Deck 1: Choices: Money, Medicine, and Health

Question 1

Over the past 100 years, out of pocket expenditures for health care services by individuals have decreased from about 50% to less than 10%.

Answer 1

False

Question 2

Third party payers account for 60% of all health care expenditures in 2012.

Answer 2

False

Question 3

Ranking everyone by the amount spent on medical care, 70 percent of the total (all expenditures for all people) is accounted for by the top 10 percent of patients. This phenomenon is called cost shifting.

Answer 3

False

Question 4

Not only is the share of the GDP going to health care higher in 2012 than in 1929, the wages of health care workers have risen more rapidly than for other types of labor.

Question 5

The Flow of Funds idea emphasizes that total dollars spent by individuals, government and other third party payers for health care must equal total income earned by health care providers, administrators and other health care workers.

Question 6

The hospital opens a cancer center in an adjacent abandoned building. Since it was an abandoned building, there are no opportunity costs of this decision.

Question 7

Socioeconomic differences in mortality found in the U.S. are most likely attributable to lack of universal health insurance coverage.

Question 8

When a drug company advertises it will provide a prescription drug at no charge to certain individuals who cannot afford a doctor prescribed drug, costs are most likely being shifted away from individuals who are paying high prices to those who are paying nothing.

Question 9

A hospital system is rewarded with higher profits in the short term when it implements electronic health records which increase the timeliness of physician and patient communication.

Question 10

As access to high-quality care has been steadily improving across the world, inequalities in health can still be found only in relatively poor countries.

Question 11

In which of the following examples does the fundamental theorem of exchange not apply?

A) You pay your optometrist $500 for a new pair of eyeglasses.
B) You donate your old, used eyeglasses to the Lions Club, a charitable organization which recycles and distributes the glasses to needy people.
C) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which does not result in pregnancy.
D) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which results in pregnancy.
E) Unknown to you, your neighbor is tapping into your cable TV service and sharing your service.

Question 12

To reduce the ache in your knees when you work out, you buy an elastic knee brace from the pharmacy section at the grocery store. This transaction differs from paying a surgeon to replace your knee joint because

A) the price of the knee brace is the same at all the local markets; however, the price for a knee replacement cannot be determined.
B) the knee brace is basically the same product regardless of where you buy it or who you buy it for, even though there may be different manufacturer brand names. However, each knee replacement surgery is different, and its specifics vary according to the individual patient's needs and the individual physicians' assessment and skills.
C) you are able to pay for the purchase of the knee brace from your health savings account.
D) you require a physician's expertise to determine your need for the knee brace.
E) you expect that the transaction will result in alleviating your pain.

Question 13

Buying a hip replacement surgery is different from the assumptions of a purchase in the perfectly competitive market because

A) the seller has an ethical duty to care for you.
B) all buyers are price makers.
C) product characteristics do not vary significantly across providers.
D) information is freely available about surgeons specializing in hip replacements.
E) obtaining Board Certification in Orthopedic Surgery is a relatively quick and uncomplicated procedure.

Question 14

U.S. health spending per capita in 2012 was

A) less than $3,000.
B) between $3,000 and $5,000.
C) between $5,000 and $7,000.
D) between $7,000 and $9,000.
E) more than $9,000.

Question 15

Which of the following statements is false? Significant increase in healthcare spending over the past seventy years can in part be explained by the

A) increase in the cost of labor-intensive services.
B) increase in the overall level of medical care prices.
C) increase in intensity and quality of care.
D) increase in the share of the healthcare costs spent on manufactured goods such as drugs.
E) population growth.

Question 16

When a money price cannot be assigned to a health care action such as a choice an individual makes to exercise to maintain a healthy cardiovascular system, economists use the concept of opportunity cost which values the action

A) according a rule of thumb.
B) as the next best alternative the individual gives up in order to exercise.
C) at the median gym membership price in the residential area.
D) at zero price.
E) as the number of years expected to be added to the person's life due to exercise.

Question 17

Scarcity means

A) time and resources spent researching a cure for breast cancer are time and resources that could have been spent researching cures for lymphoma.
B) 25 year olds might be more willing to start a family than 35 year olds.
C) government funding of federal programs equals the amount paid in taxes.
D) all consumers are assumed to have limited financial resources.
E) money flows in a circle.

Question 18

A US citizen is considering having plastic surgery in Costa Rica. The next best alternative for her is to have that surgery done in a local doctor's office, where it is priced significantly higher. The full opportunity cost of having surgery in Costa Rica versus having it done locally would include all of the following except

A) direct price of the procedure
B) roundtrip airfare
C) hotel costs incurred during the mandatory recovery time while in Costa Rica
D) acceptance of certain risks, including not having access to follow-up care from the same physician upon return
E) lost income due to down time

Question 19

Firms apply marginal analysis to maximize the following production goal:

A) demand.
B) profit.
C) output.
D) prices.
E) total revenue.

Question 20

The healthcare sector currently comprises more than one sixth (18%) of the entire economy; it is big and growing. The opportunity cost of this growth includes all of the following except

A) direct cost of labor resources that went into the healthcare industry
B) direct cost of capital resources that went into the healthcare industry
C) direct cost of land resources that went into the healthcare industry
D) the value of the new jobs that the healthcare sector continues to create at a faster rate, compared to other industries
E) the foregone value of the output not created by other industries, as the resources that could have been used in those industries were diverted to health care

Question 21

Investments in human capital include all the following except

A) attending college.
B) saving money for college.
C) exercising.
D) maintaining a healthy weight.
E) immunizing children against diseases.

Question 22

Government regulations and professional licensing of health care providers is a response to the nature of human response to illness and pain. Examples include all the following except

A) requiring hospitals to report the number of hospital acquired infections to state agency.
B) requiring for profit hospitals to pay income tax.
C) requiring physicians to be licensed by the state.
D) requiring FDA approval of cancer fighting drugs.
E) requiring hospitals receiving Medicare funds to be approved by Medicare.

Question 23

Which of the following statements about the concept of "rationality" is false?

A) Rationality means that people make choices to make themselves better off subject to resource constraints.
B) Rationality means that organizations make choices to meet their objectives (maximize profits, minimize cost, get elected).
C) People and organizations are always perfectly rational in their decisions.
D) Purchasing life insurance to minimize the risk of financial problems for your family is an example of a rational decision.
E) Rationality is a concept that organizes and guides economic analysis, but may sometimes miss the human meaning of transactions in healthcare markets.

Question 24

Dr. Getzen differentiates choices people make concerning lifestyle, risk modification measures and illness treatments. Why do health economists seem to concentrate on measuring the illness treatments rather than lifestyle choices?

Question 25

What do economists mean by scarcity? What is a major resource that is scarce for a full-time student who also works night shifts to pay for her education?

Question 26

Jenna pays $400 for a pair of designer eyeglasses. She realizes a week later that she really does not believe they are worth $400 and the eye doctor robbed her and she overpaid. Use the Fundamental Theorem of Exchange to refute her claim.

Question 27

Explain why the existence of third party payers make people less sensitive to price when buying health care services in the hospital than they would have been in 1929.

Question 28

The university bans use of perfumes and colognes in any office, dorm room, classroom, or other public building on campus. What is the public good that is impacted? What is the cost? What is the benefit?

Question 29

Who pays for research in the U.S. health care industry?

Question 30

According to the Centers for Medicare and Medicaid Services, more than a quarter of the Medicare budget goes to paying for medical care incurred during the enrollees' last year of life. What is the opportunity cost of those billions of dollars? Is it relatively low or high? What could be possible alternative uses of that money? List at least a few alternative options and discuss the associated tradeoffs.