Health economics, - Assignment Example

Health Economics a)π(q) = R(q)-C(q)= R-F-C(q)= R-1000-10q b) profits Quantity (q) 500 c) AC(q)= C(q)/q=1000+10q/q=1000+ 10(500)/500=12d) Q e)The hospital output increases as the hospital becomes an imperfect agent with the reimbursement schedule.2. a) Non-profit hospitals engage in charity care more than for-profit hospitals. They are also exempted from taxation while profit-making hospitals are taxed.b) The physicians are expected to maximize output so as to increase the income per doctor.

The non-profit hospital sets output levels that would ensure that members of staff reap maximum benefits. However, an increase in demand may increase prices but reduce output, resulting into lower staff sizes (Pauly & Redisch, 1973).c) According to Brill (2013), non-profit hospitals are actually high-end profit making institutions. This is because physicians’ bid to increase the income of medical staff has led to the non-profit hospitals increasing the prices for their health services. This impacts negatively on the poor who have no access to Medicaid or any form of health insurance.3. a) Indemnity health plans have higher premiums than HMOs due to two reasons: demographics and health status.

Indemnity plans have more older enrollees compared to HMOs. Secondly, older people suffering from a terminal illness are more likely to join indemnity than HMO (Altman et al, 2003). Alterman et al (2003) show this by analyzing the data collected from the two health plans.b) The weaknesses of this argument include the assumptions that HMOs negotiate for lower premiums and that they discourage sick people from enrolling with them. It is also taken for granted that HMOs offer lower intensity of treatment.4. a) (110,608-94,977/94,977)100% = 16.46%b) %age change in total visits=16.46%c) %age change in average prices = (55.61-49.67)/49.

67*100% = 11.96%d) %age change in average complexity of visits = total 2010-total 2007/total 2007*100% = 49320-35973/35973*100% = 37.10%e) Increase in spending was due to an increase in demand for the services, leading to the enlargement of staff.5. a) Ellis and McGuire make various recommendations on predictability and predictiveness. They state that the problem of rationing could be eliminated by identifying the problematic areas that inhibit complementarity of improving the quality of care.

They suggest that payment systems should be designed for plans that attempt to neutralize incentives to ration some services more tightly than others (Ellis & MacGuire, 2007).b) The demand elasticity for services play the role of fixing prices for healthcare services as well as determining the cost of care.c) Services vulnerable to over-provision: diagnosis, imaging, physician self-referralServices under-provided: blood transfusions, cancer screening.6. a) Mortality may decrease during recession because people lead healthier lifestyles during hard economic times than when there is abundance.

During recession, unhealthy lifestyles such as excessive smoking and drinking and consumption of junk food go down due to lack of sufficient finances among people. Consequently, mortality rates reduce.b) Ruhm uses evidence from a variety of econometric specifications which show that lifestyles become healthier when economic conditions worsen.c) This is because they have huge macroeconomic effects for groups of people such as heavy smokers and the physically inactive. There are numerous indirect changes, such as changes in sleep that accompany economic fluctuations.

Therefore, economic downturns affect much more than just the macroeconomic status of individuals and the country.7. a) Individuals pay so much from their pockets even if they have private health insurance because they are unable to buy comprehensive insurance.b) Most people with private insurance pay this much because it is the standard practice to charge exorbitantly in major hospitals in the US. There is no cheaper alternative.c) These people cannot apply for Medicaid because their incomes are too low: it would cost them a fifth of their salaries every month (Brill, 2013).d) The Affordable Care Act will solve such problems if enacted.

This is because it would provide comprehensive insurance to all Americans.e) Getting Congress to lobby for the provision of affordable healthcare to all. It would enable people who cannot afford comprehensive insurance have access to affordable medical care. However, it would cost the government more on providing healthcare to its citizens.8. demand supply equilibrium If the employer cancels the health insurance policy for his employees, market demand, market supply and quantity of labor hired by the firm will be affected.

Quantity of labor hired would go down since most employees would not work for an employer who does not pay for their health insurance. The average annual income paid per worker will increase due to the reduction in the insurance paid.9. a) ex ante: the concept that people have less incentive in maintaining their health when they know that somebody else will bear the financial consequences when they eventually become sick. People may therefore, drink and smoke more, exercise less often and eat unhealthy foodstuff.

Ex post: this is the idea that people will consume more medical care because the price of that medical care is lower.b) price demand curve Quantity Inefficiency curvec) Insurance affects the willingness to expend effort to avoid illness because people who have a medical insurance cover are likely to care less about their health as they know that should they fall sick, they would be taken care of by insurance.

On the other hand, insurance increases the demand for medical care as people are likely to consume more health services due to the resultant lower prices of medical care.d) Quantity This figure shows that an increase in demand will increase the constant marginal cost, hence, the supplier will take this opportunity to increase their prices.e) A trade-off between cost reducing and quality improving innovation shows that the presence of insurance may change the allocation of research and development towards cost increasing rather than cost reduction.

This is because insurance increases the demand for medical care as it enables many people to afford medical care. For this reason, the cost of providing medical care to people increases to meet this high demand.ReferencesBrill, S. (2013) Why medical bills are killing us. Special Report, Time Magazine.Ellis, R.P. and T.G. McGuire (2007), "Predictability and predictiveness in healthcare spending," Journal of Health Economics, 26: 129-51Pauly, M. and M. Redisch (1973), "The Not-for-Profit Hospital as a Physicians’ Cooperative," American Economic Review, 63(1): 87-99.