Q2: Problem 3 (Chapter 1 Appendix) on textbook pp.
34 (10%) Victor Fuchs (1996) lists the following questions in an article in The Wall Street Journal. Identify whether the following questions involve positive or normative analysis. All the questions deal with a Republican plan to reform Medicare, the public health insurance program for the elderly. A. How many Medicare beneficiaries will switch to managed care? B. How much should the younger generation be taxed to pay for the elderly? C. Should seniors who use less care benefit financially, or should they subsidize those who use more care?
D. How many Medicare beneficiaries will switch to medical saving accounts? E. What effect will these changes have on utilization? 1 F. How much should society devote to medical interventions that would add one year of life expectancy for men and women who have already passed the biblical “three score and ten”? G. Will senior citizens’ choices about types of coverage depend on their health status? H. If the rate of spending growth is reduced to 6 percent from 10 percent a year, what will happen to the growth of medical services?
Q3: Problem 9 (Chapter 2) on textbook pp. 60 (15%) Explain how a change in each of the following factors would alter the shape of the total product curve for medical care. A. An increase in education. B. An improvement in lifestyle. C. An improvement in the environment. Q4: Problem 10 (Chapter 2) on textbook pp. 60 (10%) Some people believe cigarette and alcohol advertisements should be banned completely in the United States. If this were the case, what would likely happen to the shapes of the total and marginal product for medical care?
Q5: Problem 9 (Chapter 3) on textbook pp. 87 (10%) According to Chase (1993), TPA, a heart drug produced by Genentech Inc. , costs ten times more at $2,200 a dose than streptokinase, an alternative heart drug sold by Astra AB and Kabi Farmacia AB of Sweden and by Hoechst AG of Germany. A trial of 41,000 heart attack patients found that the TPA treatment saves 1 more life out of 100 than streptokinase does. Assume that a person pays full cost for either drug and chooses TPA over streptokinase. Another otherwise identical person makes the opposite choice.
Use the willingness-to-pay approach to calculate the difference in the value of their lives (assume that dosage requirements are the same). Q6: Problem 12 (Chapter 3) on textbook pp. 87 (15%) Given this information, answer the following questions. Cost $100,000 $250,000 Effectiveness 4 life-years gained 10 life-years gained Current Treatment New Treatment A. Calculate the ICER for the new treatment, assuming that the new treatment would replace the old one. B. In what quadrant is the ICER located in Figure 3-4?
Is cost effectiveness analysis relevant? C. How does the answer change if the cost of the new treatment equals $75,000? 2 Q7: Problem 3 (Chapter 5) on textbook pp. 135 (10%) Describe the demand curve shift (rightward or leftward) about how the following changes would affect the demand for inpatient services at a hospital in a large city. A. Average real income in the community increases. B. In an attempt to cut costs, the largest employer in the area increases the coinsurance rate for employee health coverage from 10 percent to 20 percent.
C. The hospital relocates from the center of the city, where a majority of the people live, to a suburb. D. A number of physicians in the area join together and open up a discount-price walk-in clinic; the cross-price elasticity of demand between physician services and inpatient hospital services is –0. 50. Q8: Problem 7 (Chapter 5) on textbook pp. 136 (5%) In reaction to higher input costs, a physician decides to increase the average price of a visit by 5 percent. Will total revenues increase or decrease as a result of this action?
Use the concept of price elasticity to substantiate your answer. Q9: Problem 10 (Chapter 5) on textbook pp. 136 (10%) You are employed as an economic consultant to the regional planning office of a large metropolitan area, and your task is to estimate the demand for hospital services in the area. Your estimates indicate that the own-price elasticity of demand equals –0. 25, the income elasticity of demand equals 0. 45, the cross-price elasticity demand for hospital services with respect to the price of nursing home services equals –0. , and the elasticity of travel time equals –0. 37. Use this information to project the impact of the following changes on the demand for hospital services. A. Average travel time to the hospital diminishes by 5 percent due to overall improvement in the public transportation system. B. The price of nursing home care decreases by 10 percent. C. Average real income decrease by 10 percent. D. The hospital is forced to increase its price for service by 2 percent.
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