Page 1 of 25
19 May 2026
MHA 710 - Healthcare Economics Exam 2 | 130
Questions with 100% Correct Answers | Verified |
Latest Update 2026
The most important source of funding for Medicare is
a. the federal income tax.
b. premiums paid by elders and deducted from their monthly Social Security checks.
c. a 2.9 percent payroll tax paid by all workers, regardless of their age.
d. proceeds from the Medicare Trust Fund.
e. a tax on the health insurance premiums paid by all group plans. - CORRECT ANSWER-c. a 2.9
percent payroll tax paid by all workers, regardless of their age.
By the time a drug enters the clinical trial phase of testing on humans,
a. its approval is virtually assured.
b. an average of five years of the overall patent life has already expired.
c. it has already completed most of the investment in research and development.
d. its safety and effectiveness are no longer major concerns.
e. the only step left in the process is testing to see if the drug accomplishes its intended purpose. -
CORRECT ANSWER-EITHER -
a. its approval is virtually assured
or
b. an average of five years of the overall patent life has already expired
How much did pharmaceutical companies spend on direct-to-consumer advertising in 2019?
a. $27 billion
b. $4.3 billion
c. $9.8 billion
d. $791 million
e. $6.1 billion - CORRECT ANSWER-e. $6.1 billion
The Medicare pay-as-you-go system is jeopardized by:
, Page 2 of 25
19 May 2026
a. a reliance on the premiums paid by the elderly themselves to fund a majority of the total cost of
the system.
b. an overly generous fee schedule that pays physicians more than private insurance for most
procedures.
c. the rising costs of long-term care.
d. allowing physicians to balance bill their patients.
e. The changing demographics of the United States' population, with an increasing percentage over
the age of 65. - CORRECT ANSWER-e. The changing demographics of the United States' population,
with an increasing percentage over the age of 65.
Danzon and Furukawa (2003) argue that:
a. the provision of government-provided free care increases the availability of newly introduced
drugs to everyone covered by the government plan.
b. price controls in the United States would lower drug prices without affecting the overall
availability of branded drugs or lowering incentives for future drug development.
c. pharmaceutical price differences across countries are roughly in line with differences in per capita
gross domestic product, supporting the predictions of Ramsey pricing practices.
d. generic competition in the United States has not done much to lower drug prices or spending. -
CORRECT ANSWER-c. pharmaceutical price differences across countries are roughly in line with
differences in per capita gross domestic product, supporting the predictions of Ramsey pricing
practices.
Medical care spending escalates as an individual reaches old age. Which of the following
statements is true regarding medical care spending and the elderly?
a. Chronic illnesses increase as we age as do the multiplicity of services available to treat those
illnesses.
b. The easy way to control end-of-life spending is to limit use of all but the most cost-effective
treatments to those over the age of 65.
c. Most of the medical care cost explosion is due to the high cost of treating the elderly.
d. The high cost of acute care spending for the elderly is a major contributing factor in the increase
in medical spending. - CORRECT ANSWER-a. Chronic illnesses increase as we age as do the
multiplicity of services available to treat those illnesses.
Finkelstein and McKnight (2008) provide an empirical estimate of the benefits to seniors of the
1965 introduction of Medicare. Which of the following statements is true concerning the results of
this study?
, Page 3 of 25
19 May 2026
a. The real impact of the introduction of Medicare was on the reduction in out-of-pocket health care
spending for households faced with catastrophic events (those in the top 25 percent of spenders).
b. The long-run benefits of Medicare may be due to encouraging the use of preventive care to
control chronic illnesses.
c. The introduction of Medicare in 1965 played an essential role in the decline in mortality rates for
the elderly over the following decade.
d. There is evidence of a significant reduction in mortality from specific causes (e.g., cardiovascular
disease) and the mortality rates of certain vulnerable population groups (e.g., non-whites). -
CORRECT ANSWER-a. The real impact of the introduction of Medicare was on the reduction in out-
of-pocket health care spending for households faced with catastrophic events (those in the top 25
percent of spenders).
The only disease-specific group eligible for Medicare are those suffering from:
a. diabetes.
b. advanced coronary artery disease.
c. end-stage renal disease.
d. metastasized cancer.
e. acquired immunodeficiency syndromes (AIDS). - CORRECT ANSWER-c. end-stage renal disease.
Which of the following is a true statement about long-term care?
a. Nursing homes are largely populated by elderly men.
b. Over 20 percent of the elderly population currently live in nursing homes.
c. Almost half of all nursing home residents are over age 85.
d. There would be fewer residents of nursing homes if more people had long-term care insurance.
e. The cost of long-term care is funded primarily by private insurance - CORRECT ANSWER-c.
Almost half of all nursing home residents are over age 85.
Medicare and Medicaid were enacted by the Johnson administration in 1965 as amendments to
which federal law already in existence?
a. Social Security Act
b. Employee Retirement and Income Security Act
c. Equal Rights Act
d. Managed Care Act
e. Welfare Act of 1960 - CORRECT ANSWER-a. Social Security Act
19 May 2026
MHA 710 - Healthcare Economics Exam 2 | 130
Questions with 100% Correct Answers | Verified |
Latest Update 2026
The most important source of funding for Medicare is
a. the federal income tax.
b. premiums paid by elders and deducted from their monthly Social Security checks.
c. a 2.9 percent payroll tax paid by all workers, regardless of their age.
d. proceeds from the Medicare Trust Fund.
e. a tax on the health insurance premiums paid by all group plans. - CORRECT ANSWER-c. a 2.9
percent payroll tax paid by all workers, regardless of their age.
By the time a drug enters the clinical trial phase of testing on humans,
a. its approval is virtually assured.
b. an average of five years of the overall patent life has already expired.
c. it has already completed most of the investment in research and development.
d. its safety and effectiveness are no longer major concerns.
e. the only step left in the process is testing to see if the drug accomplishes its intended purpose. -
CORRECT ANSWER-EITHER -
a. its approval is virtually assured
or
b. an average of five years of the overall patent life has already expired
How much did pharmaceutical companies spend on direct-to-consumer advertising in 2019?
a. $27 billion
b. $4.3 billion
c. $9.8 billion
d. $791 million
e. $6.1 billion - CORRECT ANSWER-e. $6.1 billion
The Medicare pay-as-you-go system is jeopardized by:
, Page 2 of 25
19 May 2026
a. a reliance on the premiums paid by the elderly themselves to fund a majority of the total cost of
the system.
b. an overly generous fee schedule that pays physicians more than private insurance for most
procedures.
c. the rising costs of long-term care.
d. allowing physicians to balance bill their patients.
e. The changing demographics of the United States' population, with an increasing percentage over
the age of 65. - CORRECT ANSWER-e. The changing demographics of the United States' population,
with an increasing percentage over the age of 65.
Danzon and Furukawa (2003) argue that:
a. the provision of government-provided free care increases the availability of newly introduced
drugs to everyone covered by the government plan.
b. price controls in the United States would lower drug prices without affecting the overall
availability of branded drugs or lowering incentives for future drug development.
c. pharmaceutical price differences across countries are roughly in line with differences in per capita
gross domestic product, supporting the predictions of Ramsey pricing practices.
d. generic competition in the United States has not done much to lower drug prices or spending. -
CORRECT ANSWER-c. pharmaceutical price differences across countries are roughly in line with
differences in per capita gross domestic product, supporting the predictions of Ramsey pricing
practices.
Medical care spending escalates as an individual reaches old age. Which of the following
statements is true regarding medical care spending and the elderly?
a. Chronic illnesses increase as we age as do the multiplicity of services available to treat those
illnesses.
b. The easy way to control end-of-life spending is to limit use of all but the most cost-effective
treatments to those over the age of 65.
c. Most of the medical care cost explosion is due to the high cost of treating the elderly.
d. The high cost of acute care spending for the elderly is a major contributing factor in the increase
in medical spending. - CORRECT ANSWER-a. Chronic illnesses increase as we age as do the
multiplicity of services available to treat those illnesses.
Finkelstein and McKnight (2008) provide an empirical estimate of the benefits to seniors of the
1965 introduction of Medicare. Which of the following statements is true concerning the results of
this study?
, Page 3 of 25
19 May 2026
a. The real impact of the introduction of Medicare was on the reduction in out-of-pocket health care
spending for households faced with catastrophic events (those in the top 25 percent of spenders).
b. The long-run benefits of Medicare may be due to encouraging the use of preventive care to
control chronic illnesses.
c. The introduction of Medicare in 1965 played an essential role in the decline in mortality rates for
the elderly over the following decade.
d. There is evidence of a significant reduction in mortality from specific causes (e.g., cardiovascular
disease) and the mortality rates of certain vulnerable population groups (e.g., non-whites). -
CORRECT ANSWER-a. The real impact of the introduction of Medicare was on the reduction in out-
of-pocket health care spending for households faced with catastrophic events (those in the top 25
percent of spenders).
The only disease-specific group eligible for Medicare are those suffering from:
a. diabetes.
b. advanced coronary artery disease.
c. end-stage renal disease.
d. metastasized cancer.
e. acquired immunodeficiency syndromes (AIDS). - CORRECT ANSWER-c. end-stage renal disease.
Which of the following is a true statement about long-term care?
a. Nursing homes are largely populated by elderly men.
b. Over 20 percent of the elderly population currently live in nursing homes.
c. Almost half of all nursing home residents are over age 85.
d. There would be fewer residents of nursing homes if more people had long-term care insurance.
e. The cost of long-term care is funded primarily by private insurance - CORRECT ANSWER-c.
Almost half of all nursing home residents are over age 85.
Medicare and Medicaid were enacted by the Johnson administration in 1965 as amendments to
which federal law already in existence?
a. Social Security Act
b. Employee Retirement and Income Security Act
c. Equal Rights Act
d. Managed Care Act
e. Welfare Act of 1960 - CORRECT ANSWER-a. Social Security Act
