Health Economics and Policy, 8th Edition – Solution Manual by James W. Henderson

HealthVEconomicsVandVPolicy,V8thVEditionV SolutionVManualVby
VJamesVW.VHenderson.




1 OpportunityVcostVisVaVmeasureVof
a. foregoneVopportunities.
b. valueVbasedVonVtheValternativeVnotVchosen.
c. valueVinVtermsVofVtheVcostVofVproduction.
d. theVdifferenceVbetweenVproductionVcostVandVresourceVcost.
e. bothVaVandVb.

2. TheVopportunityVcostVofVinvestingVinVaVnewVlithotripterV(aVmachineVthatVpulverizesVkidneyVst
onesVwithVsoundVwaves)Vis
a. definedVbyVtheVdollarVcostVofVtheVequipment.
b. theVsameVforVeveryVhealthVcareVprovider.
c. measuredVbyVtheVdifferenceVbetweenVtheVexpectedVrevenuesVfromVsellingVtheVserv
icesVofVtheVlithotripterVandVtheVinvoiceVcostVofVtheVmachine.
d. definedVbyVtheVnextVbestVuseVofVtheVmoneyVinvestedVinVtheVequipment.
e. impossibleVtoVcalculate.

3. TheV“invisibleVhand”VusingVAdamVSmith’sVterminologyVrefersVto
a. governmentVcontrolVofVtheVmarket.
b. marketVforcesVworkingVthroughVtheVpriceVmechanism.
c. theVmoneyVsupplyVthatVservesVtoVkeepVtheVeconomyVworkingVsmoothly.
d. theVroleVofVinnovationVinVmaintainingVaVsteadyVrateVofVgrowth.
e. “behind-the-
scenes”V policyV makingV toV influenceV howV marketsV allocateV scarceVresources.

4. AccordingVtoVrecentVpublicVopinionVpolls,VwhatVpercentageVofVAmericansVareVsatisfiedVwit
hVtheVqualityVofVtheVmedicalVcareVtheyVreceive?
a. 15Vpercent.
b. 40Vpercent.
c. 65Vpercent.
d. 70Vpercent.
e. 90Vpercent.




©V2015VCengageVLearning.VAllVRightsVReserved.VMayVnotVbeVcopied,Vscanned,VorVduplicated,VinVwhol
eVor
inVpart,VexceptVforVuseVasVpermittedVinVaVlicenseVdistributedVwithVaVcertainVproductVorVserviceVorVot
herwiseVonVaVpassword-protectedVwebsiteVforVclassroomVuse.

,5. ChargingVhigherVpricesVforVoneVcategoryVofVpatientsVinVorderVtoVprovideVfreeVorVsubsidized
VcareVtoVanotherVgroupVisVcalled
a. priceVdiscrimination.
b. cost-shifting.
c. categoricalVcosting.
d. reprehensibleVandVunethical.
e. creativeVaccounting.

6. AccordingVtoVeconomicVtheoryVwhatVisVtheVoptimalVpercentageVofVGDPVtoVbeVspentVonVm
edicalVcare?
a. 6Vpercent.
b. 8Vpercent.
c. 10Vpercent.
d. 12Vpercent.
e. ThereVisVnoVwidely-acceptedVwayVtoVdetermineVtheVoptimalVpercentage.

7. WhatVphraseVbestVdescribesVmedicalVcareVspendingVinVtheVUnitedVStatesVinV1998?
a. TotalVspendingVofVmoreVthanV$2VtrillionVrepresentsV17VpercentVofVGDPVandVapproximate
ly
$8,000VperVcapita.
b. TotalVspendingVofVmoreVthanV$1VtrillionVrepresentsV14.8VpercentVofVGDPVandValmostV$
6,000VperVcapita.
c. TotalVspendingVofVlessVthanV$1VtrillionVrepresentsVlessVthanV13VpercentVofVGDPVandValmo
st
$3,000VperVcapita.
d. TotalVspendingVisVrisingVatVdouble-
digitVratesVandVspendingVisVsoaringVtoVoverV$5,000VperVcapita.
e. TotalVspendingVisVunderVcontrolVandVrepresentsVaVshrinkingVpercentageVofVGDP.

8. TheV1974VfederalVlegislationVthatVexemptedVemployersVfromVcertainVstateVlawsVgoverningVh
ealthVinsuranceVwas
a. COBRA
b. ERISA
c. CON
d. HIPAA
e. SCHIP

9. WhichVofVtheVfollowingVstatementsVisVbasedVonVpositiveVanalysis?
a. IndividualsV withoutV healthV insuranceV haveV lessV accessV toV physicians’V servicesV t
hanVthoseVwhoVhaveVhealthVinsurance.
b. TheVhighVcostVofVhealthVinsuranceVplacesVU.S.VfirmsVatVaVcompetitiveVdisadvantageV
withVtheirVforeignVcompetitors.
c. EmployersVshouldVbeVrequiredVtoVprovideVhealthVinsuranceVforVallVfull-
timeVworkersVandVtheirVdependents.
©V2015VCengageVLearning.VAllVRightsVReserved.VMayVnotVbeVcopied,Vscanned,VorVduplicated,VinVwhol
eVor
inVpart,VexceptVforVuseVasVpermittedVinVaVlicenseVdistributedVwithVaVcertainVproductVorVserviceVorVot
herwiseVonVaVpassword-protectedVwebsiteVforVclassroomVuse.

, d. noneVofVtheVabove.




©V2015VCengageVLearning.VAllVRightsVReserved.VMayVnotVbeVcopied,Vscanned,VorVduplicated,VinVwhol
eVor
inVpart,VexceptVforVuseVasVpermittedVinVaVlicenseVdistributedVwithVaVcertainVproductVorVserviceVorVot
herwiseVonVaVpassword-protectedVwebsiteVforVclassroomVuse.

, e. BothVaVandVb.

10. EconomistsVuseVtheVtermV“marginal”VtoVdescribeVcostsVandVbenefits
a. thatVareVminimalVandVhardlyVworthVnoting.
b. thatVareVincrementalVandVthusVrelevantVtoVdecisionVmaking.
c. thatVareVnoteworthyVbutVnotVtheVmostVimportant.
d. whoseVimportanceVcanVbeVminimizedVthroughVhardVwork.
e. noneVofVtheVabove.

11. SelfVinsuranceVrefersVto:VtheVpracticeVofVsettingVasideVfundsVtoVpayVforVmedicalVcareVexp
ensesVinsteadVofVpayingVpremiumsVtoVanVinsuranceVcompany.V Approximately,V
ofVallVemployeesVwhoVparticipateVinVgroupVinsuranceVplansVworkVforVfirmsVthatVself-
insure.
a. startingVone’sVownVinsuranceVcompany
b. buyingVinsuranceVfromVaVnotVforVprofitVentity
c. settingVasideVfundVtoVpayVforVmedicalVcareVexpensesVinsteadVofVbuyingVinsurance
d. noneVofVthese
e. bothVaVandVb

12. WhichVofVtheVfollowingVisVnotVaVcharacteristicVthatVmakesVmedicalVcareVdifferentVfromVo
therVcommodities?
a. DemandVforVmedicalVcareVisVirregular.
b. SellersVhaveVmoreVinformationVthanVbuyers.
c. Third-partyVpayersVabound.
d. For-profitVprovidersVplayVaVmajorVroleVinVdeliveringVmedicalVcare.
e. TheVtransactionVitselfVifVfilledVwithVuncertainty.


StructuredVDiscussion:
1. Resolved:VTheVUnitedVStatesVsystemVofVhealthVcareVdeliveryVisVinVaVstateVofVcrisis.

2. Resolved:V TheV recentV slowingV ofV healthV careV spendingV asV aV shareV ofV grossV domesti
c

productVwillVcontinue.V InVotherVwords,VtheVrelativeVsizeVofVtheVhealthVcareVsectorV

hasVreachedVaVnaturalVlimit.

AppendixV1A:VTheVMedicalVCareVPriceVIndex

ThisVappendixVdemonstratesVtheVuseVofVpriceVindexesVtoVmeasureVpriceVchanges.V CautionVisV

advisedVinVinterpretingVchangesVinVfixed-
weightVindexes,VsuchVasVtheVConsumerVPriceVIndexV(CPI)VandVtheVMedicalVCareVPriceVIndexV(

©V2015VCengageVLearning.VAllVRightsVReserved.VMayVnotVbeVcopied,Vscanned,VorVduplicated,VinVwhol
eVor
inVpart,VexceptVforVuseVasVpermittedVinVaVlicenseVdistributedVwithVaVcertainVproductVorVserviceVorVot
herwiseVonVaVpassword-protectedVwebsiteVforVclassroomVuse.