Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 12, Problem 15PAA
To determine
To know: The reason for controversial legislation.
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The president-elect of healthystate appointed you on top of a health transition team and requested a new health policy that will ensure equity, liberty, and minimize the cost of implementing it. In addition, the president-elect wants to minimize the role of the government under the new policy.
With Moral hazard and adverse selection problems being the major challenges to any policy, design a plan that provides equity to the public, eliminate adverse selection problem, and combat moral hazard. In addition, identify parties that would be tasked with the implementation of the policy while minimizing the role of the government in the process.
Approximately __________ million Americans are without health insurance.
Insurance coverage has been shown to diminish the importance of time in the decision about how much medical care to seek and which providers to use.
True OR False
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Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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- In the mid-1990s, the state of New Jersey revised its rules for the individual insurance market and began requiring that insurers charge the same premiums for the same coverage to all applicants. Assuming that insurers had previously used medical underwriting, which of the following is a predictable consequence of adverse selection? 1) Insurance becomes less attractive to the healthiest individuals, so fewer of them buy it 2) Insurers’ average costs of providing coverage increase because of a changing risk pool 3) The average age of those buying in the individual market goes up 4) All of the abovearrow_forward_____ is when everyone in a country is covered by insurance that is run and administered by the government. This strategy is effective at combatting _____. a. Means tested health insurance; adverse selection b. Universal public health insurance; adverse selection c. Universal public health insurance; moral hazard d. Compulsory insurance; moral hazard e. Compulsory insurance; monopoly pricing f. Means tested health insurance; moral hazardarrow_forwardLife insurance companies require applicants to submit to a physical examination as proof of insurability prior to issuing standard life insurance policies. In contrast, credit card companies offer their customers a type of insurance called “credit life insurance” that pays off the credit card balance if the cardholder dies. Would you expect insurance premiums to be higher (per dollar of death benefits) on standard life or credit life policies? Explain.arrow_forward
- Which option is the most effective for companies and employees: a standard fee-for-services health care insurance option or a high-deductible health insurance plan.arrow_forwardTo receive coverage for bodily injury resulting from an accident with a stolen vehicle, an individual should purchase which of the following coverage? please read the question carefully? Medical payment Uninsured Motorists Bodily injury liability Property damage liabilityarrow_forwardThe following is an excerpt from "The Labor Market Effects of Rising Health Insurance Premiums," by Katherine Baicker, Amitabh Chandra. If workers in a certain sector of the economy or those who are married are systematically more likely to have different levels of unobservable characteristics that affect health insurance premiums, then such a correlation is possible. This problem is identical to the standard endogeneity problem in program evaluation, where receipt of the treatment is correlated with unobservable characteristics of the person receiving treatment. A solution to this problem is to instrument for imputed premiums using variables that are uncorrelated with εi and mi but are correlated with imputed health insurance premiums. In our analysis we use state‐level, per‐capita medical malpractice payments as an instrument for imputed premiums. In other words, in order for malpractice payments to be a valid instrument for health insurance premiums, it must be the case that…arrow_forward
- Which of the following is a provision of the Patient Protection and Affordable Care Act? Group of answer choices Insurance companies may not legally deny coverage to anyone on the basis of a preexisting medical condition. Every firm must purchase health insurance for their employees or face a $2,000 fine per employee. Every individual must purchase their own health insurance for themselves and their dependents or pay a fine. Adult children of parents with employer-provided health insurance can remain covered by their parents' insurance through age 35.arrow_forwardSuppose that the graph below illustrates the demand for healthcare services given a coinsurance plan of 25%, what would be the expected change if the participant changed jobs and received a plan with 100% coinsurance?arrow_forwardThe fact that most medical care purchases are financed through insurance: a. has no effect on health care consumption because aggregate costs are the same regardless of payment method. b. reduces the amount of health care consumed by raising the price of additional units of care. c.has decreased health care costs and therefore reduced aggregate health care expenditures. d. increases the amount of health care consumed by reducing the price of additional units of care.arrow_forward
- Draw a demand and supply diagram and use it to explain the effects of occupational licensure of physicians on the quantity, quality of care, and income of physicians in the market for physician services.arrow_forwardWhich of the following is a reason for the prevalence of employer-sponsored health insurance in the US? It offers a way to pool risk (wrong) Wage controls in WWII made employer sponsored health insurance more common. (wrong) all are possible reasons Firm specific human capital helps reduce adverse selection.arrow_forwardEven though the total cost of an uninsured hospital stay is lower, why would an uninsured person actually end up paying more than those with insurance?arrow_forward
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