One hypothesis for explaining the socio-economic disparities in health is known as the "direct income hypothesis." This theory states that health disparities arise because higher income individuals have more resources available to invest in health. In the context of the Grossman model, everything else held constant, we would expect For the higher-income individual to have a higher rate of health depreciation The Marginal efficiency of capital curve to be shifted inward (to the left) for the higher-income individual For the higher-income individual to have less productive time available. the PPF for the higher-income individual to be shifted outward compared to the lower-income individual
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- Preventive care is not always cost-effective. Suppose that it costs $100 per person to administer a screening exam for a particular disease. Also suppose that if the screening exam finds the disease, the early detection given by the exam will avert $1,000 of costly future treatment. a. Imagine giving the screening test to 100 people. How much will it cost to give those 100 tests? Imagine a case in which 15 percent of those receiving the screening exam test positive. How much in future costly treatments will be averted? How much is saved by setting up a screening system? b. Imagine that everything is the same as in part a except that now only 5 percent of those receiving the screening exam test positive. In this case, how much in future costly treatments will be averted? How much is lost by setting up a screening system?Atl Econ J (2013) 41:8991DOI 10.1007/s11293-012-9342-2ANTHOLOGYSocial Capital and Income Inequality in the UnitedStatesRati RamPublished online: 17 October 2012# International Atlantic Economic Society 2012Many scholars have explored in recent years various correlates and consequences ofsocial capital along with discussions of the concept. For example, relationship ofsocial capital with population happiness, health, income, economic growth, andhuman development has been researched by several scholars. However, very fewstudies have considered the relationship between social capital and income inequality.One exception to that is the recent work by Robison et al. (Journal of SocioEconomics, 2011) which proposed a theoretical link between social capital andincome distribution and conducted an empirical exploration for the U.S. states forthe census years 1980, 1990, and 2000. Their key measure of social capital wassomewhat narrowly focused on percent of households headed by a single female…Do you think Canada's universal health care program can alleviate problems caused by moral hazard and adverse selection in the private insurance markets? Why or why not? John's utility curve over total wealth is given by U(W) =VW (i.e. square root of W). Suppose that he has a 50% chance of being healthy. If he is healthy, he gets all his wealth-$10,000. If he becomes sick, he only has $3,600 remaining after medical expenditures. Calculate John's wealth and utility when he does and does not get sick, his expected utility, expected wealth, and his expected loss. Now he has the option of buying health insurance Calculate the maximum amount John would be willing to pay to fully insure against the cost of the sickness. How much is the actuarially fair and risk premium? Suppose that society consists of large, equal numbers of identical male and identical female consumers. Male consumers are similar to John; female consumers differ only in that they face a 25% probability of being sick, but…
- In the framework of the Grossman model, suppose there is an increase in the return in alternate non-health market investments. Draw what happens to the MEC curve and the optimal level of health. Explain intuitively why this might be the case in reality.What are the implications of the RAND Health Insurance Experiment results with regard to the production of health from medical care? Draw the implied PF for health outcomes given medical care, indicate (and explain) the point where the HIE suggests we are at. What does this imply with regard to health care cost containment polices like higher co-insurance rates?One curious finding from the RAND Health Insurance Experiment was that the rate of treated bone fractures per capita was higher in the group of families that had been assigned to the free insurance plan, compared with those in the high copayment plans. Concisely describe how the Grossman model might explain the fact that people facing higher prices for health care would break bones less often. Be sure to discuss the concept of marginal efficiency of health investment.
- [A] High-income Canadians tend to choose a higher desired health stock, even though they can afford more healthcare goods. Using the Grossman model, explain why this is the case. Use an appropriate graph to support your answer. [B] Suppose the funding agency switches both physicians' and hospitals' prospective payment to a system of retrospective payment, i.e., from salary to fee-for-service for physicians, and from global budget payment to activity-based funding for hospitals. Clearly explain each of these terms and how these changes will impact the utilization of physician and hospital services.Suppose Tim is deciding how much to invest in his health, and his Marginal Efficiency of Investment (MEI) curve for health inputs (H = hours spent exercising per week) is given by the following equation: H = 40 – 100(r+δ), where r is discount rate and δ is the rate of health capital depreciation. If Tim’s discount rate is 8% (or 0.08), and his rate of depreciation of health capital is 4% (or 0.04), how many hours per week will he spend exercising? Show your work. Now, suppose Tim gets a large raise at work, such that his hourly wage doubles. Would we expect his optimal level of health investment to change as a result? If so, how and why? Explain your answer using the theoretical framework.describe how COVID-19 may differentially affect families across the socioeconomic spectrum. That is, how might the consequences of COVID-19 for families with low SES be similar to or different from the consequences of COVID-19 for families with high SES?
- One of the most robust, fundamental “facts” of health economics is the SES and health gradient. a) Define the SES and health gradient. b) Give three ways in which the SES and health gradient is robust. c) Provide evidence that some of the gradient is correlational (i.e., give a potential confounder) and evidence that the gradient is in fact causal. d) i. Give an interpretation of Figure 1 below in layperson terms. ii. What pattern do you see for men vs women? iii. “The education and mortality gradient does not depend on healthcare spending or whether the country has universal healthcare.” Use Figure 1 to support or refute this claim.One major premise of the Rothschild–Stiglitz model is that there is a perfectly competitive market for health insurance. Suppose instead that the market is not perfectly competitive, and in fact competitor firms have a hard time entering the market. Could a pooling equilibrium occur in this case? What is it about competition that prevents pooling in the Rothschild–Stiglitz model? No formal proof is necessary, but do make your reasoning clear. Evaluate the following statement: competition in health insurance markets is harmful.Suppose that your utility function over health care (h) and other goods (c) is given by U(h, c) and that you have a fixed income of $100. (Assume that the indifference curves of your utility function bear the usual convex shape.) Each year, you choose h and c to maximize your utility subject to a budget constraint: phh+pcc=Ywhere ph is the price of health care, pc is the price of other goods, and Y is your income. In year 1, the price of health care is $1, while the price of other goods is $2. At these prices, you demand 30 units of health care and 35 units of other goods. In year 2, your utility function and your income do not change, but prices do. Health care becomes more expensive at $1.50, while other goods become cheaper at $1.50. At these prices, you demand 20 units of health care. a. Assuming you spend all your income in year 2, how many units of other goods do you buy?b. Draw a graph with your demand for health care on the horizontal axis and your demand for other goods on the…