Question 1

Economic analysis indicates that the increasing government expenditures and growth of third-party payments accompanying the Medicare and Medicaid programs

Accepted Answer

A)  reduced the demand for healthcare services.
B)  reduced the incentive of consumers to economize on their use of healthcare.
C)  increased the incentive of consumers to economize on their use of healthcare.
D)  placed downward pressure on the prices of healthcare services.

Question 2

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

Accepted Answer

A)  equalizing the tax treatment of out-of-pocket medical expenses and the direct purchase of health insurance with that of health insurance purchased through an employer
B)  encouraging consumer use of health savings accounts and the direct payment of medical bills from the accounts
C)  encouraging the purchase of catastrophic health insurance and discouraging the purchase of policies with first-dollar coverage and small co-payments
D)  All of the reforms listed above could help to improve the situation.

Question 3

Which of the following would help control the future growth of healthcare prices and expenditures?

Accepted Answer

A)  greater reliance on government financed healthcare reimbursement plans
B)  an increase in the share of healthcare expenditures financed with low co-payment insurance
C)  an increase in the share of healthcare cost paid for either directly or from personal medical savings accounts
D)  the finance of prescription drugs for the elderly with a low co-payment insurance plan under Medicare

Question 4

Which of the following is true regarding employer-provided health insurance?

Accepted Answer

A)  About two-thirds of nonelderly adults have health insurance through group plans offered by their employers.
B)  Employee compensation in the form of health insurance is not subject to taxation, which makes it particularly attractive for people to purchase it through their employers rather than privately, and also to demand policies with small co-payment rates and a low deductible.
C)  The linking of health insurance to employment reduces employee mobility and creates a situation where employees lose their health insurance when they lose their job or change jobs.
D)  All of the above are true.

Question 5

If a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that

Accepted Answer

A)  the total expenditures (including those made by the third party)  on the good will decline.
B)  the demand for the good will decrease.
C)  consumers will have a stronger incentive to economize on their use of the good.
D)  suppliers will have less incentive to provide the good at low prices.

Question 6

Which of the following would help control the future costs of healthcare?

Accepted Answer

A)  a new government program that would cover the cost of prescription drugs purchased by all healthcare consumers
B)  an increase in the share of healthcare expenditures financed with low co-payment insurance
C)  allowing consumers to purchase healthcare insurance from out-of-state providers
D)  an increase in the tax benefits of purchasing healthcare through one's employer

Question 7

Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will

Accepted Answer

A)  place downward pressure on the prices of healthcare services.
B)  lead to higher healthcare prices.
C)  increase the incentive of consumers to economize on their purchases of healthcare services.
D)  increase the incentive of healthcare providers to provide their services at economical prices.

Question 8

Third-party payments by either the government or an insurance company accounted for ____ of the 2009 healthcare expenditures, compared to ____ paid by third parties in 1960.

Accepted Answer

A)  40 percent; 20 percent
B)  20 percent; 40 percent
C)  86 percent; 45 percent
D)  96 percent; 73 percent

Question 9

In 2007, health-care expenditures were approximately what percent of GDP?

Accepted Answer

A)  6 percent
B)  16 percent
C)  26 percent
D)  36 percent

Question 10

Special savings accounts that individuals would pay into and then use to pay for medical expenses (or use to purchase a catastrophic health insurance policy)  are called

Accepted Answer

A)  Medicare accounts.
B)  comprehensive insurance plans.
C)  medical savings accounts.
D)  Health Maintenance Organizations (HMOs) .

Question 11

Which of the following contributes to the poor performance of the healthcare industry?

Accepted Answer

A)  An increasing share of healthcare costs is paid for directly by consumers.
B)  The tax system discourages the purchase of healthcare through employers, while offering advantages to those who purchase healthcare plans directly.
C)  State regulations often force insurers to cover items such as in-vitro fertilization, drug rehabilitation, and marriage counseling, which drive up insurance costs.
D)  State regulations make it attractive for health insurers to provide only low-cost, catastrophic health insurance.

Question 12

When health insurance is purchased primarily through one's employer,

Accepted Answer

A)  direct purchase of health insurance becomes cheaper.
B)  the benefits of the healthcare insurance are fully taxable.
C)  it is more costly for employees to switch jobs and move to areas where jobs are available.
D)  the overall number of people without health insurance decreases.

Question 13

"When a third party (for example, an insurance company or the government)  pays all or most of the cost of a good or service, the incentive of consumers to shop for the best value per dollar spent and of producers to offer the item at an economical price is substantially reduced." This statement is

Accepted Answer

A)  essentially true.
B)  false; consumers will still have a strong incentive to search for the most economical price even if someone else is paying the bill.
C)  false; producers will still have a strong incentive to keep prices low even if consumers are non-responsive to price differences among suppliers.
D)  false; the party paying for the good will not influence the incentive of either consumers or producers to economize.

Question 14

Why is the current U.S. tax-treatment of health insurance purchased through one's employer discriminatory?

Accepted Answer

A)  Health insurance should not be a tax-deductible expense for anyone.
B)  The system gives preferential tax treatment to self-employed individuals.
C)  The system imposes higher taxes on the direct purchase of health insurance because it is not tax deductible.
D)  The system gives preferential tax treatment to people who purchase health insurance directly from a provider.

Question 15

Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example) ?

Accepted Answer

A)  No; the quantity of health-care service demanded is not influenced by either the price of health care or who is paying for it.
B)  Yes; consumers of health care will have a stronger incentive to economize when they are buying the service with their own money.
C)  Yes; consumers of health-care services will have a stronger incentive to economize when the services are paid for by a third party.
D)  No; health care is an essential service, and therefore, the incentive to economize on it is unaffected by who is paying for the service.

Question 16

The growth of third-party payments (payments by insurers and the government)  of healthcare services during the last four decades has been accompanied by

Accepted Answer

A)  a reduction in expenditures on healthcare as a share of the economy.
B)  an increase in the sensitivity of consumers to the prices of healthcare services.
C)  persistent increases in the prices of healthcare services and rapid growth in the total expenditures on healthcare.
D)  an increase in the incentive of suppliers to provide healthcare services at a low cost.

Question 17

Relative to the general index of consumer prices, medical-care prices have

Accepted Answer

A)  fallen quite substantially since the beginning of the Medicare and Medicaid programs in 1965.
B)  risen quite substantially since the beginning of the Medicare and Medicaid programs in 1965.
C)  remained roughly constant since the beginning of the Medicare and Medicaid programs in 1965.
D)  fallen, but only slightly, since the beginning of the Medicare and Medicaid programs in 1965.

Question 18

As the share of healthcare expenditures paid for by third parties has grown, both healthcare prices and total expenditures have increased rapidly. Is this surprising?

Accepted Answer

A)  Yes; third-party payments provide healthcare consumers with a strong incentive to economize, and therefore, the growth of expenditures is particularly surprising.
B)  No; third-party payments weaken the incentive of healthcare consumers to economize, and therefore, the rapid growth of expenditures is an expected result.
C)  Yes; the price increases are surprising because healthcare suppliers have a strong incentive to provide the services at a low price when they are paid for by a third party.
D)  No; the growth of third-party payments will reduce the demand for healthcare, which will lead to both higher prices and expenditure levels.

Question 19

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

Accepted Answer

A)  shifting Medicare at least partially from a reimbursement service to a defined-benefit plan
B)  placing more emphasis on the demand side of the health-care market
C)  encouraging the purchase of health insurance policies with first-dollar coverage and small co-payments
D)  All of the reforms listed above could help to improve the situation.

Question 20

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

Accepted Answer

A)  The demand for health-care services will decrease.
B)  The prices of health-care services will grow less rapidly than has been the case during the last three decades.
C)  The real (adjusted for inflation)  expenditures on Medicare and the taxes to finance the program will tend to decline.
D)  The health-care inflation and spending growth of recent decades will continue or even accelerate.

Exam 22: Appendix: the Economics of Healthcare

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

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When health insurance is purchased primarily through one's employer,

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In 2007, health-care expenditures were approximately what percent of GDP?

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As the share of healthcare expenditures paid for by third parties has grown, both healthcare prices and total expenditures have increased rapidly. Is this surprising?

Correct AnswerverifiedShow Answer

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

Correct AnswerverifiedShow Answer

Which of the following would help control the future costs of healthcare?

Correct AnswerverifiedShow Answer

The growth of third-party payments (payments by insurers and the government) of healthcare services during the last four decades has been accompanied by

Correct AnswerverifiedShow Answer

Economic analysis indicates that the increasing government expenditures and growth of third-party payments accompanying the Medicare and Medicaid programs

Correct AnswerverifiedShow Answer

Which of the following is true regarding employer-provided health insurance?

Correct AnswerverifiedShow Answer

Which of the following would help control the future growth of healthcare prices and expenditures?

Correct AnswerverifiedShow Answer

Relative to the general index of consumer prices, medical-care prices have

Correct AnswerverifiedShow Answer

Special savings accounts that individuals would pay into and then use to pay for medical expenses (or use to purchase a catastrophic health insurance policy) are called

Correct AnswerverifiedShow Answer

Third-party payments by either the government or an insurance company accounted for ____ of the 2009 healthcare expenditures, compared to ____ paid by third parties in 1960.

Correct AnswerverifiedShow Answer

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

Correct AnswerverifiedShow Answer

Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example) ?

Correct AnswerverifiedShow Answer

Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will

Correct AnswerverifiedShow Answer

"When a third party (for example, an insurance company or the government) pays all or most of the cost of a good or service, the incentive of consumers to shop for the best value per dollar spent and of producers to offer the item at an economical price is substantially reduced." This statement is

Correct AnswerverifiedShow Answer

Which of the following contributes to the poor performance of the healthcare industry?

Correct AnswerverifiedShow Answer

If a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that

Correct AnswerverifiedShow Answer

Why is the current U.S. tax-treatment of health insurance purchased through one's employer discriminatory?

Correct AnswerverifiedShow Answer

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Third-party payments by either the government or an insurance company accounted for of the 2009 healthcare expenditures, compared to paid by third parties in 1960.

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