Increasing Attention to the Elasticities of Demand for Health Plans - Assignment Example

Health economics Charles e Phelps Chapter 5 Answer Certain types of healthcare are seen as more price sensitive than many other forms of care. Preventive care along with pharmacy benefits are some of the example. In case of preventive care, different goods and services can serve as substitute products. When the price of one health care increases, consumers can shift away from the preventive health care towards substitute products like the nutritional supplements or healthy foods. Answer 2 There is an increasing attention in the elasticities of demand for health plans with changes in the cost of insurance or insurance plans increasing from a mean of 2.73 to 4.55 (Phelps 7). Answer 3 The income elasticity of demand is used to measure the responsiveness of consumers to changes in the level of their income. The demand for the product is income elastic if the consumer demand gets very responsive towards income changes, or income inelastic if the income changes introduce little effect on the demand. Health care demand is known to be elastic or inelastic in respect of income is a debatable question that has led to a large literature. Answer 4 Policy makers need to have elasticity estimates when proposing new benefit plans in order to understand the consumer responsiveness or elasticity with the changes in the price of the product of the service. Incorrect information could lead to welfare losses (Phelps 5). Answer 5 The Natural Experiments found that the number of visits were maximum in case of free visit plan. The outpatient expenses had increased by 67.48%. Similarly the total expenses in dollars had gone up by 44.59% (Phelps 7). Again, for the free plan, the admission per year was 0.128 and inpatient cost was $409 showing that these two were taken as complements and not substitutes (Phelps 10). Again according to the plan c= 0.95, it was found that the maximum spending rate was in the Free/Free for 200$ (Phelps 11). Again it was found that the maximum spending was 492$ for a non insurance plan where as for a free care plan it was 842$ (Phelps 12). This showed that demand increased as the scope for insurance plan also increased. Chapter 6 Answer 1 Doctors who own their own practice “employ far fewer aides than they should” as it gives them an opportunity to perform a dual role as principal labor and manager-owner that saves cost (Phelps 1). Answer 2 Patients are happier with the Non-Physician Primary Care because they get more time and attention and it also saves cost (Phelps 2). Answer 3 In a group practice, there are almost 80 members who attend the same job. The potential effects of shirking could be a poor health service by the physicians. Answer 4 The numbers of applicants have dropped from 3 to 1. The medical costs are higher OB/GYN. It is even higher for anesthesia (Phelps 2). These factors affect the post decision phase in choosing specializations. Chapter 7 Answer 1 The supply sides of the physicians are guided by the location whether it is in the rural area or urban (Phelps 1). Also the supply side is very poor with 2.7 physicians for 1000 individuals. Also the specialization of the doctors is not even in all disciplines (Phelps 1). Answer 2 Induced demand states that where the supply is more, the demand or consumption will also be more. This is consistent with the observation that where there are more physicians there will be more demand for them. Answer 3 Price discrimination occurs when different prices are charged for the same product from different consumers. Using price discrimination the physicians might charge extra amount showcasing their amenities or style of treatments (Phelps 3). This can lead to under treatment or over treatment going by the income status of the patient. Answer 4 Monopolistically competitive model in respect of the medical treatment by physicians means that the physicians may become monopolists by offering services which may not be actual substitute to each other. Patients relied more on amenities and quality and less on price. This proves the basis of the monopolistically competitive model. Answer 5 Patients search by phone calls or by consulting friends. They search after examining the price, quality, amenity and style of the physician. Patients switch patients after examining these features in the service of the doctor (Phelps 3). Also price discrimination is more in cities going by the difficulties in searching a physician and also the amenities they offer. Chapter 8 Answer 1 Hospitals are odd Ducks” in their organization as because there are many levels or hierarchies in the units with an individual authority assigned to each level. The main persons who make up the hospitals, the physicians have no permanent place in the hospitals (Phelps 1). Answer 2 Residual claimant is the person who is the owner of the stock holder. In a non profit organization the residual claimant could be anyone such as the workers, the clients and even the BoT (Phelps 1). The organization of a hospital helps in deciding whether they want to be a for profit or not for profit organization. Answer 3 The not for profit board is self replacing in nature. They choose their own replacements. They are mostly unpaid but are expected to provide money (Phelps 2). While deciding whether the hospital will treat more patients or avail superior amenity will depend on the decision of the majority. BoT gifts can guarantee more authority in decision making to the individuals. Answer 4 The number of admission increased from 36157 in 1975 to 37005 in 2005. There was a reduction in the number of the days of stay in the hospital. The inpatients in the days had reduced by half while the outpatients had almost tripled. The outpatient surgery rate had also increased (Phelps 3). Chapter 9 Answer 1 Hospitals have the scope of using things other than money to attract doctors and patients as they have better equipments which reduces cost and offer quality (Phelps 3). Hospitals tend to attract people by providing facilities such as better amenities in the form of room and food, better quality and price (Phelps 1). Answer 2 9.1 states that as demand increases cost rises and as a result the price also rises. 9.2 states the locus of the quality quantity combination. 9.3 U2 is the highest utility maximizing indifference curve provided feasibility is maintained. Answer 3 9.5 through the policy of product differentiation the hospitals generally attract the customer and increase the customer base in compliance with the monopolistic characteristics. Answer 4 A medical arms race can be created when hospital would attract a physician who would then convince a patient to visit the hospital which in turn would elevate the demand curve (Phelps 3). Answer 5 The demise of the American Hospital stated that the total number of “inpatient days” were declining due to shortened days, while the total admissions was rising (Phelps 4).also, demand was declining because of the reduced number in hospitals, lack of private rooms etc (Phelps 4). Answer 6 Nursing shortage arises because of the lack in amenities and hospitals. It is not the in availability of skilled workers but the proper utilization of these resources. Reference Phelps, Charles E. Health Economics. Prentice Hall. 2010 Read More