Deck 6: The Demand for Medical Care

Question 1

Which of the following business strategies are used by health insurance companies to curb physician-induced demand?

A)Requiring prior authorization before administering a treatment/procedure
B)Providing physicians with financial incentives to reduce overall cost
C)Requiring patients to seek a second opinion for high-cost treatments/procedures
D)All of the above
E)None of the above

Answer 1

D
Health insurance uses two primary strategies: (1)increase knowledge to the insurer or patient to make a better informed decision;(2)provide financial incentives to the physician to curb cost.

Question 2

For individuals in the United States.

A)The income elasticity of demand for medical services is less than 1.0 in absolute value
B)The price elasticity of demand for hospital and physician visits is greater than 0.5 in absolute value
C)Both a and b
D)Neither a nor b

Answer 2

D
The income elasticity for medical services is greater than 1 in all the studies cited.The price elasticity for medical services is less than 0.5 in absolute value.

Question 3

Which one of the following studies determined the allocation of medical services based on need?

A)Lee and Jones research of the 1930s
B)Hill-Burton research of the 1940s
C)Both a and b
D)Neither a nor b

Answer 3

C
Both studies use medical need as the motivation to allocate medical resources.

Question 4

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?

Question 5

Discuss the results of the RAND Health Insurance Experiment.Specifically,did the generosity of the health insurance plan affect the level of medical care use? Did the generosity of the health insurance plan affect overall health,on average?

Question 6

Suppose a particular new treatment increases health,H,by the following amount where I is income spent.How much additional benefit do you receive from I = 25 to I = 36? At what amount is the marginal benefit equal to the marginal cost of the treatment?

Question 7

When studying the demand for health,using expenditures on health to measure utilization is

A)Completely acceptable
B)Is acceptable when price data are present as well
C)Does not capture differences in quality
D)All of the above
E)None of the above

Question 8

High-income patients have a high opportunity cost of time.Which of the following methods would best increase the quantity demanded by these patients?

A)Decreasing the price of treatment
B)Increasing the price of treatment to reduce waiting times
C)Locating an office near the high-income patients
D)Locating an office near low-income patients

Question 9

Which of the following items will not increase demand for medical services today?

A)Age
B)Income
C)Education
D)Wealth

Question 10

Discuss the role of physicians on patients' demand for medical services.

Question 11

Discuss the role of "time cost" on the demand for medical services.

Question 12

Education is believed to

A)Increase the demand for health because higher educated people also have higher wages
B)Decrease the demand for health because higher educated people experience a greater return to their health investments.
C)Have no effect on the demand for health

Question 13

According to Michael Grossman,consumers have a demand for health because

A)It is a consumption commodity
B)It is an investment commodity
C)Both a and b
D)Neither a nor b

Question 14

Empirical studies of demand for health care have often failed to account for

A)The cost of time
B)The availability of substitutes or complements
C)Utilization of medical services
D)All of the above

Question 15

As co-insurance rates increase,patients become

A)More sensitive to changes in price,which leads to over-consumption
B)Less sensitive to changes in price,which leads to over-consumption
C)More sensitive to changes in price,which leads to under-consumption
D)Less sensitive to changes in price,which leads to under-consumption

Question 16

According to Robert Fogel,the benefits of health care have

A)Exceeded cost
B)Are equal to cost
C)Not kept up with cost
D)There is no relationship between cost and benefits

Question 17

Which of the following variables should be included in an analysis of consumer demand?

A)age of patient
B)education of patient
C)income of patient
D)All of the above

Question 18

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

Question 19

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