Chapter 5 - The Economics of Health and Healthcare, 7/E

Chapter 5 – Production of Health Key Ideas Health care is a factor in producing health, but while health care makes a difference, other factors (life-style, nutrition, and sanitation) often make a much larger difference. Although health care may not always impact mortality (death rates), it may have a substantial impact on morbidity (illness). Depending on how effective health care is in improving health, a society may wish to reallocate resources toward or away from health care. Recent analyses suggest, however, that based on willingness to pay, many procedures may be very highly valued, even if they come at high marginal cost. The accompanying diagram indicates this. Teaching Tips One can start a lively discussion about health care and hospitals in historical perspective. The modern hospital dates only back to the beginning of the twentieth century – before that, hospitals were often breeding grounds for illnesses. One can also discuss the vast differences in mortality experience in our time versus one or two hundred years ago. Students may know that the number of children reared by their grandparents or great grandparents was much larger than it is today. Why was this so? Although iatrogenic (provider-caused) disease seems counter-intuitive, students may be able to recount adverse reactions to prescription drugs. As another example, the elderly often forget which drugs they are taking, and providers may prescribe drugs that conflict with other. Students like Fuchs’s Utah-Nevada comparison. Even though the original study appeared over forty years ago, the descriptions and discussions are still valid. Instructors may wish to have the students update the numbers. Chapter 5 – Production of Health - Multiple Choice Inputs Health Status Marginal Product Average Product 1 20 20 20 2 28 ___ 14 3 33 5 11 4 36 3 ___ 5 36 0 7.2 In the chart above, the marginal product of the second unit of the health care input is ___ units of health status. 7 8* 20 28 In the chart above, the average product after the fourth unit of the health care input is ___ units of health status. 0 3 6 9* When marginal products approach 0: average cost rises quickly. marginal cost rises quickly.* marginal valuation plummets. answers (a) and (b) are both correct. Health status is maximized when the: marginal products of health care inputs are maximized. average products of health care inputs are maximized. marginal products equal the average products. marginal products of health care inputs equal 0.* Society’s well-being is maximized when the: marginal products of health care inputs are maximized. average products of health care inputs are maximized. marginal products equal the marginal benefits.* marginal products of health care inputs equal 0. Consider the following hypothetical table of benefits and costs for health production for the people in the society. Age Total Benefits (in $) Total Costs (in $) 75 100 10 76 120 12 77 138 15 78 154 19 79 168 25 80 182 33 81 194 43 82 204 55 83 212 75 84 218 105 85 222 150 According to the table above, the total benefits for the people in society are maximized at age: 75 80 83 85* In the table above, policy-makers should spend ___ dollars because ____. 10; it is the least cost solution 43; past this level, marginal costs exceed marginal benefits* 150; it maximizes total benefits Answers (a) and (c) are correct If the current lifespan is 80 years, policy-makers should _____ allocations to health care because _____. increase; marginal benefits exceed marginal costs decrease; they are spending enough on health increase; total benefits exceed total costs* Answers (a) and (b) are correct Figure 5-2 in the text indicates that the world’s population is expected to have increased by __ billion or roughly ____ percent from 2010 to 2040. 2; 33. 3; 50.* 6; 66. 8; 100. Providing increased levels of health care resources may decrease health if: some resources (like drugs) negate the effectiveness of others. consumers reduce non-health care resources (like exercise). consumers continue do not control their caloric intake. answers a and b are correct.* The following did NOT contribute to the reduction of mortality rates in the 19th century. improved nutrition. the development of antibiotics.* improved sanitation with respect to airborne diseases. improved sanitation with respect to waterborne diseases Suppose in a given country that the expected life span is 50 years. Health policy-makers increase health care spending by 10% and the life span rises to 51 years. The elasticity of life span with respect to health care spending is: +0.0. +0.1. +0.2.* +1.0 Suppose in a given country that the expected life span is 70 years. Health policy-makers increase health care spending by 10% and the life span rises to 71 years. The elasticity of life span with respect to health care spending is: 0. .* +1. Fuchs’s Utah-Nevada comparison implies that _________ makes the largest difference in the production of health. geography health care life style* climate. In some pioneering work, Hadley calculated that the elasticity of mortality with respect to cigarette sales was 0.053. This implies that: doubling cigarette sales increases health by 5.3%. halving cigarette sales increases health by 2.65%.* increasing cigarette sales by 1% decreases health by 5.3%. decreasing cigarette sales by 1% decreases health by 5.3%. In Table 5-3 of the text, the high explained variation in the analysis of reduced neonate mortality suggests that: some treatments helped blacks but not whites. given current levels of health care at the time, white variation was more random than was the black variation.* the WIC program was unproductive for either whites or blacks. answers (b) and (c) are correct. In Table 5-4 of the text, comparing free care to family deductible represents a ________ difference in work loss days. This difference __________ statistically significant. 0.65; is. 0.65; is not.* 0.87; is. 0.87; is not.  0 8 12 24 time spent on health time spent on other goods Consider the diagram above, in which Mary can produce health status or other goods with 24 hours of time. Her optimal allocation to health production is: 0 hours 8 hours 12 hours* 24 hours Suppose that the prices of non-health goods fall. Using the diagram with problem 18, the optimal allocation to health production: stays the same increases decreases* is not affected by schooling. Suppose that schooling increases the marginal utility of health. Using the diagram with problem 18, the optimal allocation to health production: stays the same increases* decreases is not affected by schooling. Mortality refers to ____ whereas morbidity refers to ______. death rates; disease rates.* disease rates; death rates. fertility rates; illness rates. levels of illness; levels of nutrition. If a health care initiative does not impact mortality but reduces morbidity: it is not productive because mortality is the only appropriate measure of health status. it is are not productive because improvements are hard to measure. it is only productive if people can earn more money. it may be productive to society if people feel better.* Studies have found that higher levels of prescription drug use are positively correlated with life expectancies. This means that: prescription drugs are productive in improving people’s health.* people with higher incomes consume more prescription drugs. national health insurance leads people to buy more prescription drugs. countries should shift their spending from education to prescription drugs. Schwartz and Dockery (1992) find that reducing the pollution level in Philadelphia by the 100 micrograms per cubic meter would reduce deaths _______ in the general population and ______ for the elderly. by insignificant amounts; by 5 percent. by more than 2 percent; by more than 7 percent. by more than 6 percent; by nearly 10 percent.* by over 11 percent; by nearly 15 percent. Economists are finding social capital to be an important determinant of health. Which of the following forms of capital would not be considered a form of social capital? exercising by oneself at the health club.* hanging around with classroom peers. belonging to a church group. working on a neighborhood crime patrol. Economists generally focus on schooling rather than education because: they measure the same thing. although education includes both formal and informal training, including schooling, schooling is easier to measure.* schooling is more important than education. it is easier to focus policies on schooling. A person with a high discount rate values: money more than education. the future relative to the present.. the present relative to the future.* education relative to money. Someone with a low discount rate would likely : value health care rather than a new car. value education rather than a new car. value a new car rather than health care. answers (a) and (b) are correct.* Lleras-Muney found that in the first part of the twentieth century education experience ___ average life years by about ____ years. decreased;0.1. increased; 0.7. increased; 1.7.* increased; 7.0. If a $100 billion increase in funding for health care increases average life years by 0.76 life years: it is a poor investment. it may be a good investment, depending on the alternative uses of the funds.* it is a good investment only if it helps the poor. the funds would be better spent on schooling.