers to entry?
A. Oligopoly
B. Monopolistic Competition
C. Perfect Competition
, D. Monopoly
Answer: A
Rationale: An oligopoly consists of a small number of sellers who are interdependent in
their pricing and output decisions. High barriers to entry, such as massive capital
requirements or regulatory hurdles, prevent new competitors from easily entering the
market. This structure is common in the pharmaceutical industry and among large regional
hospital systems.
4. What does the term ‘Adverse Selection’ refer to in the health insurance market?
A. Insurers choosing only the healthiest patients to cover to maximize profits.
B. An imbalance of information where high-risk individuals are more likely to purchase
insurance than low-risk individuals.
C. Patients choosing the most expensive doctors because they have insurance.
D. The process by which the government selects which insurance plans are allowed in the
marketplace.
Answer: B
Rationale: Adverse selection happens when consumers have more information about their
own health status than the insurer does. This leads to a situation where the insurance pool
becomes disproportionately filled with sick individuals, driving up premiums. If left
unchecked, this cycle can lead to a ‘death spiral’ where healthy individuals drop out of the
plan entirely.
