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Econ Study Guide

by: Juleah Aiken

Econ Study Guide ECO211

Marketplace > University of Miami > Economcs > ECO211 > Econ Study Guide
Juleah Aiken
GPA 3.78
Principles of Macroeconomics
David Spigelman

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Principles of Macroeconomics
David Spigelman
Study Guide
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This 26 page Study Guide was uploaded by Juleah Aiken on Sunday February 1, 2015. The Study Guide belongs to ECO211 at University of Miami taught by David Spigelman in Fall. Since its upload, it has received 312 views. For similar materials see Principles of Macroeconomics in Economcs at University of Miami.


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Date Created: 02/01/15
Juleah Aiken Health Economics 386 Final Study Guide Cumulative Midterm study guide New material starts pg 13 Highlighted items are very important Review Power Point Lectures lt DO practice problems from book Read chapters in BHT and Nudge Review Dr Mundt s presentation on Social Networks and Healthcare 1 Introduction to Health Economics and Review of Economic Principles Chapter Important DefinitionsConcepts Economics the science of choice Society s wantsdesires for goods and services exceed the productive capacity of the resources used to produce these goods and services the highest valued alternative we give up to get something else Everything is a tradeoff Market failure is a state in which the market does not use resources efficiently EX ante before the event EX post after the event Positive issue what is Based on scientific research or facts Normative issue what should be Value judgements Normal good an increase in demand from an increase in income Inferior good a decrease in demand from an increase in income Copayment rate the fraction of the medical bill for which the patient is responsible Cost sharing plan a positive copayment rate so that costs are shared between the insured and the insurer A What is health economics Quality gt quantity We should ask why the price is so high instead of why it costs so much The price is high because we don t do comparison shopping The goal of health economists is to make people eX ante about healthcare Americans spend the most on healthcare 1 in every 6 dollars Health is different than other goods because of uncertainty 3 functions of health 0 a consumption good 0 an input to production 0 a stock of capital B Health insurance Average health care is skewed by outliers We should be using the median instead of the average 18 of our total gdp is spent on healthcare everyone that has health insurance believes that everything should be covered and do not want to pay for anything They view healthcare as an entitlement the top 5 consume about 50 of total services C Market failure and government intervention 0 caused because it is a natural monopoly o FPL government regulated o The key role of prices are incentives Incentives can only do so much to nudge people ultimately they will make individual choices D Economic and public policy 0 Healthcare is largely public sector bc of government 0 Per capita gdp is the gdppopulation usually a good indicator of health because it measures af uence Positive correlation between life eXpectancy and gdp per capita The health sector cannot be solved alone by adding funds 0 Compared to the uk we leave it to the market and they have universal healthcare therefore a single provider and no competition E Health Care markets 0 price and behavior when the actual price of healthcare is lower than the perceived price then people don t value it anymore 0 the people that are going to use health insurance are the ones who are more likely to buy it o when one part of the transaction has more information or is superior to the other Leads to moral hazard and adverse selection 0 Externalities in consumption we are effecting everyone through the healthcare actions we take 0 Insurance companies want healthy people to balance out the sick people and help keep premiums reasonable 0 Economics job block people who stay at an unfitting job because of the health insurance provided 0 Equity how resources are distributed through society 0 Technical efficiency lowest cost 0 Allocative efficiency highest social welfare F Rand Health Insurance Experiment 0 No measureable difference between groups with no cost sharing or different levels of co payment 0 Begged the question of whether free medical care would lead to better health than insurance plans that require people to pay part of the cost 0 Verified that demand for healthcare is in fact downward sloping II Demand for Health and Medical Care Chapters 2 3 amp 4 BHT Important definitonsconcepts Quantity demanded amount that consumers plan to buy during a time at a price 0 Demand the relationship between the price and the quantity purchased 0 Demand curve marginal benefit curve 0 Law of demand the higher the price the smaller the quantity demanded Substitution effect the idea that as income increases or decreases then the consumer will replace less expensive goods with costlier ones replace costlier goods with less expensive ones Income effect as income increases the quantity of goods and services increases as well Elasticity of demand how much a percent change in the price of a good changes the quantity demanded Grossman model we choose our own health 0 Better health among the educated o Declining health among the aging A Health production functions and variables 0 Ht level of health 2 home good Working TW Playing TZ Improving health TH Being sick TS 2t Z tha Jt 5 individual s discount rate Q individual s lifespan total number of periods Ht H 1 VHt 1 TtH7 Mt y rate of depreciation B Demand for health 0 Except if you absolutely need something ex an artificial heart I then the demand is perfectly inelastic if you don t need a procedure there is no demand curve 0 change in demand can be caused by a change in price of related goods O 0000 complements goods used in conjunction substitutes interchangeable goods preferences expected future prices income C Grossman Model 0 Health as a consumption good promotes health and allows us to do things 0 O O 0 Direct input to utility Ur UHt Zl Strongest predictor of Ht is Ht l yesterdays health Indifference curves because they are the same utility 0 Health as an input into production 0 Health as a form of stockcapital 0 000000 People choose how much care they want Health is a stock because it carries over into each new period As you age you choose more Diminishing returns to health investments as you age Ht H 139 VHt1 TtH Mt u UH01Z0 5UH11Z1 6ZUH2ZZ 39 39 39 2 Z NMHDZ t0 D Demand for medical care 0 in uenced by many external factors 0 market demand is the sum of all the indiVidual demand 0 planning for perceived need will over utilize resources E Price 0 if people always obey their doctors then price should be perfectly inelastic 0 AianoralAinP F Price discrimination Price discrimination is charging different prices in different markets or to different consumers in the same market Try to raise prices in markets that are price insensitive Health insurance premiums that you pay based on your life Hospitals negotiate with different insurance companies to get the best prices There is a sticker price that some people will pay but it is set high for negotiation purposes G Physicianinduced demand Derived demand comes from the physician Physician agent patient principle I principle agent problem There is a great incentive for physicians to order tests and overprescribe so that they don t get sued The extent of the asymmetry is wider in healthcare than in other markets This is why there is malpractice insurance H Empirical studies of demand III Patients and Health Insurance 4 assumptions of rational people 0 people want to maximize their utility 0 people are rational o ceteris paribus present value is more important than future value and loss 0 utility includes other factors besides health hyperbolic discounting vs exponential discounting behavioral economics is the bridge between economics and psychology obesity is an example of the tradeoff obesity is related to education Chapters 7 8 9 10 amp 11 A Risk Tragedy of the commons if everyone owns it then no one is going to protect it We don t take as good of care of our bodies when we have insurance Insurance companies never lose money they are the most careful companies in our market Who pays for people that need medical care and cannot pay for it 0 The hospital 0 Insurance 0 The government Demand for health care is derived Health capital age education wealth shocks additions place in society Absolute vs relative af uence how we compare ourselves to others is correlated to our health Methods for covering risks Self insuring Familyfriend assistance Charity Private medical care insurance 0 Medicaid Medicare ppaca 0000 Stop loss levels starts at the beginning of the year and there is a maximum amount that you will pay out out of pocket Co insurance a of the bill that you pay Co paymenet a set dollar amount for the bill regardless of how much you consume Deductible consumers pay a at dollar amount before insurance starts Premium the amount consumers pay to purchase a health insurance policy B Pooling risk Ideally you want to attract the healthiest people however they are the least likely to buy health insurance Large numbers give you predictability Small risk with a large pool People feel entitled to healthcare Insurance companies price risks but don t take risks Adjustment factor to buffer the expected loss Actuarially fair premium risk of health problem x size of loss C Demand for health insurance 0 Degree of risk adversion 0 Flexible spending and medical savings account only work if a lot of people choose to do them 0 They are an incentive to spend money on healthcare and it makes people spend the extra money on unnecessary things Employers deduct 11 to cover health benefits 0 Flexible spending 0 In addition to having insurance employees can deduct an amount from the paycheck that goes into an untaxed account There is a cap that must be predetermined and any extra is lost Incentive is to deny claim No rollovers Depends on the tax amount on whether its better to pick a price over or under what you will actually spend 0 Medical saving account 0000 o A combination of the employer and employee putting money into an untaxed account 0 There is a deductible o It can rollover 0 High generosity extremely risk adverse people and very sickly people 0 Low generosity healthy people and few sick 0 Social Insurance 0 Medicare age based 0 Medicaid needs based 0 Obamacare private insurance with government subsidies 0 Social insurance is extremely political o The uninsured young poor and unemployed If the government subsidizes insurance coverage we will get too many unhealthy people and it will backfire Job lock takes away job lock if we subsidize because then people have a fall back plan 0 The aca would lead to a reduction in taxes because the risk pool would be more diverse D Risk aversion It is the desire to pay a certain premium each period to avoid a potentially large loss 0 Most people are risk adverse You are more likely to have an insurer if you have a large employer 0 The investment and risk is not worth it to small employers F 0 Risk adverse person has a concave utility function marginal utility is increasing at a decreasing rate with income o P probability of sickness l p probability of staying healthy 0 Risk adverse prefers utility of eXpected income Uncertainty leads to insurance companies raising the premium to avoid uneXpected loss E Adverse selection 0 The consumer buying insurance has all the power through information dominance o Akerlofs market for lemons 0 Seller of used cars The seller of the used are is the consumer and the buyer is the insurance company 0 The buyer only knows the make model mileage etc but the seller knows everything 0 What the buyer decides to offer is the equivalent of a premium Commonality between group insurance plans 0 To get rid of adverse selection we would need universal healthcare F Moral hazard When people consume healthcare differently because they have insurance If demand were to be perfectly inelastic there would be no moral hazard The greater the elasticity the greater the moral hazard Mbmc is where you stop consuming bc the next unit provides disutility The welfare loss triangle is caused because of the gap between marginal cost and marginal benefit The more healthcare you consume the larger the triangle becomes Lower elasticity would cause bankruptcy Managed carecost containment Because the price of healthcare is perceived to be lower people over consume It increases the cost of healthcare the price and the cost of insurance to everyone G Health insurance and labor markets H Concierge Medicine Started as the broker for patients to deal with insurance You pay an extra amount eX21500 a year in addition to your insurance to get no waiting and 24 hour care Lowers the number of patients but they get a cut of the concierge price Doctors are less stressed and can give patients the care and time that they need We don t know if moral hazard would increase it would depend on the individual Causes pcps to be slaves to their patients I Managed care Process of selective contracting Capitation Contracts through health plans and providers Limits the network of providers J Policy options IV Libertarian Paternalism Choice Architecture Feldsteinl suggested that all healthcare is 50 copayment for every dollar up until its 10 of your income and then all the rest is covered It gives incentive to not over consume Introduction Chapters 15 and Health Insurance A Choice architecture setting up incentives for people Loss aversion of bonuses are more effective than just the bonus at the end Make a healthy behavior fun People will follow the herd People heavily discount events that happen soon in the future and therefore don t discount accurately 0 Default option to improve welfare organ donors retirement accounts health insurance plans 0 The best way to nudge is to provide feedback B Libertarian paternalism 0 Behavioral economics 0 Providing a series of incentives that nudge people to an action that they wouldn t normally do on their own C The nudge D Humans and Econs 0 Econs rational forward thinking always make the right choice 0 Humans make normal mistakes can benefit from nudges 0 The way people are humans vs the way people aspire to be econs 0 We can in uence people by setting up default options a large percent of people will end up using the default option E Assumptions and misconceptions 0 It is impossible to avoid in uencing peoples choices 0 People hate losing more than they like winning 0 People tend to be overly optimistic and confident 0 Absolute vs comparative choices humans like having something to compare things to 0 People cannot resist temptation 0 Status quo bias people reluctance to change what is already set people are creatures of habit 0 Informal bets are highly effective F Choosing the correct deductible G Waiving the right to sue for malpractice default option 0 Malpractice is when a doctor wrongsneglects you 0 Malpractice insurance is very eXpensive 0 It is an incentive for pcps to over prescribe 0 If we got rid of it our premium would be about 40 cheaper but we would give up the right to sue H Scheduled payouts for predefined medical injuries Health Care Providers Physicians Chapter A Medical school 0 The medical director is a very distinct title they must be a practiced doctor but does a great deal of non clinical work 0 12 the applicants are accepted into medical school med school is very eXpensive but they make it back in their career 0 doctors have very high opportunity costs 10 o residency is like doing your dissertation to become a professor on the job training in a hospital 0 4 years of school plus 3 7 years of residency 0 CME continuing medical education ground rounds doctors have to go to these to keep their license B Physician supply 0 Prices have qualifications not the same as other professional services 0 Insurance indicates the level of demand 0 80 hour workweeks C Physician revenues D Physician payments 0 Charges are almost always higher than actual payments 0 People that pay the full price are either wealthy middle class or naive Capitation healthcare is consumed at the location that its distributed 0 HMOs are heavy in preventive care and light in acute care paid a salary capitated They look over average expenditures for physician patients over the year 0 Medicaid is managed care with a fee for service type 0 Payments based on patient outcomes E Physician incomes o Non wage income like working for pharmaceutical companies public speaking extra work etc 0 Not driven by productivity 0 Large difference in opportunity cost between pediatrics and cardiac surgeons 0 Finance professor and history professor have a large opportunity cost gap too because of the value of the market job 0 IRR internal rate of return how heavily you discount it to be equivalent to present incomes Usually I l 14 Why has the IRR stayed high Suggests that being a physician is highly lucrative 0 Returns to medical training is very back loaded 0 Income is 5 times higher than the average worker F Physician costs 0 Expenses are practice related 0 Groups can take advantage of fixed costs and economies of scale G Physician decisionmaking Substitution vs income effect 0 They have a backwards bending supply curve 0 If the wage increases you will have more money and can afford more leisure so they work less backwards part Grossman model as people age they will work less 0 The graph is personalized to each individual s preferences H Asymmetric information principal agent problem ll 0 Physician controls the loss much more for a patient than principal agents in other fields 0 You cannot redo or fiX things easily and health is not replaceable 0 Price transparency is more prevalent in other principle agent situations 0 Insurance plays a roll I Licensure Important Graphs Grossman Model Utility LaborLeisure Tradeoff TW 2 7 Increasing utility Z TZ MEG FYO Rate of return l quoty Marginal Efficiency of Capital 12 Utility U Wealth W Risk for Utility and Wealth Z U H Ulle Um Elutmm i d I ElUllllms 5 l s t Ulla V I I l a i a i l H ls Elllo s Elflogs h Hm Uncertainty example PPF in Grossman Model VI Health Care Providers Hospitals Chapter 6 BHT A Chapter Questions answered 0 Hospitals are paid almost exclusively by insurance this includes outpatient inpatient intensive care and trauma 0 government and hospitals pay for people s bills who cannot pay They use extra revenues most commonly from procedures to offset these losses 0 It bene ts the poor 13 0 Overall it is not good for society as a whole because the revenue from procedures should go to where it is valued the most hospital bills are difficult to understand because they list the charges that go to insurance negotiate what insurers will pay etc the hospital is a workplace but doctors do not work for the hospital disruptive technologies in healthcare 0 for diabetes it could be more efficient disruptive technologies are changing the way we currently do business 0 any physician that is concerned about losing their job to technologies should lose their job 0 the key to the sharing of medical information is patient signoff B Development of the modern hospital Hospitals have evolved tremendously Physician offices are quotminihospitals Hospitals are being replaced with compleX health systems Technological advances have reduced recovery times eX childbirth is now 2 days instead of 57 Insurers increasingly design hospital payments to incentivize shorter hospital stays purchasing another hospital 0 Be careful about horizontal integration because it is going to change the competition few competitors in the area establishing primary care and other services through an already eXisting hospital adding additional services 0 Suppliers Research centers Pharmacy bene t managers Urgent care center Rehabilitation center Pharmacies Wellness centergymsports medicine OOOOOO C Types of Hospitals Short term lt 30 days long term gt 30 days They are either government owned pro t or nonpro t most are nonpro t 14 o a document that allows a hospital to be built in an area also laws limit capital spending and hospitals are subject to antitrust laws intended to promote competition you have to prove that the market can endure the facility without it sitting idle You want to establish a steady state capacity to where any more or less will decrease efficiency 0 6000 hospitals in the us our optimal steady state is 80 but we are operating at 67 o moral hazard because patient pay is only 3 o know the difference between percentage point and percentage change a 3 percentage point change to 3 is now 6 which is 100 change 0 Rural and urban hospitals are completely different the hospital industry is composed of few companies who run the market 0 They essentially police each other and have enough power to in uence each other 0 They have a board of trustees that approves the hospitals decisions made by the medical staff 0 Monopolistic competition is 1 dominant rm that sets the roles of smaller rms who follow their lead common in physician offices 0 We must de ne the market for us it is the area of Miamidade when you need additional specialists you must rede ne your market 0 Nonpro t o Altruisticmotive theory 0 Governmentfailure theory 0 Asymmetric information donors trust non pro ts with more money 0 Forpro ts in disguise O Barriers to entry 0 Emergencies mean that the consumer cannot shop for the bestcheapest hospital High costs to set up a hospital 0 It is difficult to predict patient in ow excess capacity 0 People make important decision on hospitals based on quotcoffee 8 donuts 0 Hospital utopia I perfect competition In healthcare competition is Viewed as distasteful 0 People want the best option and anything less is notenough O 15 0 Hospitals compete for physicians because physicians refer their patients and patient typically take their advice greater competition among hospitals for physicians can result in redundancy and overconsumption of medical technologies This can actually increase costs without improving quality 0 Recently hospitals have either started advertising or merged because it is easier to survive as a single entity 0 Hospital regulation JCAHO comes unannounced every 3 years and the hospital must pass the evaluation to stay accredited o Medicare s prospective payments system PPS set limits on hospital reimbursement AC falls as the size of the hospital increases 0 Fixed costs can be bundled o Marginal average cost is lower when they merge horizontally acquire another hospital D Hospital revenues not capital or equipment 0 To cut costs you would have to cut salaries or lay off people 0 Most prevalent nurses 0 Nurses have unions strict rules and high costs because they want higher wages o Unlikely to re nurses because they are skilled labor and will nd other work with the competitor They are valuable to train new people Medicare is 29 and private insurance is 36 0 Revenue growth due to managed care 0 Teaching hospitals overcharge to compensate Hospital quality no speci c way to measure hospital quality 0 More staff Technology Sophisticated services Credentials Patient outcomes mortality rates rehospitalization rates cognitive status E Hospital costs OOOO 16 patient and procedural revenues from one group of clients to subsidize another Charge Master a directory with the list prices of every procedure a hospital offers However these rates are negotiated Only the wealthy pay the full price Different demographic areas charge different rates Beverly hills vs poor town Hospitals want sick patients because they use more expenditures Esi employer sponsored insurance F Hospital ownership and performance Ownership is not always clear Hospitals don t bank extra revenue they use it to buy equipment and better technologies Rent free workshop pcps work at a hospital but are not employed by them VII Health Care Providers Nurses and LongTerm Care A Supply of nurses 90 female shortage of nurses government can manipulate intrinsic motivation positive relationship intensive and quality of nurse staffing and quality of care The us is becoming older 226 billion dollar industry different than other medical services because it is care instead of cure most nursing home patients are poor females over 65 types acute hospitals longterm hospitals nursing homes assisted living community assistance orida has one of the highest ltc facilities per capita C Role of Medicaid in LTC Higher opportunity costs of at home care today increasing the use of nursing homes 52 Medicaid and only 8 medicare nursing home owners are paid a xed Medicaid price abuse Medicaid coverage by donating a lot to charity and investing more in z o intentionally become welfare eligible 17 o divorce to declare one spouse indigent and transfer assets to children 46 of nursing home cost is for lower skilled labor Certi cate of need required to build nursing home Demand belowmarketprice Medicaid patients to ll beds and not have to charge the private pay patients a lower price Dernand FlInnatePayr Paiients Twn F art Nursing lllorrne Market Demand Medicaid Patients Paine Dummy may ernbined Demand PrivatePay and Medicaid Wee Dernaind PrinatehPa1yr and Medicaid Pl T0121 beds U my D Elderly incomes Higher incomes than eXpected bc they pay lower taxes receive subsidies asset accumulation home ownership AGI adjust gross income Income peaks around 4554 wealth peaks around 5564 E Consumer ignorance uncertainty F Price 0 Many elderly cannot make their own choices Sick parents reduces employee productivity High price transparency in LTC More investigations done into LTC facilities than hospitals Quality is worse bc there is an incentive to reduce costs Game the system Medicaid selection effects 0 Casemix reimbursement was established to provide nancial incentives to admit severely ill patients 0 Always want cheap patients that are easy to care for Skilled nursing facilities SNF have the highest price 18 40000 a year for private pay in a nursing home price elastic for demand for privatepay patients G Wealthy elderly Continuing care retirement communities are popular Don t need LTC insurance as much Pay an initiation fee monthly rental feeds country club fees association fees etc and they get care and a house Wealthy population is increasing H Economics and aging VIIIPharmaceuticals Economists treat everyone as a machine separate entity The reality is that the elderly get more care because they have more needs Growth in long term care hospice is an alternative for the terminally ill LTC is a substitute to hospital care because they don t stay long term in the hospital and a complement because it is a back and forth between the LTC facility and the hospital 0 Must be purchased far in advance 0 Medicaid is always there providing a stoploss against large expenditures 0 Bene ts are not for that individual heirs and Medicaid Chapter 12 BHT A Chapter Questions Pharmaceutical industry X costs are important at rst when you discover the drug and then variable costs are important in the long run Americans take a lot of drugs over the counter drugs are self paid prescription drugs are heavily subsidized Morbidity and serious death led to regulation of prescription drugs by the FDA More money is spent on marketing drugs than marketing surgery because surgery is much more unpleasant Drugs are constant and surgeons are not Pharm companies have a lot of nancial backing INFORMATION ASYMMETRY people don t know about surgeries and they don t want to know about it The drug industry is very pro table Patents raise the returns to research Prescription costs are managed by insurance companies through PBM pharmacy bene t manager 19 B Overview People generally want more regulation in the pharmaceutical industry They quotdon t mind higher costs but they don t realize that they will end up incurring them regardless through insurance premiums Pharmaceutical companies are some of the most pro table but under intense scrutiny o Niches 0 Patent protection 0 High xed costs typically 13 billion to develop a prescription drug C Prices and reimbursement Retail pharmacies get about 20 of the prescription drug price 70 on average 3 chains CVS Walgreens Riteaid PBMS CVS Caremark Medco 0 Data oriented info on millions of prescriptons how often preferences consumption 0 Carveoutl human or insurance company will hand it off to a specialist this is the contract with a PBM o Heavily concentrated large of rms the top 20 are the big selling ones genteX phiser merc etc o PBMs get fees from the insurance companies to develop bene t plans administer claims and manage relationships with pharmaceutical companies and retail pharmacies Pharmaceutical company s revenue 0 Cost of goods 30 salesmarketing 31 net income 20 what does this tell us about society 0 Diabetes 0 Antidepressants 0 Cholesterol lowering 0 Arthritis 0 Asthma D Modern Pharmaceutical Industry generic drug manufactures Government is involved in patent and testing of drugs Only somewhat involved in pricing this reduces the incentives in rampd Requires lots of research btwn the placebo and active ingredient 20 0 Patents protect drugs for up to 20 years 0 O O 0 Generic drugs compete with name brand drugs after the patent expires Encourages small changes in brand name drugs to extend the patent Set up a monopoly through the patent Brings the price of the drug down when generics enter the market increased competition 0 Individuals are less price sensitive than insurance companies 0 Government regulation FDA approval is lengthy and complex Elasticity of demand is lower for prescription drugs and rms charge higher prices to increase revenue 0 Public health insurance programs regulate drug prices 0 O This shows negative effects on drug innovation Encourages parallel imports increases competition discourages rampd investment E Research and development 0 The cost of producing a new drug is 800 million 0 Effective patent life of 913 years cash ows are positive in the 31 01 year sales peak in 10th year RampD expenditures correlate with drug prices 0 3 stages of RampD O O O discovery preclinical stage clinical trials E Price Discrimination Pharm companies can engage in 3rd degree price discrimination Charge higher prices to segments of the market with more inelastic demand 0 Foreign prices may be different G PharmoEconomics Opportunity cost increased salary compare to an econ professor why would he stay teaching he enjoys it 0 They perform economic research on the impact of pharmaceuticals costeffectiveness analysis of new drugs 0 3 buyers for individual drugs 0 O 0 individuals I inelastic demand group purchasers pharmacies hospitals PBMSI elastic demand state and federal government elastic demand 21 0 responses to competitive pressures 0 reduce price 0 product differentiation 0 new contractual relationship H cost containment higher copayments shift burden to patients 0 promote generic substitutes IV Health Policy Chapters 15 16 17 18 8 19 BHT A Chapter Questions 0 No one usually pays people to discover things Scientists love it 0 Treatment of certain diseases should in the public or private health system based on their relative externalities If it can affect others eg syphilis then it should be public Vaccinations should not be charged at the full price because they are a common good 0 Surgical techniques are developed with public funds and pharm research is done with private funds because of the size of the market and monopoly rents We pay for costbene t analysis of public programs because we don t want to support the wrong ones helps avoid asymmetric information o it is important and effects us that others do not have health insurance B Government Spending Pay for healthcare through taX revenues There is little opportunity to cut down on spending through medicareMedicaid C Public provision of health insurance In Eavor Everyone deserves to have health insurance Avoids adverse selection Enforces crosssubsidy from healthy to sick 0 Efficient in cost saving for administration costs D Public provision of health insurance Against Crosssubsidies do not necessarily enhance consumer welfare 0 Private insurers provide better preferences to consumers Confers monopsony power E Government Intervention Maintain law and order 0 Pharma safety consumer product safety insurance regulation 22 0 Provide public goods 0 Potential freerider problem 0 Externalities 0 Overall increase in welfare but individually less so 0 Address market imperfections 0 Natural designated monopoly o Imperfect information o Incomplete mobility of resources 0 Lack of incentives to minimize costs 0 Paternalism Redistribute income 0 Medicaid is important for the poor 0 NIH is like medicare there are not a lot of critics on the principle of it 0 Sending money to NIH is considered good F Economics of the queue mcmb is the optimal queue length 0 Cost of patient care falls as queues become longer diminishing rate 0 Reduction of total cost of patient care is a bene t from increasing queue length G Public versus private systems Creates a multitier system 0 Private system creates negative externalities May catch too many dolphins and not enough tuna Chapter 11 H Australian Health Care System 0 Private health sector is larger 0 Upon admission the patient decides to be a public or private patient 0 Private care provides choice in physician shorter queues newer treatments etc I Government intervention can be inefficient by Distorting prices 0 Mc not equaling mb 0 Minimum wage Illicit drug control J How to increase organ donations Riged through a connection based world Corneas are harvested a lot without loved ones being noti ed Presumed consent 0 Organ transportation is hard and makes it difficult to reduce the shortage of organs IX Economic Evaluation of Health Care 27 DSTOS 23 Chapters 14 BHT Chapters A Chapter questions economists like positive issues we like to provide info and let decision makers choose based on what we provide An actual life we would spend whatever it take to extend longevity A statistical life is 500 million 0 In order to decide how much to spend you have to de ne what a life is rst 0 If it is an identi ed life then one is more valuable than the other eX the president vs a janitor o Economical evaluation is in statistical lives where everyone is equal The effort eXpended to save one more life is marginal cost It is more bene cial to screen high risk people for a disease Neither patient choices or prof judgements are ideal for measuring the value of care There is always a trade off between health and money The average bene t can be in uenced by really high bene ts from patients that are exceptionally receptive Marginal bene t is actually very small B Why economic analysis is important Replication you cannot replicate something that resources are not available to you You need to value the resources bc if someone wants to do it they need to know what resources to use We cannot consume all the medical care we desire Provides a framework for evaluating alternatives Empirical evidence vs value judgments Helps us maXimize net bene ts Otherwise healthcare providers would be making decisions with incomplete information 24 FIE ILIHE 31 Tetelf Net end Marginal Bene ts and eet 5 p m rm Total Eenletlits 7 retail Eeete I Met Elenefite Crete quotME gt m Marginal Benefit Mergir l eei Quantity C circumstances for conducting an economic evaluation efficacy effectiveness availability generalizability 0 cost analysis 0 based on opportunity costs 0 costminimization analysis 0 compare two or more programs that accomplish identical outcomes and search for the least cost alternative CEA 0 measured in medical units 0 compare two or more programs that have differential costs and outcomes 0 incremental costs are directly compared to incremental outcomes in ratios 0 single outcome programs a form of CEA o effectiveness is measured in health utility units 0 utility is the preference of an individual society 0 the most common health unit show that medical care affects both duration and quality of life 25 Measure quality of life between death 0 and perfect health 1 Future qalys gained must be discounted to the present Wealthy people give higher values of what they would be willing to pay to up their risk in health problems than poor people The value has to be stated before after the fact Cannot value it while they are in the state costoffset analysis program costs are compared to future medical care savings 0 narrow set of outcome for expenditures bene tcost analysis 0 used when programs have multiple outputs o valued in dollars 0 analyzed in bene tcost ratios E Measuring bene ts 0 Outcomes must be converted to dollars 0 Direct monetary conversion factors price of medical care and rate of pay 0 Indirect monetary conversion factors willingness to pay eXpert judgment hedonic prices F The value of life 0 Value ranges from 1510 million Economists measure the value that individuals put on life or health by behaviors G Economic analysis 0 Base decisions on marginal rather than average analysis MC vs MB instead of AC vs AB 0 Discount future costs and bene ts Public Goods and Public Health Chapters 20 8 21 BHT A Chapter questions 0 The changes in obamacare prior to passage made it weaker B Health is Contagious Many economic externalities in health and health care 0 Con dentiality protection vs social welfare C Externalities Can Justify Government Intervention Without externalities markets reach an efficient outcome 0 Taxes 8 subsidies only distort the efficient outcome 26 Externality any positive or negative effect that a market transaction or event imposes on a third party D Private Welfare vs Social Welfare 0 Private welfare is the utility level accruing to one individual within a society 0 Social welfare is the summed utility levels of all individuals within a society E Herd Immunity Each vaccination protects not only the vaccine recipient but also neighbors the social gain from each vaccination is greater than the private gain F Antibiotic Resistance 0 increases in antibiotic resistance Every dose of antibiotics breeds more resistant bacteria 0 Use of antibiotic drugs imposes a negative externality G Pigouvian Subsidies and Taxes Pigouvian subsidy or tax a subsidy or taX designed to internalize an externality by altering private costs and bene ts 0 Pigouvian subsidies encourage positive externalities 0 reduce negative externalities H Review of Public Goods 0 A pure public good has MCO and no exclusivity Some people derive more consumer surplus from public goods than others IMorality vs Public Health 0 Decisions based on moralistic criteria will increase transactions costs create more health risks and reduce social welfare but will never eliminate markets


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All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.