Transcript
Chapter 23 – Health Systems Reform
Key Ideas
Different countries vary in their health care systems. Comparing them may provide insights into potential health care system improvements.
National health systems appear to reduce health spending. However, one must impute time costs and adjust for difference in quality of care in evaluating the full costs of alternative systems
Health insurance through the workplace comes at a cost. At the national level, the fundamentally inelastic labor supply suggests that most of the costs of health insurance fall upon workers in the form of lower wages.
If a good’s manufacturer has some monopoly power, some of the costs of employer-provided health insurance may be passed on to consumers.
The imposition of universal health coverage also comes at a cost, of resources that could be used for something else. Whether the cost is “worth it” often constitutes more of a political question than an economic one.
Teaching Tips
With the passage of the Patient Protection and Affordable Care Act (PPACA), there is important news every day about reforming the U.S. healthcare system. This is a chance to apply the analyses here to “real world” policy.
Estimates of PPACA parameters change frequently. Instructors and students may wish to follow the analyses carefully to examine the underlying assumptions used.
What do people in other countries see about their health systems? Canadian newspaper web sites often provide useful insights about the Canadian health care system from their point of view.
For class discussion, it is useful to consider whether different societies are different. Do students in the United States recognize differences between themselves and students elsewhere regarding attitudes toward government and preferences for health care? Do the students outside the United States who use the book recognize similar differences?
The issue of “who pays” for coverage is a provocative one. Discuss the issue of two employers, one of which pays “all” of the health care costs, the other of which pays 80%. In which firm are workers better off? The response of course depends on the net wage (the money wage + monetary value of the benefits). Formulas that deter-mine “who pays” are ultimately unimportant; what matters is the workers’ net wages.
Chapter 23 – Health Systems Reform – Multiple Choice
If we define the health expenditure share s of the GDP as:
s = PQ/Y,
where P is the price of health care, Q is the quantity, and Y is GDP, then if Y increases by 10% and Q increases by 12%, then:
share s will rise.*
share s will fall.
there will be no change in share s.
there is not enough information to determine the answer.
If we define the health expenditure share s of the GDP as:
s = PQ/Y,
where P is the price of health care, Q is the quantity, and Y is GDP, then if P increases by 8% and Q decreases by 4%, then:
share s will rise.*
share s will fall.
there will be no change in share s.
there is not enough information to determine the answer.
Consider the figure below. Which of the following points constitute inefficient allocations of the economy’s resources?
A*
B
D
E
In the figure below, starting at point A, if health reform moves the economy to point ___ it is _____ efficiency?
J; increases
B; increases*
B; increases
D; decreases
In the figure below, starting at point A, a move to point B:
increases efficiency only if financed by taxes.
increases efficiency only if paid for by employers.
increases efficiency only if accompanied by technological change.
increases efficiency.*
Many of the more industrialized countries have sought to reform their health care systems by introducing elements of:
market mechanisms.*
rationing.
price controls.
government service provision.
Individual insurance mandates require:
taxpayers to enroll in government-sponsored insurance.
taxpayers to buy insurance from private sellers.
all consumers to get insurance, whether from employers, the private market or the government.*
employers to stop offering insurance.
Employer mandates require:
all employers to provide health insurance.*
all employers to increase workers’ pay so they can buy health insurance.
all employers to provide pharmaceutical coverage.
Answers (b) and (c) are correct.
Total expenditure for universal health insurance would ______ the true cost because ____.
overstate; the uninsured are already receiving uncompensated care.*
understate; employers would lose money.
precisely estimate; we have good estimates of health care costs.
understate; insurers could not offer this coverage without a subsidy.
Hadley and colleagues estimated that that establishing a plan to provide full-year coverage to the uninsured would:
increase expenditures on the uninsured from $0 to $52 billion.
increase expenditures on the uninsured from $0 to $123 billion.
increase expenditures on the uninsured from $86 billion to $209 billion.*
increase expenditures on the uninsured from $150 billion to $236 billion.
In the figure above, suppose that a given industry has L0 workers, each of whom earns wage W0. Suppose that the workers negotiate a benefit package that costs $z per worker, and is worth $z per worker. The new labor market equilibrium will be at:
money wage W2; labor force, L0.*
money wage W1; labor force, L0.
money wage W0; labor force, L0.
money wage W1; labor force, L1.
In the figure above, suppose that a given industry has L0 workers, each of whom earns wage W0. Suppose that the workers negotiate a benefit package that costs $z per worker, and is worth $0 per worker. The new labor market equilibrium will be at:
money wage W2; labor force, L0.
money wage W1; labor force, L0.
money wage W0; labor force, L0.
money wage W1; labor force, L1.*
Referring to the figure above, economists argue that universal employer mandates are unlikely to raise labor costs because.
within a country, labor supply is fundamentally inelastic, thus the burden falls largely on the worker.*
within a country, labor supply is fundamentally elastic, thus the burden falls largely on the consumer.
wage controls can be used to address labor cost inflation.
within a country, labor supply is fundamentally elastic, thus the burden falls largely on the worker..
Suppose a worker earns $15 per hour plus health benefits worth $2 per hour. If the employer withdraws the benefits and offers the worker $16 per hour:
the worker will be better off because $16 is more than $15.
the worker will be as well off because he or she is earning more than before.
the worker will be worse off because previously he or she was earning $17 including the benefit, but is now only earning $16.*
There is not enough information to answer this question.
Suppose a worker earns $14 per hour plus health benefits worth $2 per hour. If the employer withdraws the benefits and offers the worker $17 per hour:
the worker will be better off because $17 is more than the $16 he or she was earning in wages plus benefits.*
the worker will be as well off because he or she is earning more than before.
the worker will be worse off because previously he or she is no longer getting the benefits.
There is not enough information to answer this question.
In the United States, employer-provided health insurance distorts the choice between health care and other items because:
health insurance may lead to over-consumption of health care due to moral hazard.
employer contributions are tax exempt, thus reducing the price of insurance relative to other goods.*
workers believe that the health insurance is free.
answers (a) and (b) are correct.
Advocates of “single payer” national health insurance believe that it is desirable because.
it reduces administrative costs by reducing multiple forms that hospitals, clinics and nursing homes must fill out.*
it eliminates a wastefully competitive health insurance industry.
it provides less costly variety than would privately provided insurance.
can achieve economies of scale in providing insurance.
In the figure above, a monopolistic firm in the product market will initially optimize at point ___ and charge price ____:
E; P2.*
B; P3.
C; P1.
E; P4.
In the figure above, if mandated insurance benefits increase marginal costs to MC2, the firm will:
pass all of the increased costs along to the consumers in the form of increased prices.
optimize at point C, passing on part of the cost increases to the consumers, by raising the price from P2 to P1.*
take advantage of economies of scale by reducing the price from P2 to P3.
optimize at point A where MC1 equals demand.
When U.S. employers argue that health insurance expenditures make them uncompetitive with international competitors, they are:
correct, because these expenditures raise their costs.
incorrect, because the health benefits are part of the labor compensation package.
incorrect, because the burden of the benefits usually falls on the workers.
Answers (b) and (c) are correct.*
In the figure above, the more elastic the underlying demand for the good in the product market:
the larger the proportion of a mandated health benefit will be paid by producers.
the smaller the proportion of a mandated health benefit will be paid by consumers.
the burden of the mandate will be equally shared.
Answers (a) and (b) are correct.*
Medical savings accounts would reduce some of the current tax subsidy for health insurance by:
providing a fixed credit for health insurance irrespective of income.
inducing some of the uninsured to buy insurance.
refusing to subsidize larger, more comprehensive policies.
answers (a) and (c) are correct.*
Consumer directed health plans typically:
have low insurance deductibles.
have high insurance deductibles.
allow consumers to shop among alternatives and, in some cases, to recover some of the funds that they do not spend.
Answers (b) and (c) are correct.*
With consumer directed health plans:
all insured will be better off.
if the healthier people leave other plans, those remaining in the other plans may have to pay increased premiums.*
the uninsured will get better health care.
the uninsured will get better insurance.
In the figure above, loosening supplier regulations could move an equilibrium from point ___ to point ____.
B; A.
C; E.
E; C.*
Answers (a) and (c) are correct.
In the figure above, loosening supplier regulations, and managing demand could move an equilibrium from point ____ to point ____.
E; B.*
C; A.
A; B.
A; B.
In the figure above, loosening supplier regulations alone would reduce expenditures if:
the consumer demand elasticity is infinitely elastic.
the consumer demand elasticity is between 0 and -1.*
the supply elasticity is infinite.
the government controls prices.
Pay for performance (P4P) plans:
have proven successful in reducing health expenditures.
require detailed performance measures to be successful.*
have improved the Canadian health care system.
will always increase health care quality.
The Patient Protection and Affordable Care Act (PPACA) features the following:
an individual mandate for consumers to purchase health insurance.
a “Cadillac tax” on high-cost employer-provided health insurance.
a single payer for all medical expenses.
Answers (a) and (b) are correct.*
Under the Patient Protection and Affordable Care Act:
all U.S. residents will receive health insurance by 2018.
all U.S. citizens will receive health insurance by 2018.
approximately 32 million of the 50 million uninsured in 2010-2011 will receive health insurance by 2018.*
the U.S. government will provide health care to all citizens by 2018.
