Health Economics - Assignment Example

Question 1 1)  {distributionof  health  expenditures}  Ranking  everyone  by  the  amount  spent  on   medical  care,  30  percent  of  the  total  (all  expenditures  for  all  people)  is  accounted  for  by  the  top  1  percent  ofpatients.  Take  the  overall  average  per  capita  personal  health  expenditure  and  determine  how  much  on  average  is  spent  on  each  of  these  highcost  patients.  The  top  half  of  the  population  accounts  for  90  percent  of  total  spending.  What  is  the  average  amount  spent  on  the  remaining  people  in  the  bottom  half  of  the  distribution?  Is  the  median  (i.e.,  amount  spent  on  the  person  who  is  at  the  middle  of  distribution,  with  half  of  all  people  spending  more,  and  half  of  all  people  spending  less)  higher  or  lower  than  the  mean? US expenditure of GDP is 73.1 million according to Getzen Hence amount spent on high cost patient = 30% of 73.1 million = 2193 Top half = 90% Hence average = 2193/90 = 24 million The median in which case will be 45%/2 = 22.5 million The mean is higher than the median Question two  {manpower}  Which  has  increased  more  rapidly  since  1929,  the  number of  physicians  or  the  number  of  ancillary  health  workers?  As  medicine  becomes  more  technologically  advanced,  which  will  grow  faster,  the  number  of  more skilled  workers  or  the  number  of  less skilled  worker Since 1929 the number of physicians has rapidly increased as compared to ancillary health workers. This is because of the magnitude to which macro-economic trends, GDP and personal income, influence physicians utilization according to the study carried by et al, 2003. As from this year, the GDP and personal income have been shown to increase thereby increasing the utilization of physicians. As more technological advances becomes of the medicine the demand for less skilled workers will reduce since technology have been shown to do more of the work. Intuitively, the number of skilled workers will grow faster because their labor is needed in supporting technological advancement.  Question 3 What  determines  the  value  of  a  knee  brace?  How  can  an  economist  maintain  that  I  am  better  off  if  I  paid  $7,000  for  an  operation  that  made  my  twisted  knee  worse  rather  than  b Just like any goods and services, the value of knee brace is determined by the market forces, that is demand and supply. When the demand is high and supply is low, the value is likely to increase in the market. The operation is a medical service already offered and therefore would require a compensation in form of $7,000. This puts the patient in a better place since he or she has received a service which was really needed and at the same point has paid for it. Question 4  If  the  price  of  office  visits  increases  from  $20  to  $22,  and  the  number  of  visits  per  family  per  year  declines  from  12  to  10,  what  is  the  arc  price  elasticity  of  demand? Arc price elasticity = -0.1818/0.09523 -1.909 hence elastic Question 5 In  the  year  2005,  in  Anytown,  suppose  that  one  person  is  willig to  pay  $1,000  for  relief  from  hay  fever;  another  two are  willing  to  pay  $350;  about  five  more  are  willing  to  pay  $50; one  is  willing  to  pay  $40;  one  is  willing  to  pay  $35;  one  each  is  willing  to  pay  $34,  $32,  $30,  and  $28;  about  a  dozen  are  willing  to  pay  $10;  four  are  willing  to  pay  $5;  and  half  of  the  rest  of  the  town  (another  75  people)  are  willing  to  pay  $1 Price Quantity demanded $1,000   1 $350 2 $50 5 $40 1 $35 1 $34 1 $32 1 $28 1 $10 12 $5 4 $1 75 If provided to everybody that asks for it, there would be increased demand for the relief from hay fever but at reduced potential benefit because of the lower prices. This is because the increased demand will diminish the supply at lower prices. If provided to those willing to pay 35 and above, the potential benefit will still be low since this will serve only a few, less than a quarter of the population. At $20 the quantity demanded will be 65 At 50 the quantity demanded will be 60 At 5 the quantity demanded will be 70 Question 6 s  is  Quantity  =  10  – (0.2  *  Price) Quantity 9 8 7 6 5 price 5 10 15 20 25 At a price of 10 the quantity demanded is 8 At a price of 25 the quantity demanded is 5 At a price of 30, she would buy 4 visits At a price of 10, she would buy 8 visits Shift in demand after subsidy Quantity 9.5 9 8.5 8 7.5 price 5 10 15 20 25 DD 2.5 5 7.5 10 12.5 Between 5 and 6 = 9 -8.8/6-5 = 0. 2 hence the demand is price inelastic At around 30 = the demand is price elastic At around 30 = 5 – 4/30 – 25 = 0.2 At around 30 = 4.5 – 4/30 – 27.5 = 1.25 When half subsidized, the elasticity at around 30 becomes elastic as compared to the original when the elasticity was inelastic. Question 7 Qd = 200 - 2*P Qs = 50 quantity 20 40 60 80 price 160 120 80 40 At the point where the curves intersect, Equilibrium price = 50 Equilibrium quantity = 75 Question 8 The expected value for rehabilitation = 70% x 6000 = 4200 Without treatment = one year 20% die in hospital Hence 100 – 20 = 80% 80% partially or fully recover in the hospital Partially recover = 80% - 25% = 55% Expected value for additional years = 55% of 10 + 25% of 20 = 10.5 This implies that the expected value expressed as addition years of life is ten and half years. Question 9 patient cost life gained per month A 8000 2 4000 B 8000 6 1333.333 C 8000 1 8000 D 8000 5 1600 E 8000 4 2000 TOTAL 40000 18 16933.33 The average cost per year of life gained = 16933.33 x 12/18 = 11288.89 Patient B should be considered because of the low cost assurance. Marginal curve Demand curve Question 10 Research and development: This factor affects the US expenditure in health since the innovation of new medicines is essential and needs to be funded. This also affects the increase in demand Aging population: The aging population affects the rotation of the demand curve because of the funds required to support the increased mortality. Malpractice insurance: apart from the government, money used to fund healthcare expenditures arise from insurance hence any malpractice leaves the government with the only option of increasing its expenditures. Read More