Health economics and policy 5th edition henderson test bank

Instructors’ Manual and Test Bank to accompany Health Economics and Policy, 5th Edition James W Henderson Baylor University Copyright © 2012 by South-Western College Publishing, Cincinnati, Ohio Introduction With public policy as its unifying thread, this book’s focus is the U.S health care system in transition The technical tools of economics are important, but they are not treated as ends to themselves Instead, I employ theory as a way of preparing to address policy questions Each chapter begins with a case-like discussion introducing an issue related to the chapter content Other discussion material is provided in features called “Issues in Medical Care Delivery.” They summarize important studies in medical research, epidemiology, public health, and other fields as they relate to the economics of health care delivery Another feature found in most chapters is the “Profiles” of individuals who have made significant contributions to health economics Many of them are economists; some are physicians; all have had a profound impact on how we view health, health economics, and health policy The “Back of the Envelope” inserts are meant to show the economic way of thinking, using graphs These and similar graphical presentations are frequently used by economists in informal settings They might represent scribbles on the back of a paper napkin that are used to make a point during lunch with colleagues Topics include: the valuation of a life, how to calculate a rate of return, the notion of elasticity, the welfare implications of subsidies, the impact of employer mandates, cost-benefit calculations, and the cost effectiveness of disease prevention, among many other Developing the ability to use models in this way is an important goal of this book Goals and Objectives The primary goals of this course are to enable the student to: Recognize the relevance of economics to health and medical care and apply economic principles to related health issues Understand the mechanisms of the health care delivery system within the broad social, political, and economic contexts Explore the changing nature of health and medical care and the implications for medical practice, medical education and research, and health policy Analyze public policy in health and medical care from an economic perspective To accomplish these goals, the student should be able to: 1.1 Explain the usefulness of economics in understanding matters of life, death, disability, and suffering 1.2 Identify and describe the various factors that influence the demand for medical care 1.3 Summarize the major arguments concerning how practitioners influence the supply of medical care 2.1 Explain the observed patterns in the quantity and price of medical care 2.2 Identify and analyze the relevant issues in health care financing and delivery 2.3 Describe the implications of an aging population on the market for medical services 3.1 Identify the factors that influence the supply of physicians and demonstrate how they affect the price and quantity of medical care 3.2 Outline the major issues determining the supply and demand for medical manpower: nurses, technicians, dentists, pharmacists 3.3 Explain how the increase in medical malpractice suits has impacted on the market for medical services 3.4 Explain the role of medical research and medical technology in the quantity and quality of medical care and the price paid for it 4.1 Identify and analyze the reasons for the increasing popularity of national health insurance worldwide 4.2 Explain and analyze the roles of government, family, and religion in health care 4.3 Explain the relation between medical care for the elderly and other aspects of aging 4.4 Summarize the economic, political, and moral implications of recent changes in reimbursement schemes (PPOs and DRGs) on health and the quality and accessibility of medical care 4.5 Describe and critique the quality and quantity of uncompensated medical care 4.6 Evaluate the efficacy of alternative delivery systems, primarily HMOs, in containing medical costs Suggested Course Content: There is a mid-term exam and a comprehensive final exam in the course I teach at Baylor The mid-term exam counts 30 percent toward the final course grade The final counts 30 percent Two critical review papers are required and count 20 percent Class participation and structured discussions count for the remaining 20 percent  Structured Discussion—On six occasions the class is assigned a discussion topic that can easily be translated into a specific pro-or-con format In a 15 week semester, there is a discussion scheduled every 2-3 weeks Each discussion counts 10 percent of your course grade Class attendance and discussion for non-participants will count percent of your course grade The following steps are recommended in preparing the class for a structured discussion The class is assigned a discussion topic that can easily be translated into a specific pro-or-con format Each student is required prepare five pro and five arguments on the discussion topic Each argument must be supported with evidence comprised of an economic theory, a concept, or a study On the day of the class discussion, students bring their arguments to class and divide into two groups Each group is assigned either the pro or side of the argument Each group meets for 15 minutes to choose their strongest arguments (To save class time this step could be assigned for group work outside of class.) For the next 45 minutes, taking turns each side presents an argument with its supporting evidence If time permits allow a challenge from the alternate side and even a short rebuttal Repeat the process with pro and alternating Keep a record of all discussion Dropping the assigned advocacy roles, during the remaining time the entire class examines the arguments, expresses opinions, and reflects on the issues Students are required to prepare individual essays on the discussion topic stating their own opinions and providing supporting evidence  Critical review papers—The goal in this assignment is to write a paper that can be understood by the typical student in the class Grades are determined by how well the student accomplishs the assigned tasks More specifically, I look for:  style and presentation that is clear, well-organized, and free from misspellings, grammatical errors, faulty punctuation, and other mechanical problems that obscure the meaning (20 percent);  an internal structure that is consistent with the article you are reviewing This will likely include information provided in the article: an introduction, a purpose statement, a discussion of the previous research in the topic area, a clear statement of the testable hypotheses and issues, and a summaryconclusion that includes a statement of the current status of the issue and implications for the future (20 percent)  content consistent with the paper’s internal structure, providing a clear statement of the principle issues, methodology, and other pertinent details presented in the article (60 percent); Follow these steps in conducting a critical review of an article Organize your evaluation as follows:  What is the principle issue examined in the article? Is it clearly presented and well motivated?  Comment on the methodology used in the study Was the sample selection appropriate? How well did the authors control for confounding factors?  Describe the statistical analysis used in the study Were the results well explained?  Were the article’s main conclusions supported by the statistical analysis? What additional analysis might have been done to improve the results? The following is my analytical rubric for grading critical review articles Style and Presentation (20 points) Internal structure (20 points) Content (60 points) Exceptional Clear, free from misspellings and other errors Clear statement of internal structure including headings based on an outline Competent Some awkward transitions or other minor errors Adequately organized Clear statement of the principle issues, exhibits understanding of model and methodology, detailed depiction of results No clear purpose statement; sufficient detail to address the issues Basic Careless errors, but coherently written Deficient Many errors Score Some organizational problems but adequately addressed the paper Basic gaps in content; adequate to make the point No clear direction, difficult to follow due to organization problems Missed the point on content or conclusion; did not provide basic content of paper Proposed Course Outline Date Week Week Topic of discussion What is health economics? Using economics in health care Analyzing medical care markets Assignments Chapter Week Week Week Week Week Week Week Week 10 Week 11 Week 12 Week 13 Week 14 Week 15 Government intervention Economic evaluation in health care Structured discussion No Cost-effectiveness analysis Demand for health and medical care The theory of private insurance Structured discussion No Health insurance access and affordability Cost-savings and managed care Market for physicians’ services Structured discussion No Market for hospital services Mid-term exam Pharmaceutical market Confounding issues Structured discussion No Government’s role in improving access Medicare, Medicaid, SCHIP Strategies to control costs Structured discussion No International comparisons The Swiss model Principles of health care reform U.S policy options Structured discussion No States’ approach U.S reform Final Exam 4 1st critical review paper 1-9 10 11 12 12 13 2nd critical review paper 14 14 15 15 15 15 1-15 Note: The proposed outline allows every chapter to be covered, admittedly in an overview fashion for some chapters Traditional lectures may be substituted for the six structured class discussions, freeing these class periods to cover material in a format more suited to the instructor’s preferences Chapter 1: U.S Medical Care: A System in Transition This chapter introduces the student to the economic way of thinking as it relates to the study of the U.S medical care system After a brief summary of the historical development of medical care delivery and finance, the basics of economic modeling and analysis are addressed The similarities and differences between medical care and other economic goods and services are also discussed As a set of unifying themes providing focus and continuity throughout the book, ten guiding principles are introduced and defined New Content in the 5th edition Students are introduced to the recent health care legislation opening discussion in the “Patient Protection and Affordable Care Act of 2010.” The inconvenient truths about health care spending (Fuchs, 2005) are featured in “Concerns over High and Rising Spending.” A new Figure 1.2 highlights the differences in growth trends between health care spending and gross domestic product All other tables and figures are updated Chapter Outline a Historical developments in the delivery of medical care Post-war experience Concerns over high and rising spending Changes in medical care delivery b The nature of medical care as a commodity c Health economics defined d Ten key economic concepts e Summary and conclusions Issues in Medical Care Delivery  Patient Protection and Affordable Care Act of 2010  Spending Somebody Else’s Money Chapter Objectives Understand the nature of the health care crisis in America Identify the important historical developments affecting health care delivery and finance in the U.S system 3 Identify and explain the major reasons for the high and rising cost of medical care Understand how the third-party payment mechanism and managed care affect health care delivery Recognize the relevance of economics in studying health care issues Understand the aspects of medical care that contribute to its uniqueness as a commodity Opening Video A Health Care System in Crisis The Rainmaker (1997) Distributed by Paramount Pictures Produced by Michael Douglas, Steven Reuther, and Fred Fuchs Directed by Francis Ford Coppola Written by John Grisham Screenplay by Francis Ford Coppola Cast: Matt Damon as Rudy Baylor, young attorney handling his first case Jon Voight as Leo F Drummond, lead attorney for Great Benefit Life Michael Girardin as Everett Lufkin, vice president of claims for Great Benefit Life Johnny Whitworth as Donny Ray Black, young man dying from leukemia Synopsis: A court room drama where recent law graduate Rudy Baylor teams up with Deck Shifflet, an “ambulance-chasing” paralegal, who has failed the bar exam six times From the beginning, Rudy has misgivings about the questionable ethics of the type of client solicitation practiced by Shifflet When Rudy asks, “What’s wrong with ethics?” Deck answers, “Oh, nothing, I guess I mean I believe a lawyer should fight for his client, refrain from stealing money, and try not to lie, you know, the basics.” With these rules of professional conduct guiding him, Rudy accepts his first case, a lawsuit against Great Benefit Insurance Company Great Benefit has been selling its health policies door-to-door in low-income neighborhoods and denying most of the presented claims, betting on the fact that none of their clients will file suit For seven years, Dot Black has paid the premiums, but when she files a claim for Donny Ray’s recently diagnosed leukemia, Great Benefit denies the request for a bone marrow transplant Great Benefit Life refused to pay for the procedure on four grounds: that the leukemia was a pre-existing condition, that due to his age (21) he was no longer a dependent and therefore not covered by the policy, that his health status has been misrepresented on the original insurance application four years before diagnosis, and that the procedure was “experimental.” Film Clip: Scene 16, “Do you remember when you first sold out?” starting at 59:53 to 1:05:18 (5 minutes, 22 seconds) Rudy travels to Cleveland to depose several key insurance company employees Of the four employees he wants to depose; only one is available Jackie Lemancyzk (Claims Handler) has resigned and Russell Crockett was downsized In a dramatic confrontation, Baylor asks Drummond if he remembers “when he first sold out,” implying that Drummond has tampered with witnesses The scene ends in Danny Ray’s bedroom with Baylor indictment against the U.S healthcare system “This is how the uninsured die In a society filled with brilliant doctors and state-of-the-art technology…it is obscene to let this boy die.” Do you think this is a fair indictment of the U.S healthcare system? What are the circumstances, if any, that would justify denial of a “valid” insurance claim? Are any of the four grounds used by Great Benefit Life valid? Discussion: In Donny Ray Black’s case we find the behavior of those associated with Great Benefit Life morally repugnant, as did the jury be rewarding the plaintiff $50 million in economic and punitive damages In the case of Great Benefit Life, the verdict resulted in the insolvency of the company, its eventual bankruptcy, and an opportunity for us to explore the impact of such awards on other stakeholders in such cases Teaching Suggestions  Get a copy of the survey from Victor R Fuchs, “Economics, Values, and Health Care Reform,” American Economic Review 86(1), March 1996, 1-24 Ask your students to answer the survey and tabulate the answers Compare their answers with those of the economists who answered the survey originally This is a good way to check the pulse of your class The ensuing discussion can be a good way to introduce many of the topics covered in the course  National media attention has focused on the problems of the medical care sector periodically in recent years The “crisis” in medical care is well documented Discuss the various meanings of the term “crisis.” Students will have some interesting perspectives on this issue  It is a good idea to discuss the use of the Internet as a research tool It is important that students be able to discern good sources from bad The Internet is full of both That is the purpose of the Internet exercise in my class Students join a ListServ or eavesdrop on a newsgroup to get some idea how to judge the quality of the information available in cyberspace There are literally thousands of forums to join Many of my students begin their electronic discussions with DejaNews, a leading site for Internet discussion groups You can find it at http://w2.dejanews.com/  If you like to emphasize the incentives created by our third-party payment mechanism, make sure you at least mention “Spending Somebody Else’s Money.” When people spend their own money they spend it differently than when they spend someone else’s money Students will remember this example the entire semester and beyond  Take the time to go over the 10 key economic concepts A brief introduction helps develop continuity Suggested Approaches to End-of-Chapter Questions A crisis is defined in the dictionary as a critical time or occasion, or even an emergency Students will approach this question differently At this early juncture many will be influenced by their own experience with the health care system Those arguing that the U.S has a health care crisis will likely cite the following: 1) rising costs and spending, 2) the changing demographics of the population, 3) the number of uninsured, and 4) health status comparisons with other developed countries Those arguing against a health care crisis will likely argue that 1) even the uninsured have access to care through public hospitals and emergency rooms, 2) medical technology is more widely available in the U.S than anywhere else in the world, and 3) confounding factors make international comparisons suspect Medical care spending is absorbing an increasing share of national output, at least up until the last two or three years Whether this recent slowing in the percentage share of GDP will continue is debatable (and a good structured discussion topic) The reasons for high and rising spending include 1) the increased use of medical technology, 2) rising medical input prices, 3) an aging population, 4) the cost of medical malpractice litigation, and most importantly, 5) the third-party payment mechanism Cost containment is an important policy goal since the health of the population is not the only important national goal But cost containment may not be the most important national health care goal The pursuit of cost-effective delivery makes more sense from an economic perspective Other health care goals are improving access for the uninsured and quality for everyone Note, however, these latter goals tend to drive up costs Scarcity in economics is the recognition that all resources are limited relative to wants that are unlimited in the aggregate Scarcity forces us to make choices Additional Questions for Discussion and Evaluation Outside of government itself, the largest industry in the United States is the health care industry Over the past several decades, costs in the health care industry have been increasing at a much faster rate than the rate of inflation in general Why? Cite relevant empirical evidence to support your answer How much Americans spend on medical care? Why they spend so much? How does US spending compare with that of other developed countries? Are we getting our money’s worth? Be somewhat specific How big is the role of the federal government in health care delivery and financing in the United States? How big should it be? Give consumers more information, let them choose the best provider and the resulting competition will help to squeeze out costly waste and ineffective care After all, markets work pretty well for other goods and services The notion has some appeal, and a dose of market medicine would help some of what ails the nation's health-care system But as a cure, the approach rests on the belief that health care is – in most respects – like any other product a How is medical care different from other non-medical goods and services? How is it the same? b What are the essential characteristics that are required for a market to exist? c How can the medical marketplace be made more efficient? Discuss the following: the demand for medical care is irregular, resulting primarily from the onset of an illness; there are widespread information problems; uncertainty is exceptionally problematic; there is a reliance on not-for-profit providers; and we pay for it with other people’s money The 1980s was characterized by a dramatic change in the way Americans paid for medical care—retrospective to prospective Define the two concepts and explain how the way we pay affects the care we receive? [The two concepts are defined in the glossary Retrospective payment establishes incentives to over-treat Prospective payment creates incentives to withhold care ] Discuss the opportunity cost of health care in terms of education Why you suppose taxpayers are willing to invest in an inefficient health care system with excess hospital capacity, but unwilling to invest in an under-funded education system? “Nobody spends other people’s money the way they spend their own money.” Comment on this statement The president’s health policy adviser Zeke Emanuel said the following about the US healthcare system in a November, 23, 2008, Washington Post article, “We have the most expensive system in the world per capita, but we lag behind many developed nations on virtually every health statistic.” Comment on the two parts of his statement Provide evidence to support your answer Multiple Choice Opportunity cost is a measure of a foregone opportunities b value based on the alternative not chosen c value in terms of the cost of production d the difference between production cost and resource cost e both a and b The opportunity cost of investing in a new lithotripter (a machine that pulverizes kidney stones with sound waves) is a defined by the dollar cost of the equipment b the same for every health care provider c measured by the difference between the expected revenues from selling the services of the lithotripter and the invoice cost of the machine d defined by the next best use of the money invested in the equipment e impossible to calculate The “invisible hand” using Adam Smith’s terminology refers to a government control of the market b market forces working through the price mechanism c the money supply that serves to keep the economy working smoothly d the role of innovation in maintaining a steady rate of growth e “behind-the-scenes” policy making to influence how markets allocate scarce resources According to recent public opinion polls, what percentage of Americans are satisfied with the quality of the medical care they receive? a 15 percent b 40 percent c 65 percent d 75 percent e 90 percent Charging higher prices for one category of patients in order to provide free or subsidized care to another group is called a price discrimination b cost-shifting c categorical costing d reprehensible and unethical e creative accounting 6 According to economic theory what is the optimal percentage of GDP to be spent on medical care? a percent b percent c 10 percent d 12 percent e There is no widely-accepted way to determine the optimal percentage What phrase best describes medical care spending in the United States in 1998? a Total spending of more than $2 trillion represents 17 percent of GDP and approximately $8,000 per capita b Total spending of more than $1 trillion represents 14.8 percent of GDP and almost $6,000 per capita c Total spending of less than $1 trillion represents less than 13 percent of GDP and almost $3,000 per capita d Total spending is rising at double-digit rates and spending is soaring to over $5,000 per capita e Total spending is under control and represents a shrinking percentage of GDP The 1974 federal legislation that exempted employers from certain state laws governing health insurance was a COBRA b ERISA c CON d HIPAA e SCHIP Which of the following statements is based on positive analysis? a Individuals without health insurance have less access to physicians’ services than those who have health insurance b The high cost of health insurance places U.S firms at a competitive disadvantage with their foreign competitors c Employers should be required to provide health insurance for all full-time workers and their dependents d none of the above e Both a and b 10 Economists use the term “marginal” to describe costs and benefits a that are minimal and hardly worth noting b that are incremental and thus relevant to decision making c that are noteworthy but not the most important d whose importance can be minimized through hard work e none of the above 11 Self insurance refers to the practice of setting aside funds to pay for medical care expenses instead of paying premiums to an insurance company Approximately, _ of all employees who participate in group insurance plans work for firms that self-insure a one-fourth b one-third c one-half d two-thirds e three-fourths 12 Which of the following is not a characteristic that makes medical care different from other commodities? a Demand for medical care is irregular b Sellers have more information than buyers c Third-party payers abound d For-profit providers play a major role in delivering medical care e The transaction itself if filled with uncertainty Structured Discussion: Resolved: The United States system of health care delivery is in a state of crisis Resolved: The recent slowing of health care spending as a share of gross domestic product will continue In other words, the relative size of the health care sector has reached a natural limit Appendix 1A: The Medical Care Price Index This appendix demonstrates the use of price indexes to measure price changes Caution is advised in interpreting changes in fixed-weight indexes, such as the Consumer Price Index (CPI) and the Medical Care Price Index (MCPI), as a measure of inflation Problems in using the MCPI to measure medical inflation are discussed, including what to measure, how to account for quality improvements, and how to incorporate new products into the index Appendix Objectives Summarize the issues involved in measuring price changes with price indexes Describe the use of the medical care price index in measuring changes in medical care prices Specify alternatives for measuring price changes Appendix Outline a Measuring price changes with index numbers b Medical care price index c Problems with using a fixed-weight index as a measure of inflation Measuring inputs instead of outcomes Measuring quality changes Accounting for new products Other problems ` a) Use of list prices b) Sampling c) Substitution bias d Alternative methods to measure medical care inflation e Summary and conclusions ... care and the implications for medical practice, medical education and research, and health policy Analyze public policy in health and medical care from an economic perspective To accomplish these... political, and moral implications of recent changes in reimbursement schemes (PPOs and DRGs) on health and the quality and accessibility of medical care 4.5 Describe and critique the quality and quantity...Goals and Objectives The primary goals of this course are to enable the student to: Recognize the relevance of economics to health and medical care and apply economic principles to related health