HCMG MIDTERM EXAM QUESTIONS
AND ANSWERS (GRADED A+)
first major health policy report in the US - ANSWER-committee on the costs of medical
care (found access disparities, economic barriers)
blue cross - ANSWER-beginning of private health insurance (prepayment for hospital
care)
basic problem with blue cross - ANSWER-adverse selection (people who are more
likely to need healthcare are the ones who buy insurance)
AMA against _____ - ANSWER-3rd party payment (want to keep control over
healthcare provision: only liked insurance over professional control)
nixon's economic stabilization program (ESP) - ANSWER-wage/price controls to deal
with inflation, hospital rate setting programs
quasi-market price system (US) - ANSWER-prices negotiated by private insurers with
providers (public insurers set prices, but otherwise gov't doesn't control payment)
quasi-governmental system - ANSWER-prices regulated by one public insurer/direct
from government
why isn't healthcare a well-functioning market? - ANSWER-limited provider competition,
information gap, third party payment changes prices
why should we worry about high healthcare spending? - ANSWER-opportunity cost,
financial burden, inequity in spending
role of insurance - ANSWER-protection against losses (reduces economic uncertainty,
supports risk-averse individuals
when do insurance markets work well? - ANSWER-losses are not too rare or common,
losses are easily assessed, minimal moral hazard, symmetric information
3 approaches to pricing risk - ANSWER-individual risk-rated (life/auto insurance),
experience rated (ESHI), community rated (medicare)
calculating a fair premium - ANSWER-population of sick people * cost
medical loss ratio - ANSWER-percentage of the insurance premium that is spent on
health care services (ACA limits to 80-85%)
, adverse selection - ANSWER-a high-risk person benefits more from insurance, so is
more likely to purchase it (consumer knows more about their risk than the insurer)
part A cost sharing - ANSWER-$0 premium, $1556 deductible, inpatient/SNF copays
based on length of stay, no OOP max
medicare part B - ANSWER-supplemental insurance (outpatient services: physician
visits, preventive visits, diagnostic testing, medical supplies, outpatient procedures)
part B cost sharing - ANSWER-tax-based premiums, $223 deductible, 80-20
coinsurance, no OOP max
medicare part D - ANSWER-Rx coverage (private plans only- medicare cannot
negotiate prices)
part D cost sharing - ANSWER-premiums 25.5% cost of standard drug cost, extra
premium for higher income, no OOP max (but changes coming)
death spiral - ANSWER-cycle of average risk/cost increases → low-risk individuals drop
out
ways to limit adverse selection - ANSWER-group insurance (natural risk pools), insurers
seek "advantageous selection", public policy
moral hazard - ANSWER-we seek more care when we have insurance than when we
don't
types of moral hazard - ANSWER-ex-ante (before medical event), ex-post (after medical
event)
requirements for moral hazard - ANSWER-price distortion (don't feel full cost of
treatment when covered), price sensitivity (increase consumption if costs go down)
PPO - ANSWER-preferred provider organization: higher premium upfront but patients
can go to any provider
HMO - ANSWER-health maintenance organization: lower premium, lower cost-sharing,
higher tradeoff with convenience (selective coverage/prior authorization)
HDHP - ANSWER-high-deductible health plan: lower premiums but full cost burden
(encourages shopping around to find cheapest care)
study: company-mandated switch PPO to HDHP - ANSWER-consumers didn't use price
transparency tools, instead cut back on low AND high value care
AND ANSWERS (GRADED A+)
first major health policy report in the US - ANSWER-committee on the costs of medical
care (found access disparities, economic barriers)
blue cross - ANSWER-beginning of private health insurance (prepayment for hospital
care)
basic problem with blue cross - ANSWER-adverse selection (people who are more
likely to need healthcare are the ones who buy insurance)
AMA against _____ - ANSWER-3rd party payment (want to keep control over
healthcare provision: only liked insurance over professional control)
nixon's economic stabilization program (ESP) - ANSWER-wage/price controls to deal
with inflation, hospital rate setting programs
quasi-market price system (US) - ANSWER-prices negotiated by private insurers with
providers (public insurers set prices, but otherwise gov't doesn't control payment)
quasi-governmental system - ANSWER-prices regulated by one public insurer/direct
from government
why isn't healthcare a well-functioning market? - ANSWER-limited provider competition,
information gap, third party payment changes prices
why should we worry about high healthcare spending? - ANSWER-opportunity cost,
financial burden, inequity in spending
role of insurance - ANSWER-protection against losses (reduces economic uncertainty,
supports risk-averse individuals
when do insurance markets work well? - ANSWER-losses are not too rare or common,
losses are easily assessed, minimal moral hazard, symmetric information
3 approaches to pricing risk - ANSWER-individual risk-rated (life/auto insurance),
experience rated (ESHI), community rated (medicare)
calculating a fair premium - ANSWER-population of sick people * cost
medical loss ratio - ANSWER-percentage of the insurance premium that is spent on
health care services (ACA limits to 80-85%)
, adverse selection - ANSWER-a high-risk person benefits more from insurance, so is
more likely to purchase it (consumer knows more about their risk than the insurer)
part A cost sharing - ANSWER-$0 premium, $1556 deductible, inpatient/SNF copays
based on length of stay, no OOP max
medicare part B - ANSWER-supplemental insurance (outpatient services: physician
visits, preventive visits, diagnostic testing, medical supplies, outpatient procedures)
part B cost sharing - ANSWER-tax-based premiums, $223 deductible, 80-20
coinsurance, no OOP max
medicare part D - ANSWER-Rx coverage (private plans only- medicare cannot
negotiate prices)
part D cost sharing - ANSWER-premiums 25.5% cost of standard drug cost, extra
premium for higher income, no OOP max (but changes coming)
death spiral - ANSWER-cycle of average risk/cost increases → low-risk individuals drop
out
ways to limit adverse selection - ANSWER-group insurance (natural risk pools), insurers
seek "advantageous selection", public policy
moral hazard - ANSWER-we seek more care when we have insurance than when we
don't
types of moral hazard - ANSWER-ex-ante (before medical event), ex-post (after medical
event)
requirements for moral hazard - ANSWER-price distortion (don't feel full cost of
treatment when covered), price sensitivity (increase consumption if costs go down)
PPO - ANSWER-preferred provider organization: higher premium upfront but patients
can go to any provider
HMO - ANSWER-health maintenance organization: lower premium, lower cost-sharing,
higher tradeoff with convenience (selective coverage/prior authorization)
HDHP - ANSWER-high-deductible health plan: lower premiums but full cost burden
(encourages shopping around to find cheapest care)
study: company-mandated switch PPO to HDHP - ANSWER-consumers didn't use price
transparency tools, instead cut back on low AND high value care
