True of False
Bill is an aging snowboard instructor at a local ski resort. All winter, he takes over the counter pain medication to deal with his aching joints. Each summer, he moves home with his parents and takes a part time job making minimum wage. This summer, he got qualified for and enrolled into state government subsidized health insurance. Now he plans to undergo arthroscopic surgery by the end of the summer to repair his knee. Though this is an economically rational decision for Bill, it represents a welfare loss to society as a whole.
Catastrophic medical expenses are large, infrequent and unpredictable. Risk aversion explains why people buy insurance which covers such catastrophic events.
The primary funding source for the expenses of current Medicare beneficiaries is the fund current beneficiaries contributed to throughout their lifetime.
Many useful medical technologies become wasteful when they are expanded to include low-risk individuals.
A problem with Cost-Benefit Analysis is that
a) scientists observe peopleĆ¢ĀĀs behavior to calculate how much individuals are willing to pay for a particular treatment.
b) opportunity cost is measured as the value of the next best alternative foregone.
c) the perspective of the one benefitting from the medical service must be included.
d) sometimes subtle distinctions in the alternatives considered as opportunity costs may overstate the benefits of a treatment.
e) the use of expected values employs the statistical law of large numbers and this is not acceptable for individual decision making analysis.
Which of the following is an example of adverse selection in the private health insurance market?
a) Consumers regularly engaging in bungee jumping but being able to hide it from their insurer, who developed premiums based on the average utilization rates of that large group in the past.
b) Consumers anticipating regular (twice a year) visits to the dentist for preventive care but being able to hide it from their insurer, who developed premiums based on the average utilization rates of that large group in the past.
c) Young and healthy consumers having access to multiple plans offered by the employer (from low-priced HMO and high-deductible plans to higher-priced PPO) and ultimately choosing the most comprehensive PPO plan.
d) Elderly people enrolling in Medicare.
e) Poor family enrolling their chronically ill children in Medicaid.
