Question 1

Medicare and Medicaid set their payment rates for medical services above marginal cost, but below average total cost. One major consequence of doing this is that hospitals and other providers are then

Accepted Answer

A)   reducing the amount of health care services they provide.
B)   passing the uncovered costs on to patients with private health insurance.
C)   denying services to many Medicare and Medicaid patients.
D)   filing for bankruptcy regularly.E) All of the above
F) C) and D)

Question 2

Health care costs have tended to rise more rapidly in the United States than in Canada because

Accepted Answer

A)   state insurance regulators in the United States do not face the budget constraints that national regulators in Canada face.
B)   people in the United States want more health care than people in Canada.
C)   private insurance in the United States encourages overconsumption of health care; public insurance in Canada does not.
D)   Canada has better achieved economies of scale in the production of health care.E) None of the above
F) B) and C)

Question 3

Some employers have reacted to rising health care costs by hiring more part-time and temporary workers.

Accepted Answer

A) True 
 B)False

Question 4

Which person in the following list is least likely to have health care insurance?

Accepted Answer

A)   a disabled person
B)   a temporary worker in a bank
C)   an accountant employed by a large corporation
D)   a person who receives Social Security benefitsE) C) and D)
F) None of the above

Question 5

With an intent to identify potential cost savings (which unfortunately have not materialized) , the HITECH Act of 2009 provides $20 billion of subsidies to encourage hospitals and physicians to

Accepted Answer

A)   use more high-tech diagnostic equipment.
B)   adopt electronic medical-records systems.
C)   switch from human lab technicians to electronic ones.
D)   devote more research efforts toward high-tech treatments.E) All of the above
F) C) and D)

Question 6

In industrially advanced countries, the price elasticity of demand for health care is about

Accepted Answer

A)   2.0.
B)   0.2.
C)   4.5.
D)   1.0.E) A) and B)
F) B) and C)

Question 7

Health savings accounts (HSAs) , implemented by the 2003 Medicare law,

Accepted Answer

A)   are only available to those enrolled in Medicare.
B)   allow workers to accumulate untaxed dollars for payment of qualified medical expenses.
C)   are criticized because they require workers to "use it or lose it" each year; workers are not allowed to accumulate balances over time.
D)   can only be used to pay for prescription drugs.E) A) and B)
F) A) and C)

Question 8

Health care spending in the next 10 years is projected to grow at an annual rate of about

Accepted Answer

A)   2 percent.
B)   6 percent.
C)   14 percent.
D)   20 percent.E) B) and C)
F) A) and B)

Question 9

Defensive medicine

Accepted Answer

A)   solves the moral hazard problem.
B)   increases the demand and costs for health care.
C)   solves the principal-agent problem.
D)   is the same as preventive medicine.E) B) and D)
F) None of the above

Question 10

Assume that health insurance pays three-fourths of the cost of health care. Under this type of system, there will be allocative

Accepted Answer

A)   efficiency because consumers pay a price below market equilibrium and receive a quantity at which the marginal cost to society equals the marginal benefit.
B)   efficiency because consumers pay a price below market equilibrium and receive a quantity at which the marginal benefit to society exceeds the marginal cost.
C)   inefficiency because consumers pay a price below market equilibrium and receive a quantity at which the marginal cost to society exceeds the marginal benefit.
D)   inefficiency because consumers pay a price above market equilibrium and receive a quantity at which the marginal benefit to society exceeds the marginal cost.E) A) and D)
F) None of the above

Question 11

What is the primary purpose of the insurance exchanges set up by the PPACA?

Accepted Answer

A)   provide direct care to those without employer-provided health insurance
B)   allow those with employer-provided health insurance to trade for policies that are more cost effective
C)   sell government-provided health insurance to those lacking employer coverage
D)   promote competition among insurance companies to help reduce the growth in health care spendingE) All of the above
F) C) and D)

Question 12

Proponents of the Patient Protection and Affordable Care Act (PPACA)  had one major goal, which is

Accepted Answer

A)   to expand the range of illnesses covered by insurance.
B)   to nationalize health care in the country.
C)   to extend health insurance coverage to all Americans.
D)   to set prices for all health care procedures and services.E) None of the above
F) All of the above

Question 13

One of the special features of the health care market is asymmetric information. Which of the following is not characteristic of asymmetric information?

Accepted Answer

A)   The doctor (supplier)  tells the patient (demander)  what to purchase
B)   Buyers have little understanding of services they are asked to consume
C)   Fee-for-pay arrangements lead to excessive quantities of services prescribed
D)   Consumers pay lower out-of-pocket costsE) C) and D)
F) B) and D)

Question 14

Which of the following terms best characterizes the demand for health care?

Accepted Answer

A)   price elastic
B)   price inelastic
C)   income inelastic
D)   negative cross elasticityE) B) and C)
F) None of the above

Question 15

Health care costs have greatly increased in recent years in the United States. This fact alone does not establish an overallocation of resources to health care, because

Accepted Answer

A)   the benefits of health care have also greatly increased in recent years.
B)   rising medical care prices have inflated health care costs.
C)   the marginal cost of health care exceeds the average total cost of health care.
D)   negative externalities sometimes result from additional health care spending.E) A) and D)
F) None of the above

Question 16

Between 1960 and 2014, U.S. health care spending as a percentage of domestic output

Accepted Answer

A)   more than tripled.
B)   more than quadrupled.
C)   declined by one-half.
D)   remained relatively constant.E) A) and C)
F) None of the above

Question 17

The provision of health insurance leads to a deadweight loss due to an overallocation of resources to health care.

Accepted Answer

A) True 
 B)False

Question 18

After two years of being in effect by early 2016, one apparent implementation problem that the PPACA faced was that

Accepted Answer

A)   many young people wanted to participate, but most older people did not.
B)   many older people wanted to participate, but many younger ones did not.
C)   in each state, the pricing structure (health insurance rates)  was multitiered and too complex.
D)   the health insurance rates created an implicit wealth transfer from older to younger people.E) A) and D)
F) B) and C)

Question 19

The Patient Protection and Affordable Care Act (PPACA) bans the previous practice of insurance companies to deny coverage based on preexisting conditions.

Accepted Answer

A) True 
 B)False

Question 20

One of the main differences between PPOs and HMOs is that

Accepted Answer

A)   HMO physicians charge on a traditional fee-for-service basis, while PPO physicians do not.
B)   HMOs are usually for-profit organizations, whereas PPOs are not.
C)   PPOs employ their own doctors, whereas HMOs do not.
D)   PPO physicians charge on a traditional fee-for-service basis, while HMOs do not.E) A) and B)
F) B) and C)

Exam 24: Health Care

What is the primary purpose of the insurance exchanges set up by the PPACA?

Correct AnswerverifiedShow Answer

Defensive medicine

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One of the special features of the health care market is asymmetric information. Which of the following is not characteristic of asymmetric information?

Correct AnswerverifiedShow Answer

The Patient Protection and Affordable Care Act (PPACA) bans the previous practice of insurance companies to deny coverage based on preexisting conditions.

Correct AnswerverifiedShow Answer

Between 1960 and 2014, U.S. health care spending as a percentage of domestic output

Correct AnswerverifiedShow Answer

With an intent to identify potential cost savings (which unfortunately have not materialized) , the HITECH Act of 2009 provides $20 billion of subsidies to encourage hospitals and physicians to

Correct AnswerverifiedShow Answer

Health savings accounts (HSAs) , implemented by the 2003 Medicare law,

Correct AnswerverifiedShow Answer

Proponents of the Patient Protection and Affordable Care Act (PPACA) had one major goal, which is

Correct AnswerverifiedShow Answer

One of the main differences between PPOs and HMOs is that

Correct AnswerverifiedShow Answer

Health care costs have tended to rise more rapidly in the United States than in Canada because

Correct AnswerverifiedShow Answer

Which of the following terms best characterizes the demand for health care?

Correct AnswerverifiedShow Answer

After two years of being in effect by early 2016, one apparent implementation problem that the PPACA faced was that

Correct AnswerverifiedShow Answer

Some employers have reacted to rising health care costs by hiring more part-time and temporary workers.

Correct AnswerverifiedShow Answer

Medicare and Medicaid set their payment rates for medical services above marginal cost, but below average total cost. One major consequence of doing this is that hospitals and other providers are then

Correct AnswerverifiedShow Answer

Health care costs have greatly increased in recent years in the United States. This fact alone does not establish an overallocation of resources to health care, because

Correct AnswerverifiedShow Answer

Assume that health insurance pays three-fourths of the cost of health care. Under this type of system, there will be allocative

Correct AnswerverifiedShow Answer

The provision of health insurance leads to a deadweight loss due to an overallocation of resources to health care.

Correct AnswerverifiedShow Answer

Health care spending in the next 10 years is projected to grow at an annual rate of about

Correct AnswerverifiedShow Answer

In industrially advanced countries, the price elasticity of demand for health care is about

Correct AnswerverifiedShow Answer

Which person in the following list is least likely to have health care insurance?

Correct AnswerverifiedShow Answer

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