Homework 1 Essay

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Q2: Problem 3 (Chapter 1 Appendix) on textbook pp. 34 (10%)
Victor Fuchs (1996) lists the following questions in an article in The Wall Street Journal. Identify whether the following questions involve positive or normative analysis. All the questions deal with a Republican plan to reform Medicare, the public health insurance program for the elderly. A. How many Medicare beneficiaries will switch to managed care? B. How much should the younger generation be taxed to pay for the elderly? C. Should seniors who use less care benefit financially, or should they subsidize those who use more care? D. How many Medicare beneficiaries will switch to medical saving accounts? E. What effect will these changes have on utilization?


F. How much
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Assume that a person pays full cost for either drug and chooses TPA over streptokinase. Another otherwise identical person makes the opposite choice. Use the willingness-to-pay approach to calculate the difference in the value of their lives (assume that dosage requirements are the same).

Q6: Problem 12 (Chapter 3) on textbook pp. 87 (15%)
Given this information, answer the following questions. Cost $100,000 $250,000 Effectiveness 4 life-years gained 10 life-years gained

Current Treatment New Treatment

A. Calculate the ICER for the new treatment, assuming that the new treatment would replace the old one. B. In what quadrant is the ICER located in Figure 3-4? Is cost effectiveness analysis relevant? C. How does the answer change if the cost of the new treatment equals $75,000?


Q7: Problem 3 (Chapter 5) on textbook pp. 135 (10%)
Describe the demand curve shift (rightward or leftward) about how the following changes would affect the demand for inpatient services at a hospital in a large city. A. Average real income in the community increases. B. In an attempt to cut costs, the largest employer in the area increases the coinsurance rate for employee health coverage from 10 percent to 20 percent. C. The hospital relocates from the center of the city, where a majority of the people live, to a suburb. D. A number of physicians in the area join together and open up a discount-price walk-in clinic; the cross-price elasticity of demand between physician

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