University of South Carolina, Arnold School of Public Health, HSPM J712 Revised Sept. 27, 2011, 11pm.

HSPM J712

Take-Home Exam due October 11, 2011

Instructions:

Do enough questions to get the grade you want. Please see the table to the right. ⇒

I recommend that you do extra questions for insurance, in case you get partial credit for some answers.

Submit your completed exam with Blackboard's  Assignments  feature.

Answers to 10-point questions should be about a page. Answers to 5-point questions should be a few sentences to half a page.

To get full credit for an answer, use course concepts and refer to readings. For the questions that ask you to cite a reading, show me that you can find the relevant reading and that you understand what the reading is about. All answers need to show that you have thought about course concepts.

To cite a reading, use the first author's last name and a title shortened to two or three words. For example, you might write: "There is a lot of variation in how health care is practiced from one community to another. (Wennberg, Will Payment Based on Diagnosis-Related Groups Control Hospital Costs.)" That is not a good style for a formal paper, but it is allowed for this exam. If you take an idea from my notes about a reading, find the idea in the reading and then cite the reading, not my notes. (Some course ideas, like "elasticity," are only in my notes and tutorials.)

The Questions:

0. (2 points) What was the best single item on the reading list for you? (You don't have to say why.)

1. (10 points -- even though this particular question may not require a whole page of writing)

1. How much was spent in the U.S. on the health care system in 2009? How much is that per person (per capita)? What percentage the GDP went for the health care system in 2009?
2. For the period from 1993 to 2009, what were some years in which health care as a percent of GDP changed a lot? What were some years in which health care as a percent of GDP did not change much from year to year? (I am asking for some years that showed these patterns. You do not have to tell me every year that fits one pattern or the other.)
3. How much of total health care spending in 2010 2009 was public and how much is private?
4. What percentage of health care spending was out-of-pocket in 2009? What has been the trend in this percentage? Has it risen or has it fallen?
5. What are the top three categories medical services and goods? By "top" I mean the categories that got the most money spent on them.

2. (5 points) Define opportunity cost. Give an example. The example can be from the readings or from your own experience.

3. (5 points) What is the Law of Diminishing Returns? Give an example from the readings that illustrates this Law.

4. (5 points) Explain what total cost, fixed cost, variable cost, and marginal cost (also can be called "incremental cost") are.

5. (5 points) Tell me an article that we read that uses the concept of marginal or incremental cost. How does it use the concept? To make what argument?

6. (5 points) In Axnick's article about measles and Eddy's article about PAP tests, the authors discount future costs and benefits (costs averted). (Eddy also discounts future years of life saved, but let us not get into that.)

1. Pick one of those articles and say what future costs or costs averted were discounted.
2. Describe how you discount a future cost. Then, for a specific example, suppose that there is a cost of $1000 that will be incurred two years from now. What is the present value of that if the interest rate is 2%?

7. (7 points) Describe a way to put a dollar value on a saved life,
or (10 points) describe two different ways to put a dollar value on a saved life.
Then discuss whether you think it is proper or useful to use such a value in making decisions about which public health, safety, or health care procedures to use. Show that you understand why some economists advocate doing this, even if you don't like the idea.

8. (5 points) Based on the articles we read or the class discussion, pick one of these:

1. PAP tests, as analyzed in Eddy's "Screening for Cervical Cancer" article
2. Chicken pox (varicella) inoculations
3. The HPV vaccine
4. Prenatal care

For the one you pick, tell me whether doing it for everybody (of the appropiate age and gender) reduces or increases total spending on health care. Explain your answer. Show me that you have thought about course concepts.

9. (5 points) Explain the difference between cost-benefit analysis and cost-effectiveness analysis. Cite one reading that is a cost-benefit analysis and one that is a cost-effectiveness analysis.

10. (10 points) Why do Fries et al argue that doing more prevention would reduce health care costs in the US? What kind of evidence do they mention in support of their claim? What is Russell's counter-argument? What kind of evidence does she cite in support of her argument? Can prevention be a good idea, even if it doesn't save money?

11. (5 points) What is an "external" cost or benefit? Give a brief example. This example can be from the readings or from your own experience and general knowledge.

12. (5 points) What is a "free rider"? Give a brief example. The example can be from the readings or from your general knowledge and experience.

13. (5 points) Is it true or false that risk averse people only take gambles that have a positive expected value for them? What does this have to do with why people buy insurance?

14. (5 points) What do economists mean when they say that the doctor is the patient's "agent"? Why do I need my doctor act as my agent, more than I need my dry cleaner act as my agent?

15. (5 points) The diagram shows a supply curve and a demand curve. The current price is shown. It is well above the equilibrium price.

1. Fill in these blanks: At the current price, the quantity ____ed is greater than the quantity _____ed.
2. According to textbook economic theory, should the price tend to rise, fall, or stay the same in this circumstance?

16. (5 points) Explain briefly what elasticity is. Then answer this, showing your math: If a pack of cigarettes sells for $2.00, and the government adds a new tax to raise the price by $1.50, and if the elasticity of demand for cigarettes among teenagers is -0.5, by what percentage will teenagers' use of cigarettes fall? (You may make your calculation simpler by not using the arc elasticity idea. Instead, take the current $2.00 price as the price level in the elasticity formula.)

17. (5 points) What is "moral hazard"? Is there moral hazard in health insurance? Explain why or why not briefly.

18. (10 points) Malcolm Gladwell, in his New Yorker article, says that moral hazard is not the main reason why health care spending is so high in the U.S.

1. Tell me about a study that argues that copayments are good because they dissuade people from buying (with insurance pool money) health care services that aren't really worth very much to them. ("Tell me about" means tell me the authors' main conclusions and how they arrived at those conclusions.)
2. Do you agree with Gladwell? Why?

19. (5 points) What do economists mean by "efficient?" How does that differ from ordinary usage? Is it always better for everybody if we are more efficient, as economists use the term? Why or why not?

20. (5 points) What are DRGs? Briefly explain how DRG-based payment works. In other words, what determines how much the hospital gets paid, when payment is by DRG?

21. (5 points) What was the problem that DRG-based payment was supposed to help solve? What happened to patient care and medical records after DRG payment was introduced?

22. (10 points) When the government tries to reduce the growth in how much it spends on Medicare, does that lead to higher prices for insured patients?

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