HEALTH ECONOMICS AND POLICY (2024-2025)EXAM
QUESTIONS AND CORRECT ANSWERS
The Economic Perspective - ANSWER-Unique among the social sciences in that it
establishes a context of scarcity and uncertainty
Health economics - ANSWER-studies issues related to efficiency, effectiveness, value
and behavior in the production and consumption of health and healthcare. Broadly, it
deals with how healthcare systems function.
Arrow's "Uncertainty" - ANSWER-Arrow argues that healthcare doesn't fit the free
market model. To Arrow, unless a patient knows much about medicine as his/her
doctor, the patient cannot evaluate the quality of advice the doctor gives him/her. This,
arrow calls "uncertainty."
Grossman's "Production on Health" Model - ANSWER-Grossman developed an
economic framework for the study of medical care demand in which medical care
counts only as one of the many factors used to produce good health.
Grossman's Determinants of Health - ANSWER-Grossman considers the determinants
of health to include, income, wealth, education, genetics, and public health.
Are Healthcare systems static or dynamic? - ANSWER-Health care systems are not
static. Rather, they are dynamic in that policy makers and planners are always looking
for better ways to produce, deliver, and pay for a growing menu of medical care
services demanded by an insatiable public.
Healthcare facilities in the United States - ANSWER-predominantly owned and operated
by the private sector. Government facilities are relatively small in number.
Health insurance in the United States - ANSWER-now primarily provided by the
government in the public sector. 60-65% of healthcare provision and spending comes
from such programs as Medicare, Medicaid, TRICARE, and the Veteran's Health
Administration.
Medicare - ANSWER-emerged in 1965 as a national social insurance program
administered by the US federal government. It guarantees access to health insurance
for US citizens and resident aliens, 65 and older, younger people with disabilities, and
people with end stage renal disease.
Medicaid - ANSWER-was created by the Social Security Amendments of 1965. As a
health program, it serves people and families with low incomes and resources. Jointly
funded by the state and federal governments, Medicaid is a means-tested program that
is managed by the states.
,TRICARE - ANSWER-serves the military population by providing civilian health benefits
for military personnel, military retirees and their dependents, including some members
of the Reserve Component. It is managed by Tricare Management Activity (TMA) under
the authority of the Assistant Secretary of Defense (Health Affairs).
The Veterans Health Administration (VHA) - ANSWER-implements the medical
assistance program of the VA through the administration and operation of numerous VA
outpatient clinics, hospitals, medical centers and long-term health care facilities (i.e.
nursing homes). The VHA is the component of the United States Department of Veteran
Affairs (VA) led by the Under Secretary of Veterans Affairs for Health.
Uninsured people in 2009, 2010. 2011 - ANSWER-49.9 million people were without
insurance in 2010. This accounted for 16.3% of the US population.
In 2009, this figure was 16.1%.
In 2011,46.3 million Americans were uninsured.
The three broad and important issues regarding the current state of US Health Care -
ANSWER-quality, access and affordability
Reasons for the need to reform US Health Care - ANSWER-- In the last decade, private
health insurance coverage has gradually declined with the number of uninsured rising at
an alarming rate.
- Gaps in health insurance coverage combined with the astronomical rise in spending
on medical care.
- Concern over access to care for the uninsured and whether those who are currently
insured would continue to be insured.
- Whether the quality of medical care would suffer as managed care gradually becomes
the norm for the provision of medical care.
Americans without insurance coverage - ANSWER-find themselves relying on public
assistance and private charity for their care. Many people get insurance coverage
through their place of employment so there is a genuine concern that that coverage
would be lost upon losing the job.
Health Care Crisis Causes - ANSWER-Experts on health care see the healthcare crisis
as one that is borne out of the astronomical rise in aggregate spending coupled with the
problems the government is experiencing in sustaining Medicare and Medicaid.
But there appears to be divergence of views from experts as far as the cause of the
crisis is concerned.
While some argue that the problem lies in the unrestrained use of medical technology,
others believe that the increased use of health insurance and tax subsidies that
encourage individuals to overinsure is driving the crisis.
,The Unique Nature of Medical Care as a Commodity - ANSWER-1. The demand for
medical care is irregular
2. There are information problems associated with medical care transactions.
3. There is widespread uncertainty in medical transactions.
4. There is widespread reliance on not-for-profit providers especially in the provision of
hospital services.
The demand for medical care is irregular - ANSWER-With the exception of a small
percentage of care that fall under the classification of preventive, the demand for
medical care follows an accidental injury or the onset of illness. This is not the case for
other commodities
There are information problems associated with medical care transactions. - ANSWER-
These problems disproportionately affect patients. Although all consumers are
frequently confronted with difficulties in collecting information about a product, in the
case of medical care, this problem becomes more acute for consumers given that
medical knowledge is very complex. Medical care consumers are poorly informed and
find it very difficult to be well informed. Patients find themselves relying on physician for
both their diagnosis and the prescription of treatments.
There is widespread uncertainty in medical transactions. - ANSWER-Since it is rare to
predict an illness, an individual cannot usually predict his or her demand for medical
care.
There is widespread reliance on not-for-profit
providers especially in the provision of hospital services. - ANSWER-It is argued that
restraining the profit motive would solidify the basis for trust between patient and
provider.
Government Intervention in Medical Care - ANSWER-Medical costs have escalated
over the last decade as have the number of uninsured, causing government
intervention.
Arguments for Government Intervention - ANSWER-- medical care is too complicated to
be left to the free market.
- patients always have to rely on the recommendations of physicians because medicine
is inherently difficult to understand.
- medical care being a social good, it is too important to be left to the workings of the
private market.
- the provision of medical care based on the ability to pay is morally repugnant.
Arguments against Government Intervention - ANSWER-- the US medical care system
has always been market-based and should remain so since more government
intervention would only lead to an escalation of cost.
, - A clear evidence of this, according to these opponents, is the original projection in the
1960s that Medicaid spending will reach $9 billion in 1990. Yet the actual cost of
Medicaid in 1990 was $109 billion
Healthcare Spending - ANSWER-Spending drives the debate on healthcare reform.
Spending per person and spending as a share of total economic output continues to
rise.
- spending on hospital services rose to $648.2 billion in 2006, spending on physicians'
services only amounted to 25.4 percent of the total spent on personal health care in
2006.
- American consumers spent $216.7 billion on pharmaceuticals and another $59.3
billion on other medical products.
- Other spending, which included payments for dentists' services and other professional
services, nursing home care, and home health services combined to account for
approximately 18.6 percent of all personal health care spending.
Access to Care - ANSWER-An estimated 47 million of Americans are without health
insurance. This situation is what drove the most recent healthcare reform. Yet having no
health insurance is not the same as having no access to medical care. It is estimated
that the uninsured receive about 60 percent of the medical care per capita of those with
insurance.
Medical Outcomes - ANSWER-Another issue of great concern is the health of the
population. It is being suggested, especially by those who are critical of the US health
care delivery system that relatively, the healthcare system has poor outcomes.
Male life expectancy at birth in the US is 75.2 years while that of females is 80.4 years.
This places the US among the lowest in the developed world. Infant mortality rates in
the US are over two times that of Japan. Yet spending, both as a percentage of GDP
and on per capita basis are much higher in the United States.
But life expectancy and infant mortality rates are for the most part influenced by the
environment, lifestyle choices and social problems.
This means that the US must deal with these problems. Problems like, drug abuse,
violence, reckless behavior, sexual promiscuity, illegitimacy, etc., complicate the
delivery of medical care and are in part, responsible for poor health indicators in the US.
"invisible hand" of the market - ANSWER-Adam Smith had argued in "The Wealth of
Nations" that individual decision making is motivated by self-interest. According to
Smith, self-serving behavior, when guided by the "invisible hand" of the market, in turn
serves to promote the interests of others.
What this means is that when the free market under perfectly competitive conditions
encourages individuals optimizing behavior on the part of individuals and firms, this
leads to efficient outcomes.
QUESTIONS AND CORRECT ANSWERS
The Economic Perspective - ANSWER-Unique among the social sciences in that it
establishes a context of scarcity and uncertainty
Health economics - ANSWER-studies issues related to efficiency, effectiveness, value
and behavior in the production and consumption of health and healthcare. Broadly, it
deals with how healthcare systems function.
Arrow's "Uncertainty" - ANSWER-Arrow argues that healthcare doesn't fit the free
market model. To Arrow, unless a patient knows much about medicine as his/her
doctor, the patient cannot evaluate the quality of advice the doctor gives him/her. This,
arrow calls "uncertainty."
Grossman's "Production on Health" Model - ANSWER-Grossman developed an
economic framework for the study of medical care demand in which medical care
counts only as one of the many factors used to produce good health.
Grossman's Determinants of Health - ANSWER-Grossman considers the determinants
of health to include, income, wealth, education, genetics, and public health.
Are Healthcare systems static or dynamic? - ANSWER-Health care systems are not
static. Rather, they are dynamic in that policy makers and planners are always looking
for better ways to produce, deliver, and pay for a growing menu of medical care
services demanded by an insatiable public.
Healthcare facilities in the United States - ANSWER-predominantly owned and operated
by the private sector. Government facilities are relatively small in number.
Health insurance in the United States - ANSWER-now primarily provided by the
government in the public sector. 60-65% of healthcare provision and spending comes
from such programs as Medicare, Medicaid, TRICARE, and the Veteran's Health
Administration.
Medicare - ANSWER-emerged in 1965 as a national social insurance program
administered by the US federal government. It guarantees access to health insurance
for US citizens and resident aliens, 65 and older, younger people with disabilities, and
people with end stage renal disease.
Medicaid - ANSWER-was created by the Social Security Amendments of 1965. As a
health program, it serves people and families with low incomes and resources. Jointly
funded by the state and federal governments, Medicaid is a means-tested program that
is managed by the states.
,TRICARE - ANSWER-serves the military population by providing civilian health benefits
for military personnel, military retirees and their dependents, including some members
of the Reserve Component. It is managed by Tricare Management Activity (TMA) under
the authority of the Assistant Secretary of Defense (Health Affairs).
The Veterans Health Administration (VHA) - ANSWER-implements the medical
assistance program of the VA through the administration and operation of numerous VA
outpatient clinics, hospitals, medical centers and long-term health care facilities (i.e.
nursing homes). The VHA is the component of the United States Department of Veteran
Affairs (VA) led by the Under Secretary of Veterans Affairs for Health.
Uninsured people in 2009, 2010. 2011 - ANSWER-49.9 million people were without
insurance in 2010. This accounted for 16.3% of the US population.
In 2009, this figure was 16.1%.
In 2011,46.3 million Americans were uninsured.
The three broad and important issues regarding the current state of US Health Care -
ANSWER-quality, access and affordability
Reasons for the need to reform US Health Care - ANSWER-- In the last decade, private
health insurance coverage has gradually declined with the number of uninsured rising at
an alarming rate.
- Gaps in health insurance coverage combined with the astronomical rise in spending
on medical care.
- Concern over access to care for the uninsured and whether those who are currently
insured would continue to be insured.
- Whether the quality of medical care would suffer as managed care gradually becomes
the norm for the provision of medical care.
Americans without insurance coverage - ANSWER-find themselves relying on public
assistance and private charity for their care. Many people get insurance coverage
through their place of employment so there is a genuine concern that that coverage
would be lost upon losing the job.
Health Care Crisis Causes - ANSWER-Experts on health care see the healthcare crisis
as one that is borne out of the astronomical rise in aggregate spending coupled with the
problems the government is experiencing in sustaining Medicare and Medicaid.
But there appears to be divergence of views from experts as far as the cause of the
crisis is concerned.
While some argue that the problem lies in the unrestrained use of medical technology,
others believe that the increased use of health insurance and tax subsidies that
encourage individuals to overinsure is driving the crisis.
,The Unique Nature of Medical Care as a Commodity - ANSWER-1. The demand for
medical care is irregular
2. There are information problems associated with medical care transactions.
3. There is widespread uncertainty in medical transactions.
4. There is widespread reliance on not-for-profit providers especially in the provision of
hospital services.
The demand for medical care is irregular - ANSWER-With the exception of a small
percentage of care that fall under the classification of preventive, the demand for
medical care follows an accidental injury or the onset of illness. This is not the case for
other commodities
There are information problems associated with medical care transactions. - ANSWER-
These problems disproportionately affect patients. Although all consumers are
frequently confronted with difficulties in collecting information about a product, in the
case of medical care, this problem becomes more acute for consumers given that
medical knowledge is very complex. Medical care consumers are poorly informed and
find it very difficult to be well informed. Patients find themselves relying on physician for
both their diagnosis and the prescription of treatments.
There is widespread uncertainty in medical transactions. - ANSWER-Since it is rare to
predict an illness, an individual cannot usually predict his or her demand for medical
care.
There is widespread reliance on not-for-profit
providers especially in the provision of hospital services. - ANSWER-It is argued that
restraining the profit motive would solidify the basis for trust between patient and
provider.
Government Intervention in Medical Care - ANSWER-Medical costs have escalated
over the last decade as have the number of uninsured, causing government
intervention.
Arguments for Government Intervention - ANSWER-- medical care is too complicated to
be left to the free market.
- patients always have to rely on the recommendations of physicians because medicine
is inherently difficult to understand.
- medical care being a social good, it is too important to be left to the workings of the
private market.
- the provision of medical care based on the ability to pay is morally repugnant.
Arguments against Government Intervention - ANSWER-- the US medical care system
has always been market-based and should remain so since more government
intervention would only lead to an escalation of cost.
, - A clear evidence of this, according to these opponents, is the original projection in the
1960s that Medicaid spending will reach $9 billion in 1990. Yet the actual cost of
Medicaid in 1990 was $109 billion
Healthcare Spending - ANSWER-Spending drives the debate on healthcare reform.
Spending per person and spending as a share of total economic output continues to
rise.
- spending on hospital services rose to $648.2 billion in 2006, spending on physicians'
services only amounted to 25.4 percent of the total spent on personal health care in
2006.
- American consumers spent $216.7 billion on pharmaceuticals and another $59.3
billion on other medical products.
- Other spending, which included payments for dentists' services and other professional
services, nursing home care, and home health services combined to account for
approximately 18.6 percent of all personal health care spending.
Access to Care - ANSWER-An estimated 47 million of Americans are without health
insurance. This situation is what drove the most recent healthcare reform. Yet having no
health insurance is not the same as having no access to medical care. It is estimated
that the uninsured receive about 60 percent of the medical care per capita of those with
insurance.
Medical Outcomes - ANSWER-Another issue of great concern is the health of the
population. It is being suggested, especially by those who are critical of the US health
care delivery system that relatively, the healthcare system has poor outcomes.
Male life expectancy at birth in the US is 75.2 years while that of females is 80.4 years.
This places the US among the lowest in the developed world. Infant mortality rates in
the US are over two times that of Japan. Yet spending, both as a percentage of GDP
and on per capita basis are much higher in the United States.
But life expectancy and infant mortality rates are for the most part influenced by the
environment, lifestyle choices and social problems.
This means that the US must deal with these problems. Problems like, drug abuse,
violence, reckless behavior, sexual promiscuity, illegitimacy, etc., complicate the
delivery of medical care and are in part, responsible for poor health indicators in the US.
"invisible hand" of the market - ANSWER-Adam Smith had argued in "The Wealth of
Nations" that individual decision making is motivated by self-interest. According to
Smith, self-serving behavior, when guided by the "invisible hand" of the market, in turn
serves to promote the interests of others.
What this means is that when the free market under perfectly competitive conditions
encourages individuals optimizing behavior on the part of individuals and firms, this
leads to efficient outcomes.
