Chapter 13, Problem 8QAP

MGMT Hospital Inc is a private concern that recently opened it doors to the public in the suburbs amidst heavy traffic.  There are hardly any quiet nights.  Sirens are a constant feature.  However, once inside, there is just the hustle and bustle of hospital staff going back and forth.  A hospital readmission is when a patient who is discharged from the hospital, is re-admitted again within a certain period of time. Hospital readmission rates for certain conditions are now considered an indicator of hospital quality, and also affect the cost of care adversely. For this reason, Centers for Medicare & Medicaid Services established the Hospital Readmissions Reduction Program (HRRP) which aims to improve quality of care for patients and reduce health care spending by applying payment penalties to hospitals that have more than expected readmission rates for certain conditions. Although diabetes is not yet included in the penalty measures, the program is regularly adding new disease…

One of the major difficulties facing the health insurance industry is that the people who are young and healthy see no need to buy insurance. The result of this tendency is that the people who want health insurance are the people that the insurance companies have the least desire to insure. The government's solution, under the Affordable Care Act (also known as Obamacare), was to simply mandate that all people must have health insurance. Unfortunately, this mandate did not yield the hoped for results of keeping one's doctor and cutting medical expenditures by $2,500 per family per year. (Infact, premiums have been rising.) Thus more reform is being talked about Please explain the economic impact of the following reform proposals: 1. Decouple insurance from employment (allowing people to shop for their own insurance like we do for car insurance). 2. Allow insurance companies to screen applicants. 3. Allow consumers to signal that they are low-risk through the purchase of high-deductible…

In Year 1, Better Sleep Company began to receive complaints from physicians that patients were experiencing unexpected side effects from the company’s sleep apnea drug. The company took the drug off the market near the end of Year 1. During Year 2, the company was sued by 1,000 customers who had had a severe allergic reaction to the company’s drug and required hospitalization. At the end of Year 2, the company’s attorneys estimated a 60 percent chance the company would need to make payments in the range of $1,000 to $5,000 to settle each claim, with all amounts in that range being equally likely. At the end of Year 3, while none of the cases had been resolved, the company’s attorneys now estimated an 80 percent probability the company would be required to make payments in the range of $2,000 to $7,000 to settle each claim. In Year 4, 400 claims were settled at a total cost of $1.2 million. Based on this experience, the company believes 30 percent of the remaining cases will be settled…