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Health Economics – ECO3501.
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Health Economics – ECO3501.
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Health Economics – ECO3501Early in U.S. history, health insurance was provided to cover:
a. the catastrophic cost of medical care including hospitalization and physicians'
services.
b. routine physicians' services.
c. medical costs due to specific diseases such as tuberculosis and alcoholism.
d. hospital expenses.
e. income loss due to disability or disease - CORRECT ANSWER-e. income loss
due to disability or disease
A prepaid hospital plan created by Baylor Hospital for a group of Dallas public
school teachers in 1929 is considered the forerunner of what was later called:
a. Blue Shield.
b. the health maintenance organization.
c. major medical insurance.
d. managed care.
e. Blue Cross. - CORRECT ANSWER-e. Blue Cross
Amendments in the mid-1960s to the Social Security Act created:
a. major medical insurance.
b. managed care.
c. tax exemptions for health insurance as an employee benefit.
d. Medicare and Medicaid.
e. Blue Cross and Blue Shield. - CORRECT ANSWER-d. Medicare and Medicaid
A major factor contributing to the growth in employee-based health insurance in
the United States has been:
a. the legislation requiring all firms to provide health insurance to all full-time
workers.
b. the long-standing tradition in the United States of providing a generous
package of benefits to all workers.
c. the tax-free treatment of health insurance as an employee benefit.
d. greater-than-average economic growth leading to increased demand for labor.
- CORRECT ANSWER-c. the tax-free treatment of health insurance as an
employee benefit.
,All of the following are true for indemnity insurance except that:
a. it provides reimbursement for financial losses, including fire and life.
b. premiums are based on separate risk pools often organized by employers.
c. it serves as the basis for all health insurance coverage in most developed
countries, including the U.S.
d. it frequently includes coverage for losses due to casualty and theft.
e. it is often experience-rated with premiums based on expected losses. -
CORRECT ANSWER-c. it serves as the basis for all health insurance coverage
in most developed countries, including the U.S.
Which of the following is not true for social insurance?
a. It is usually supported by taxes, usually income tax or payroll tax.
b. It serves the basis for most redistribution programs.
c. It requires mandatory participation to be effective.
d. It is the basis of the provision of medical care to the poor, elderly, and other
vulnerable population groups in the U.S.
e. It is usually experience-rated with premiums based on ability to pay. -
CORRECT ANSWER-e. It is usually experience-rated with premiums based on
ability to pay.
Premiums based on experience ratings:
a. are illegal in most states in the U.S.
b. vary depending on the income of the insured.
c. are uniform across age groups.
d. are only used in property-casualty insurance underwriting.
e. are based on the loss experience of the insured group. - CORRECT
ANSWER-e. are based on the loss experience of the insured group.
People buy insurance:
a. to defer consumption.
b. to insure against poor health.
c. because they are risk averse.
d. to maximize their welfare.
e. because of externalities. - CORRECT ANSWER-c. because they are risk
averse
,The goal of health insurance is to:
a. equally distribute the probability of loss over a large number of people.
b. spread risk over a large group of people.
c. redistribute income from the sick to the healthy.
d. collect sufficient premiums to cover all possible losses.
e. equalize the availability of medical care across population groups. -
CORRECT ANSWER-b. spread risk over a large group of people.
One result of asymmetric information in health insurance markets is:
a. adverse selection.
b. an optimal number of insurance policies sold.
c. externalities in consumption.
d. the principal-agent problem.
e. a low marginal benefit of additional information for the buyer of insurance. -
CORRECT ANSWER-a. adverse selection
Moral hazard and adverse selection are both examples of:
a. the principal-agent problem.
b. asymmetric information.
c. externalities in consumption.
d. perfect information.
e. efficiency in markets. - CORRECT ANSWER-b. asymmetric information.
Insurers try to minimize moral hazard by:
a. charging higher premiums to individuals than to groups.
b. requiring advance payments of premiums.
c. refusing to sell insurance to individuals with chronic illnesses.
d. only selling policies to individuals with high ethical standards.
e. charging deductibles and coinsurance. - CORRECT ANSWER-e. charging
deductibles and coinsurance.
Which of the following is not a result of moral hazard?
a. Increased medical care spending
b. Higher health insurance premiums
c. Increased likelihood of visiting a physician
d. Deductibles and coinsurance
e. Rational ignorance - CORRECT ANSWER-e. Rational ignorance
, Which of the following results from patients having better information about their
health status than insurers?
a. The principle-agent problem
b. Rational ignorance
c. Adverse selection
d. Externalities
e. The substitution effect - CORRECT ANSWER-c. Adverse selection
A person with AIDS has a guaranteed right to apply for health insurance and
receive coverage at the same rate as a healthy person. What is the likely result
for the insurance company?
a. Rational ignorance
b. The principle-agent problem
c. The substitution effect
d. Externalities
e. Adverse selection - CORRECT ANSWER-e. Adverse selection
Insurance works best in situations where:
a. there is a high probability of a large loss.
b. the level of probability and the size of the loss are irrelevant.
c. there is a high probability of a small loss.
d. there is a low probability of a small loss.
e. there is a low probability of a large loss. - CORRECT ANSWER-e. there is a
low probability of a large loss.
Use the following scenario for the question below. A group of 100 people seeks
out an insurance company to underwrite health insurance for its members. The
expected medical spending for the group is $150,000.
What will the average premium be if the health insurance company estimates the
premium adding net loading costs of 15 percent?
a. $1,200
b. $2,250
c. $1,500
d. $1,725
e. $1,765 - CORRECT ANSWER-e. $1,765
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