Health insurance is normally seen as a good that is most valuable to sick people, since health expenditures are highest for the sick. Yet, in the basic insurance model discussed in this chapter, actuarially-fair health insurance is worth nothing to people who are certain to become sick (p = 1). Why does the standard model produce this result? How is this different from the way real-world insurance markets work?
Q: If a wealthy person chooses to spend large sums of money to increase the probability of surviving an…
A: Fatal disease - disease that have high probability that the patient will die.
Q: Indicate whether the statement is true or false, and justify your answer.In the 1970s, researchers…
A: The given statement is false.
Q: An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he…
A: The probability that the person will get sick is 0.1 percent. The income of the individual is given…
Q: A field of study that integrates psychology and economics is called motivational finances? Group…
A: Answer: A field of study that integrates psychology and economics is called behavioral economics.
Q: The Bismarck Model in Germany reduces adverse selection primarily by having a universal, compulsory…
A: Answer is in 2nd step:
Q: Consider a market for health insurance similar to the one below.
A: ANSWER STEP-1 Now if the tax of $ 3000 is obligatory in exchange for the insurance arrange if this…
Q: Suppose that left-handed people are more prone to injury than right-handed people. Lefties have an…
A: Given Information Population has 2 types of people = 50% Righties & 50% Lefties Initial Wealth…
Q: True or false? According to the Grossman model, if a new drug were discovered that eliminated the…
A: The Grossman model is an important model which indicates the demand in the health economics.…
Q: Which type of medical services suffers LEAST from the uncertainty problem? preventative services…
A: Uncertainty Problem is the situation where you do something about which you are not sure which leads…
Q: During a nationwide program to immunize the population against a new strain of the flu, public…
A: Given: Cost of Inoculating x% of susceptible population= 1.85x100-xmillion dollars
Q: Indicate whether the statement is true or false, and justify your answer.In the framework of the…
A: Individuals have control over their health; it does not mean that they have complete control over…
Q: Compare and contrast two quantitative
A: 1)The qualitative decision making is based upon analysis of qualitative factors like organisational…
Q: Jane has a budget of I dollars and is deciding how to invest over the three healthcare-related…
A:
Q: Which of the following is one of the healthcare models Hurley considers? a. Fully private with a…
A: A "Model of Care" is a wide term that refers to the manner in which health services are provided.As…
Q: Indicate whether the statement is true or false, and justify your answer.In the Rothschild–Stiglitz…
A: False, an individual choose to be uninsured, if the full insurance contract lies below the…
Q: Jane has a budget of I dollars and is deciding how to invest over the three healthcare-related…
A: Utility is defined as the level of satisfaction which a consumer receives by the consumption of…
Q: If a country has universal health insurance, the government serves as an insurer and provides…
A: In a market, health insurance is obtained by an individual through different ways such as government…
Q: In what sense is the individual considered a “producer” of health in the Grossman model?
A: It is well said that unhealthy countries tend to be poor which means poor countries tend to be…
Q: In the basic model of insurance, income is the only input into a person’s utility. This is obviously…
A: When a person falls ill, he has to pay lot of expenditure on hospital doctors and medicines. but…
Q: Explain with a model that a risk averse individual would be willing to pay more than a 'fair'…
A: Risk aversion is defined as an economic agent's preference for certainty over ambiguity. Formally, a…
Q: The Grossman model emphasizes the important roles that education, health knowledge, and expectations…
A: The Grossman model of health demand is a model for studying the demand for health and medical care…
Q: While randomized control trials are gold-standard, we don't use them in economics often to explore…
A: The randomized controlled trials (RCT) as the gold standard are the studies which measure the…
Q: The president-elect of healthystate appointed you on top of a health transition team and requested a…
A: To minimize the role of government and improvement of policy,I need to come up with brilliant…
Q: In a market for housing insurance against wildfires, the adverse selection model would predict that.…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: An empirically testable hypothesis for additional health care expenditure as an investment rather…
A: A testable hypothesis is one that can be proven or disproved through collection of data, testing, or…
Q: One major premise of the Rothschild-Stiglitz (RS) model is that there is a perfectly competitive…
A: According to the Rothschild-Stieglitz model, there will be a perfectly competitive market in the…
Q: The Beveridge Model in the United Kingdom reduces moral hazard by having a universal, single payer…
A: The economies around the world work upon the basis of various different models, and various…
Q: The Bismarck Model in Germany reduces moral hazard by requiring cost sharing. True False
A: Answer is in 2nd step:
Q: Indicate whether the statement is true or false, and justify your answer.In an actuarially fair…
A: The given statement is true.
Q: Indicate whether the statement is true or false, and justify your answer.In real life, investments…
A: False, because one of the central features of the model is that health is the part of an investment…
Q: Indicate whether the statement is true or false, and justify your answer.Under the typical…
A: If firms suggest liberal insurance that lies lower than a robust individual’s indifference curve…
Q: Consider two treatments. Treatment 1 saves one year of life at a cost of $10,000. Treatment 2 saves…
A: Cost effective treatment is a treatment that produces higher level of output using lower cost.
Q: In a standard economic analysis, setting a higher copayment rate per day of hospital care 1) Has…
A: ANS A copay is a flat rate that we need to pay for obtaining a health care service. The patient…
Q: Indicate whether the statement is true or false, and justify your answer.The Rothschild–Stiglitz…
A: The above statement is false.
Q: Which one is an option for health insurance market Universal public insurance Compulsory…
A: Health insurance- It covers the medical and surgical expenses of the individual who is insured.
Q: To receive coverage for bodily injury resulting from an accident with a stolen vehicle, an…
A: A contract between the insurance company and person that helps in providing protection against any…
Q: Which is not an example of asymmetric information? Group of answer choices A customer not knowing…
A: Asymmetric information involves two parties entering into a contract where one party has more…
Q: Modify the S-I-R model for an epidemic to take into account vaccinations of people at a constant…
A: A SIR model is an epidemiological model that processes the hypothetical number of individuals…
Q: The Beveridge model in the United Kingdom reduces moral hazard by having public providers compete to…
A: Moral hazard is a situation in which a person involves in some risky event by knowing that his/her…
Q: The governments role in terrorism insurance is that of - disinterested observer - innocent…
A: Terrorism Insurance is related to the losses that occurs due to terrorist acts under the commercial…
Q: For any given distribution of outcomes and probabilities, describe how preferences over risk affect…
A: The individual's preferences are "well-behaved" enough to be spoken to over probability…
Q: Indicate whether the statement is true or false, and justify your answer.Results from the Oregon…
A: Answer: True. Due to health insurance, people make frequent visits to hospitals and also utilize…
Q: Is this evidence consistent with the predictions of the RS model? In other words, is this evidence…
A: Insurance policy is mandatory in many countries in many areas like travel, health, vehicle etc they…
Q: The Akerlof model can be used to model the health insurance market. In this market, which party is…
A: According to Akerlof's adverse selection problem the seller has additional information than the…
Q: Insurance is basically the transferring of risk from one party to another. A. True B. False The cost…
A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…
Q: The problem of asymmetric information is that Multiple Choice neither health care buyers nor…
A: In a manner, asymmetric information is considered as one of the causes of market failure.
Q: Indicate whether the statement is true or false, and justify your answer. In the Grossman…
A: Grossman's model explains that people can improve their health by doing exercise and follow diet…
Health insurance is normally seen as a good that is most valuable to sick people, since health expenditures are highest for the sick. Yet, in the basic insurance model discussed in this chapter, actuarially-fair health insurance is worth nothing to people who are certain to become sick (p = 1). Why does the standard model produce this result? How is this different from the way real-world insurance markets work?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- You have been recruited as an expert in health economics to recommend what is the best therapy for a group of patients. In the image below you will find the decision tree showing the probabilities for different health states and outcomes for patients undergoing two possible treatments, No drug therapy and Drug therapy. Based on the expected cost, which therapy would you recommend as the least expensive? Explain how you arrived at your recommendation and show your calculations the space provided. No drug theraphy ? Drug theraphy ? HEALTH STATES PROBABILITIES Remain in Good Health 0.5 Develop disease A 0.2 Develop disease B 0.2 Die 0.1 Remain in Good Health 0.53 Develop disease A 0.16 Develop disease B 0.22 Die 0.09 OUTCOMES (Costs) $0 $400 $300 $200 SO $800 $500 $0Health Care Demand An individual's demand for physician office visits in a given year is given by, Q = 11-0.045P, where Q is the number of office visits and P is the out-of-pocket price paid by the individual for each visit. Assume the market price of an office visit is $180. Use this information to answer the questions below. Questions: 1. Without insurance, how many office visits will the individual make in one year? NOTE: Enter a formula to calculate the number of visits, rounding your answer to the nearest whole number. 2. Suppose the individual has insurance and pays only a $40 copayment for each visit. How many office visits will the individual make in one year? NOTE: Again, enter a formula, rounding your answer to the nearest whole number. 3. What is the moral hazard and deadweight loss (DWL) associated with having insurance? NOTE: Enter formulas in the respective boxes below. Moral Hazard: DWL: 4. Based on the Nyman model, suppose the value the individual places on each visit…Which statement about health insurance in the US is false? Question options: 1) Going back to 1940, only about 10 percent of the US population had any health insurance 2) The share of the under-65 population with private health insurance rose until the 1970s and then plateaued—it remained virtually constant until the implementation of the Affordable Care Act 3) Early on, the health insurance market was dominated by Blue Cross plans, which practiced community rating in setting premiums 4) Measured in percentage points, the drop in the uninsured rate in the nonelderly population between 2013 and 2016 was larger than the increase in the share with private insurance
- Even though the total cost of an uninsured hospital stay is lower, why would an uninsured person actually end up paying more than those with insurance?Suppose that there are two countries, Beta and Gamma. Suppose further that everyone in country Beta is on Insurance B and everyone in country Gamma is on Insurance G. Suppose further that both governments use government-set price controls. In 2005, country Beta decided to change the reimbursement rate for pharmaceuticals, but country Gamma did not make this change. You, a researcher, want to study the effect of offering coverage for this drug had an impact on health expenditures. You have average health expenditures for State Beta and Gamma prior to 2005 and post-2005. Using your finding from the question above, you can infer that country Beta likely _____ reimbursement rates for pharmaceutical drugs. State Time Periods Pre-2005 Post-2005 State Beta $1000 $1400 State Gamma $1500 $1700 a. lower b. did not change c. raisedSuppose that there are two countries, Beta and Gamma. Suppose further that everyone in country Beta is on Insurance B and everyone in country Gamma is on Insurance G. Suppose further that both governments use government-set price controls. In 2005, country Beta decided to change the reimbursement rate for pharmaceuticals, but country Gamma did not make this change. You, a researcher, want to study the effect of offering coverage for this drug had an impact on health expenditures. You have average health expenditures for State Beta and Gamma prior to 2005 and post-2005. Using the information in the table below, a quick difference-in-difference calculation suggests covering this drug ____ health expenditures by approximately ____. State Time Periods Pre-2005 Post-2005 State Beta $1000 $1400 State Gamma $1500 $1700 a. decreased; $400 b. increased; $200 c. increased; $400 d. decreased; $200
- Suppose that there are two countries, Beta and Gamma. Suppose further that everyone in country Beta is on Insurance B and everyone in country Gamma is on Insurance G. Suppose further that both governments use government-set price controls. In 2005, country Beta decided to change the reimbursement rate for pharmaceuticals, but country Gamma did not make this change. You, a researcher. want to study the effect of offering coverage for this drug had an impact on health expenditures. You have average health expenditures for State Beta and Gamma prior to 2005 and post-2005. Using the information in the table below, a quick difference-in-difference calculation suggests covering this drug health expenditures by approximately. Time Periods Pre-2005 Post-2005 $1000 $1400 $1500 $1700 State State Beta State Gamma decreased: $400 increased; $200 decreased: $200 increased; $400The government wants to regulate health insurance companies requiring them to provide insurance coverage not just for future health problems, but also for pre- existing conditions. For such a policy to succeed, it is important to make purchase of health insurance compulsory for individuals. Is this true or false? Explain your answer.Moral hazard creates tradeoffs that complicate insurance design and policy choices. Imagine a linear demand curve for outpatient clinician visits, and assume at $100 per visit there would be 50,000 annual visits to a particular urban clinic. A politician would like to be popular, and proposes making clinic visits free (zero price). You know, as the city's staff health economist, that if this were to happen, the number of visits would rise to 75,000. Your job is to testify before the city council, and answer at least two questions: how much social welfare loss from moral hazard would occur; and how much tax money must be raised to finance clinic services if visits were made completely free? a. $2,500,000; $15,000,000 b. $5,000,000; $30,000,000 c. $1,250,000; $7,500,000 d. $3,750,000; $22,500,000
- Suppose consumers consume and gain utility from two types of goods and services – (1) health care and (2) all other goods & services. Using this information, derive the demand curve for health care.Economics Use the following information to determine the costs to you and/or to the insurance company for the following occurrences:1) You have $500 per person Wellness Benefit.2) You have a $500 İndividual Deductible and your family (spouse and children) has a $500 Family Deductible.3) You have a $10,000 annual Maximum Family Out-of- Pocket expense provision.4) Once you have met your Individual or Family Deductible, your insurance will pay 80% of the expenses and you will pay 20% as your co-pay.Unless the occurrence is a Wellness expense, you and/or your family have to meet their deductibles first before insurance will pay anything. Example:Assume that you have met your deductible, and you go to the Emergency Room for a large cut on your shin which required cleaning, 20 stitches, a tetanus shot, and antibiotics. (80/20 plan)Total Charges = $2,500 totalYour Responsibility = $2,500*.20 = $500 (goes toward your Max Out of Pocket)Insurance Responsibility = $2,500*.80 = $2,000 Question:…Jenny believes that the unwillingness to buy insurance by young healthy people creates a moral hazard problem for health insurance companies. Diego disagrees, and believes that their unwillingness to buy health insurance creates an adverse selection problem. Who is right? Explain.