Questions and Answers of Economics For Healthcare Managers

Why are many economists opposed to licensure of medical facilities and personnel?
Identify circumstances in which both public and private regulation are present. Which serves consumers better? Why?
Find out who is on the board of the licensing agency for one of the health professions for your state. Does the board include more members of the profession being regulated or more consumers?
You will receive a $10,000 insurance payment in two months. If you are willing to pay for expedited handling, you can be paid in one month. Would you be willing to pay $50? $100? $200? More?
More than two-thirds of the millions of children without health insurance appear to be eligible for Medicaid or the Children’s Health Insurance Program (Kenney et al. 2015). For many of these
You will receive a $20,000 insurance payment in 12 months. If you are willing to accept a reduced payment, you can be paid in 11 months. Would you be willing to
What annual interest rate is implied by your answer to exercise 18.1? You calculate this rate by dividing $10,000 by the difference of $10,000 and the amount you are willing to pay for expedited
How could you use behavioral economics to increase the number of insured employees in your firm?
How likely is someone aged 25 to 44 to have an emergency department visit? What is the probability of having two visits? What is a typical charge for an emergency department visit? On the basis of
What was your forecast of emergency department spending in exercise 18.7? Your forecast should equal the probability of one emergency department visit times the typical charge plus the probability of
A town has two hospitals. One averages 30 births per day; the other averages 15. Overall, half of the babies are boys, but some days more than 60 percent of the babies are boys. Is either hospital
Eighty percent of the participants at a meeting are physicians. The rest are nurse practitioners. Your neighbor Amy is there. She is 40, married, and highly motivated. Colleagues have told you that
Will you be in the top half of your class or the bottom? What proportion of your classmates will forecast that they will be in the top half? What implications does this scenario have for decision
To reduce the costs of resolving insurance disputes, insurers have required that customers use arbitration. Arbitrators are required to be knowledgeable about medicine and insurance contracts. Why
How might the Food and Drug Administration be subject to capture? Who would be likely to capture the agency?
Hospital privileges usually restrict what physicians can do. Medical licenses do not. What drives this difference?
Consumers Union, the Leapfrog Group, and the US Department of Health and Human Services have websites that provide consumer information about hospitals. Why are multiple sources of information
Give an example of a healthcare product that is financed by the government but produced by private firms. Can you explain why this arrangement exists?
Many struggle to change health-related behaviors. One reason is that people seeking to lose weight, increase exercise, or stop smoking act in a time-inconsistent manner. For example, someone joins a
What annual interest rate is implied by your answer to exercise 18.2? Is it the same as the rate in exercise 18.3? Why would this comparison matter?Exercises 18.2You will receive a $20,000 insurance
How are exercises 18.1 and 18.2 different? How are your answers to them different?Exercises 18.1You will receive a $10,000 insurance payment in two months. If you are willing to pay for expedited
You have finished interviewing candidates for an assistant director position. One of them stands out as the best candidate to you. You know that this view sets you up for confirmation bias as you
Your vice president is an accountant and believes that accountants make the best practice managers. One of the three finalists for a practice management role has an accounting background. Everyone on
Thirty-four percent of the employees in your health system are obese, and 16 percent of their children are obese as well. Obese employees are less productive, have higher medical costs, and miss more
The United States spends far more than other wealthy industrial countries but has poorer outcomes. Spending per person is more than double the spending per person in Canada, France, and the United
What is wrong with spending 17.2 percent of GDP on healthcare?
Should reducing overhead costs associated with insurance be a priority?
US national health expenditure was $7,892 per person in 2008 and $10,364 in 2016. The Consumer Price Index had a value of 210.228 in 2008 and a value of 241.432 in 2016. In 2016 dollars, how much was
How did the state and local government share of national health expenditures change between 2010 and 2016? What accounts for this change? Go to the “Actuarial Studies” page on the CMS website
Spending on pharmaceuticals rose from $253,080 in 2010 to $328,588 in 2016. Go to the inflation calculator (http:// cpiinflationcalculator.com/) and calculate 2010 spending in 2016 terms.
When was the last year that GDP grew faster than national health expenditure? Go to the CMS website (www.cms.gov/Research- Statistics-Data-and-Systems/Research-Statistics-Data-and-Systems. html) to
Your accountants tell you that the cost to set up an immunization program at a preschool and immunize one child against polio is $400. The cost to immunize 20 more children is $460 more. What is the
A new treatment for cystic fibrosis costs $2 million. The life expectancy of 1,000 patients who were randomly assigned to the new treatment increased by 3.2 years. What is the cost per life year of
In 2012 Oregon launched an ambitious redesign of its Medicaid program. It created a statewide network of coordinated care organizations, which are similar in some respects to accountable care
Why is health insurance necessary?
Why has the share of healthcare output produced by hospitals risen? Will this trend continue? Can you think of a policy or technology change that would reduce hospital use? Can you think of a policy
Mechanics usually have better information about how to fix automobiles than their customers do. What problems does this advantage create? Can mechanics or their customers do anything to limit these
Income is a possible explanation. Income per capita is higher in the United States than in the other five countries discussed in case 1.2 (World Bank 2017). This extra income could result in
Why is the idea that value depends on consumers’ preferences radical?
Which of the plans in exercise 1.3 would impose the larger burden on those with incomes under $25,000: a mandatory insurance plan financed via premiums, via the income tax, or via a payroll
A mandatory health insurance plan costs $4,000. One worker earns $24,500 in employment income and $500 in investment income. Another worker earns $48,000 in employment income and $2,000 in investment
The following table shows data for Australia, the United Kingdom, and the United States.a. How did life expectancy at birth change between 2010 and 2015?b. How did expenditure per person change
Which of the preceding questions can you answer using positive economics? For which of the preceding questions must you use normative economics?
Johnson County and Wyandotte County are adjacent counties in the Kansas City metropolitan area. Despite significant progress in recent years, the rate of premature death in Wyandotte County is more
Americans spend more on smartphones than the citizens of other countries do, yet this type of spending is seldom described as a problem. Why is spending more on healthcare different?
Identify a product that is one organization’s output and another organization’s input.
Can you think of any initiatives that reflect the input view of healthcare?
Starting a mobile clinic costs $300,000. The additional cost of serving the first patient is $40. What is the average cost of serving the first patient?
Setting up nurse practitioner clinics to serve 20,000 newborns in Georgia would cost $6 million. This program would increase life expectancy at birth from 75.1 years to 75.3 years. How many life
The conflicting incentives of FFS and capitation present significant problems for integrated health systems like Geisinger Health System of central Pennsylvania. Indeed, after its merger with Penn
Explain how adverse selection and moral hazard differ, and give an example of each.
Some consumers are overinsured, yet some are underinsured. Millions are clearly uninsured. What do you think these concepts mean?
A radiology firm charges $2,000 per exam. Uninsured patients are expected to pay list price. How much do they pay?
Should health insurance continue to be employment-based for most Americans?
A radiology firm charges $2,000 per exam. An insurer’s allowed fee is 80 percent of charges. Its beneficiaries pay 25 percent of the allowed fee. How much does the insurer pay? How much does the
A surgeon charges $2,400 for hernia surgery. The surgeon contracts with an insurer that allows a fee of $800. Patients pay 20 percent of the allowed fee. How much does the insurer pay? How much does
A community has four residents. The table shows the number of dental visits each resident will have. Calculate the total quantity demanded at each price. Then graph the relationship between price and
If the radiology firm in exercise 3.6 raised its charge to $3,000, how much would the insurer pay? How much would the beneficiary pay?Exercise 3.6A radiology firm charges $2,000 per exam. An
Should medical services be free? Justify your answer.
How would the calculation in exercise 3.13 differ for a worker who earns $500,000 and lives in Vermont? This worker faces a state income tax rate of 9.5 percent and a federal income tax rate of 35
During the last five years, average daily occupancy at the Autumn Acres nursing home has slid from 125 to 95 even though Autumn Acres has cut its daily rate from $125 to $115. Do these data suggest
How would each of the following changes affect the demand curve for acupuncture?a. The price of an acupuncture session increases.b. A reduction in back problems occurs as a result of sessions about
Your hospital is considering opening a satellite urgent care center about five miles from your main campus. You have been charged with gathering demographic information that might affect the demand
A clinic focuses on three services: counseling for teens and young adults, smoking cessation, and counseling for young parents. An analyst has developed a forecast of the number of visits each group
Your boss has asked you to describe how the demand for an overthe- counter sinus medication would change in the following situations. Assuming the price does not change, forecast whether the sales
Your firm, which operates a nationwide system of cancer clinics, has annual profits of $800 million and cash reserves of $500 million. Your clinics have a replacement value of $200 million, and fire
A physical therapy clinic faces a demand equation of Q = 200 − 1.5 × P, where Q is sessions per month and P is the price per session.a. The clinic currently charges $80. What is its sales volume
In August 2015 Turing Pharmaceuticals raised the price of Daraprim from $13.50 a tablet to $750, an increase of 5,456 percent (Over and Silverman 2015). Daraprim is the only available treatment for
The price–quantity relationship has been estimated for a new prostate cancer blood test: Q = 4,000 − 20 × P. Use a spreadsheet to calculate the quantity demanded and total spending for prices
Researchers have concluded that the demand for annual preventive clinic visits by children with asthma equals 1 + 0.00004 × Y − 0.04 × P. In this equation Y represents family income and P
Refer to exercise 6.1. What would average spending be if low-risk patients were 92 percent of the population?Exercise 6.1An insurance market consists of high-risk patients, who average $40,000 in
One in five adults is obese in wealthy countries around the world. Unfortunately, in the United States, the rate is about two in five (Organisation for Economic Cooperation and Development [OECD]
Why are price elasticities of demand called “elastic” or “inelastic” when other elasticities are not?
Why is the demand for healthcare products usually inelastic?
Per capita income in the county was $40,000, and physician visits averaged 4.00 per person per year. Per capita income has risen to $42,000, and physician visits have risen to 4.02 per person per
Sales were 4,000 at a price of $200 but fell to 3,800 when the price was increased to $220. Calculate the percentage change in sales, the percentage change in price, and the price elasticity of
Average visits per week equal 640 when the copayment is $40 and 360 when the copayment rises to $60. Calculate the percentage change in visits, percentage change in price, and price elasticity of
Per capita income in the county was $45,000, and physician visits averaged 5.0 per person per year. Per capita income has risen to $49,500. The income elasticity of demand for visits is 0.4. By what
The price elasticity of demand is −1.2. Is demand elastic or inelastic?
Why are elasticities useful for managers?
The price elasticity of demand is −0.12. Is demand elastic or inelastic?
If the income elasticity of demand is 0.2, how would the volume of services change if income rose by 10 percent?
You are a manager for a regional health system. Using an estimate of the price elasticity of demand of −0.25, calculate how much ambulatory visits will change if you raise prices by 5 percent.
If the cross-price elasticity of clinic visits with respect to pharmaceutical prices is −0.18, how much will ambulatory visits change if pharmacy prices rise by 5 percent? Are pharmaceuticals
If the cross-price elasticity of clinic visits with respect to emergency department prices is 0.21, how much will ambulatory visits change if emergency department prices rise by 5 percent? Are
If the income elasticity of demand is 0.03, how much will ambulatory visits change if incomes rise by 4 percent?
A study estimates that the price elasticity of demand for Lipitor is −1.05, but the price elasticity of demand for statins as a whole is −0.13.a. Why is demand for Lipitor more elastic than for
Your data for the clinics in exercise 9.1 suggest that clinic 2 is operating at capacity and is highly efficient. Its output is unlikely to increase. Furthermore, clinic 4 has unused capacity but is
The price elasticity of demand for the services of Kim Jones, MD, is −4.0. The price elasticity of demand for physicians’ services overall is −0.1.a. Why is demand so much more elastic for the
More and more healthcare institutions seek to reduce costs while increasing the quality of care. Accurate forecasts of the use of medical supplies represent an important element of this effort.
Your data for the clinics in exercise 9.1 suggest that clinic 2 is operating at capacity and is highly efficient. Its output is unlikely to increase. Furthermore, clinic 4 has unused capacity but is
The table lists visits for each of the four clinics operated by your system. You anticipate that volumes will increase by 4 percent next year. Forecast the number of visits for each clinic, and
Business plans require a sales forecast. Scott Fishman, the CEO of Envisage, sees three common mistakes in business plans (Fishman 2015):• They forecast “hockey stick” revenue growth.• They
A major employer has just added health insurance coverage for its employees. Consequently, 5,000 of your patients will pay a $30 copayment rather than the list price of $100 per visit. These patients
You estimate that the price elasticity of demand for clinic visits is −0.25. You anticipate that a major insurer will increase the copayment from $20 to $25. This insurer covers 40,000 of your
The following table shows data on asthma-related visits. Is there evidence that these visits vary by quarter? Can you detect a trend?A powerful test would be to run a multiple regression in Excel.
The supply function for the product in exercise 10.7 is 160 + (0.9 × P). P is the price received by the seller. At the equilibrium price, the quantity demanded will equal the quantity supplied.a.
Use the data in exercise 9.7 to answer these questions:a. Calculate the naïve estimator, which is Qt = Qt − 1.b. Calculate the two-period moving-average forecast.c. Calculate the mean absolute
Consumers who can buy health insurance through an employer get a tax subsidy. Use demand and supply analysis to assess how this subsidy affects consumers who cannot buy insurance through an employer.
Sales data are displayed in the table.a. Calculate the naïve estimator, which is Salest = Salest − 1.b. Calculate the two-period and three-period moving averages.c. Calculate the mean absolute

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