Exam 16: Regulation and Antitrust Policy in Health Care

The FDA regulates prescription medications, generic drugs, but not over-the-counter drugs.

The primary direct regulation of physician quality is through state licensure.

The economic theory of regulation as a political good suggests that providers may be able to dominate the legislative and regulatory process.

Demand-side regulation of hospitals include certificate-of-need requirements for entry of new hospitals.

A market failure occurs when prices in a market are above marginal costs as a result of monopoly power.

A core function of the Quality Improvement Organizations (QIOs) is to protect the integrity of the Medicare Trust Fund.

What are the core functions of the QIOs that have been identified by CMS?

Patents on new drugs provide a monopoly position for a period of time.

Indirect regulation refers to interventions in markets by regulatory agencies to control price, quantity, or quality with straightforward actions

A public good or service is one that is judged to have value that an individual or society should have based on some concept of need..

Suppose that emergency room services in a city are provided by three hospitals. Two of the hospitals each have a market share of 40% and the third hospital has a market share of 20%. Compute the pre-merger and post-merger HHI for this market if the two largest hospitals merge.

Suppose that you overhear a foursome of physicians on the golf course discussing the prices they charge for an office visit. Suppose further that you hear them reach an agreement to all charge a fee of $150 for an office visit. What is such an agreement called in antitrust policy, and what antitrust law may have been violated?

What are the three general forms of regulating markets? Briefly describe each form.

Discuss the five forms of market failure.

In healthcare markets, high seller concentration may be justified on the basis of access-to-care or quality-of-care considerations.