RAND study, two plans had full coverage for spending within the hospital, but one had a $150 deductible for ambulatory care. Th e plan with the ambulatory care deductible had a lower probability of hospital admission (0.115) per year than did the plan with full coverage for everything (0.128), even though both plans covered hospital care fully. (See Table 5.4. Page 120 of the Textbook: Health Economics Charles) What does this tell you about the use of hospital and ambulatory. Table 5.4. Hospital use in HIS

RAND study, two plans had full coverage for spending within the hospital, but one had a $150 deductible for ambulatory care. Th e plan with the ambulatory care deductible had a lower probability of hospital admission (0.115) per year than did the plan with full coverage for everything (0.128), even though both plans covered hospital care fully. (See Table 5.4. Page 120 of the Textbook: Health Economics Charles) What does this tell you about the use of hospital and ambulatory. Table 5.4. Hospital use in HIS

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter12: Medicare

Section: Chapter Questions

Problem 4QAP

See similar textbooks

Similar questions

In the RAND study, two plans had full coverage for spending within the hospital, but one had a $150 deductible for ambulatory care. Th e plan with the ambulatory care deductible had a lower probability of hospital admission (0.115) per year than did the plan with full coverage for everything (0.128), even though both plans covered hospital care fully. (See Table) What does this tell you about the use of hospital and ambulatory. Plan Admissionsper Year Inpatient Cost(1984 Dollars) C = 0 0.128 409 C=0.5 0.092 450 C=0.95 0.099 315 $150 individual deductible 0.115 373
In the RAND study, two plans had full coverage for spending within the hospital, but one had a $150 deductible for ambulatory care. The plan with the ambulatory care deductible had a lower probability of hospital admission (0.115) per year than did the plan with full coverage for everything (0.128), even though both plans covered hospital carefully. Based on the above, discuss the comparison between the use of hospital and ambulatory care and whether these two types of health care are substitute or complementary goods.
Let W represents an individual’s annual earned income and U(W) = (W/10)0.5 is this individual’s von Neumann-Morgenstern utility index (or utility function) . This individual earned income is $49,000. This individual faces the prospect of a 20% chance of needing health care, with a price tag of $13,000. Assume this person is risk averse. Also assume that the insurance company has only claim costs and that administrative costs are $0. The maximum health insurance premium this individual is willing to pay is??
Long-term disability (LTD) insurance policies cover workers who become disabled and can no longer perform their job functions. Workers who think they qualify as disabled can submit a claim to their employer for LTD payments to replace their lost wages. Below is an excerpt of the abstract of a recent NBER working paper entitled “Moral hazard and claims deterrence in private disability insurance” by David Autor, Mark Duggan, and Jonathan Gruber (2012): We provide a detailed analysis of the incidence, duration and determinants of claims made on private Long Term Disability (LTD) policies using a database of approximately 10,000 policies and 1 million workers from a major LTD insurer. . . . [W]e find that a higher [wage] replacement rate and a shorter waiting time to benefits receipt . . . significantly increase the likelihood that workers claim LTD. a. Higher disability claim rates when LTD benefits are more favorable may be an instance of moral hazard. Any instance ofmoral hazard…
For the adverse selection model by George Akerlof, for a given car, if the seller values the car at v, the buyer is willing to pay 1.6v. It is assumed that the value of a car for a seller lies uniformly between 0 to 2000 dollars. Demonstrate that a price of 1000 is not feasible.
Define the difference between moral hazard and adverse selection using an example. .
Suppose there are two types of people, high risk (H) and low risk (L) with utility function U(c) = c0.5 Each has income (=consumption) of $100. The high risk people are 10% of the population and have a 75% chance of getting cancer in which case their income would be zero. The low risk people are the remainder of the population and have a 25% chance of getting cancer and hence zero income. The private insurance industry is perfectly competitive. Insurers are afraid the government will take over the industry and decide to price in a different way. Mindful of the social consequences they will price so that the high risk is fully insured. What condition must be placed on the low-risk for this to be an equilibrium? What is the expected utility of the low-risk given the condition?
Multiple Choice Adverse selection describes a situation where an individual's demand for insurance is positively correlated with the individual's risk of loss. Adverse selection occurs when someone increases their exposure to risk when insured. This can happen, for example, when a person takes more risks because someone else bears the cost of those risks. The relationship between smoking status and mortality provides a good illustration for adverse selection, especially in the case in which a life insurance company did not vary its premiums according to smoking status of its customers. To counter the effects of adverse selection, insurers may offer premiums that are proportional to a customer's risk.
Suppose in a given state's new insurance marketplace, with community rating and no restrictions on who can buy at the community rate, the risk pool (distribution of expected health costs) is as follows: 30% of eligible enrollees' expected health costs = $1,000 (per year)65% of eligible enrollees' expected health costs = $2,0005% of eligible enrollees' expected health costs = $10,000 Now suppose one insurer, and one insurer only, were allowed to offer any premium it wanted to any potential buyer and to exclude those it did not want to cover? What premium would they likely charge and who would they sell to and who would they exclude? What would happen to the other insurers? Does this help you see why the ACA was written to apply to all insurers?
In economic terms, moral hazard is the negative relationship between the out-of-pocket price of the physician visit and the quantity of the physician visits demanded in a given time period. a.True b.False
Consider the model of competitive insurance. Peter is a risk averse individual with the utility function u(w) = w0.5. His current wealth is $300 and with probability 1/2 he will incur a loss of D = $240, but with probability 1/2 he will incur no loss. Ann has the same utility u(w) = w0.5 and current wealth $300 as Peter, but a different probability of loss: she will incur a loss of D = $240 with probability 0.3, and no loss with probability 0.7. In the separating equilibrium Peter is offered actuarially fair full insurance contract, so his wealth is equal to $180, whether loss happens or not. What amount of insurance (approximately) will Ann be offered an insurance contract with?
Suppose that there is asymmetric information in the market for used cars. Sellers know the quality of the car that they are selling, but buyers do not. Buyers know that there is a 30% chance of getting a "lemon", a low quality used car. A high quality used car is worth $30,000, and a low quality used car is worth $15,000. Based on this probability, the most that a buyer would be willing to pay for a used car is $___