Question 1

When health insurance is purchased primarily through one's employer,

Accepted Answer

A) direct purchase of health insurance becomes cheaper. 
B) the benefits of the healthcare insurance are fully taxable. 
C) it is more costly for employees to switch jobs and move to areas where jobs are available. 
D) the overall number of people without health insurance decreases. 
A) direct purchase of health insurance becomes cheaper. 
B) the benefits of the healthcare insurance are fully taxable. 
C) it is more costly for employees to switch jobs and move to areas where jobs are available. 
D) the overall number of people without health insurance decreases.

Question 2

Which of the following is true regarding employer-provided health insurance?

Accepted Answer

A) About two-thirds of nonelderly adults have health insurance through group plans offered by their employers. 
B) Employee compensation in the form of health insurance is not subject to taxation, which makes it particularly attractive for people to purchase it through their employers rather than privately, and also to demand policies with small co-payment rates and a low deductible. 
C) The linking of health insurance to employment reduces employee mobility and creates a situation where employees lose their health insurance when they lose their job or change jobs. 
D) All of the above are true. 
A) About two-thirds of nonelderly adults have health insurance through group plans offered by their employers. 
B) Employee compensation in the form of health insurance is not subject to taxation, which makes it particularly attractive for people to purchase it through their employers rather than privately, and also to demand policies with small co-payment rates and a low deductible. 
C) The linking of health insurance to employment reduces employee mobility and creates a situation where employees lose their health insurance when they lose their job or change jobs. 
D) All of the above are true.

Question 3

As the share of healthcare expenditures paid for by third parties has grown, both healthcare prices and total expenditures have increased rapidly. Is this surprising?

Accepted Answer

A) Yes; third-party payments provide healthcare consumers with a strong incentive to economize, and therefore, the growth of expenditures is particularly surprising. 
B) No; third-party payments weaken the incentive of healthcare consumers to economize, and therefore, the rapid growth of expenditures is an expected result. 
C) Yes; the price increases are surprising because healthcare suppliers have a strong incentive to provide the services at a low price when they are paid for by a third party. 
D) No; the growth of third-party payments will reduce the demand for healthcare, which will lead to both higher prices and expenditure levels. 
A) Yes; third-party payments provide healthcare consumers with a strong incentive to economize, and therefore, the growth of expenditures is particularly surprising. 
B) No; third-party payments weaken the incentive of healthcare consumers to economize, and therefore, the rapid growth of expenditures is an expected result. 
C) Yes; the price increases are surprising because healthcare suppliers have a strong incentive to provide the services at a low price when they are paid for by a third party. 
D) No; the growth of third-party payments will reduce the demand for healthcare, which will lead to both higher prices and expenditure levels.

Question 4

Economic analysis indicates that the increasing government expenditures and growth of third-party payments accompanying the Medicare and Medicaid programs

Accepted Answer

A) reduced the demand for healthcare services. 
B) reduced the incentive of consumers to economize on their use of healthcare. 
C) increased the incentive of consumers to economize on their use of healthcare. 
D) placed downward pressure on the prices of healthcare services. 
A) reduced the demand for healthcare services. 
B) reduced the incentive of consumers to economize on their use of healthcare. 
C) increased the incentive of consumers to economize on their use of healthcare. 
D) placed downward pressure on the prices of healthcare services.

Question 5

The growth of third-party payments (payments by insurers and the government) of healthcare services during the last four decades has been accompanied by

Accepted Answer

A) a reduction in expenditures on healthcare as a share of the economy. 
B) an increase in the sensitivity of consumers to the prices of healthcare services. 
C) persistent increases in the prices of healthcare services and rapid growth in the total expenditures on healthcare. 
D) an increase in the incentive of suppliers to provide healthcare services at a low cost. 
A) a reduction in expenditures on healthcare as a share of the economy. 
B) an increase in the sensitivity of consumers to the prices of healthcare services. 
C) persistent increases in the prices of healthcare services and rapid growth in the total expenditures on healthcare. 
D) an increase in the incentive of suppliers to provide healthcare services at a low cost.

Question 6

Special savings accounts that individuals would pay into and then use to pay for medical expenses (or use to purchase a catastrophic health insurance policy) are called

Accepted Answer

A) Medicare accounts. 
B) comprehensive insurance plans. 
C) medical savings accounts. 
D) Health Maintenance Organizations (HMOs). 
A) Medicare accounts. 
B) comprehensive insurance plans. 
C) medical savings accounts. 
D) Health Maintenance Organizations (HMOs).

Question 7

"When a third party (for example, an insurance company or the government) pays all or most of the cost of a good or service, the incentive of consumers to shop for the best value per dollar spent and of producers to offer the item at an economical price is substantially reduced." This statement is

Accepted Answer

A) essentially true. 
B) false; consumers will still have a strong incentive to search for the most economical price even if someone else is paying the bill. 
C) false; producers will still have a strong incentive to keep prices low even if consumers are non-responsive to price differences among suppliers. 
D) false; the party paying for the good will not influence the incentive of either consumers or producers to economize. 
A) essentially true. 
B) false; consumers will still have a strong incentive to search for the most economical price even if someone else is paying the bill. 
C) false; producers will still have a strong incentive to keep prices low even if consumers are non-responsive to price differences among suppliers. 
D) false; the party paying for the good will not influence the incentive of either consumers or producers to economize.

Question 8

Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example)?

Accepted Answer

A) No; the quantity of health-care service demanded is not influenced by either the price of health care or who is paying for it. 
B) Yes; consumers of health care will have a stronger incentive to economize when they are buying the service with their own money. 
C) Yes; consumers of health-care services will have a stronger incentive to economize when the services are paid for by a third party. 
D) No; health care is an essential service, and therefore, the incentive to economize on it is unaffected by who is paying for the service. 
A) No; the quantity of health-care service demanded is not influenced by either the price of health care or who is paying for it. 
B) Yes; consumers of health care will have a stronger incentive to economize when they are buying the service with their own money. 
C) Yes; consumers of health-care services will have a stronger incentive to economize when the services are paid for by a third party. 
D) No; health care is an essential service, and therefore, the incentive to economize on it is unaffected by who is paying for the service.

Question 9

Relative to the general index of consumer prices, medical-care prices have

Accepted Answer

A) fallen quite substantially since the beginning of the Medicare and Medicaid programs in 1965. 
B) risen quite substantially since the beginning of the Medicare and Medicaid programs in 1965. 
C) remained roughly constant since the beginning of the Medicare and Medicaid programs in 1965. 
D) fallen, but only slightly, since the beginning of the Medicare and Medicaid programs in 1965. 
A) fallen quite substantially since the beginning of the Medicare and Medicaid programs in 1965. 
B) risen quite substantially since the beginning of the Medicare and Medicaid programs in 1965. 
C) remained roughly constant since the beginning of the Medicare and Medicaid programs in 1965. 
D) fallen, but only slightly, since the beginning of the Medicare and Medicaid programs in 1965.

Question 10

Which of the following contributes to the poor performance of the healthcare industry?

Accepted Answer

A) An increasing share of healthcare costs is paid for directly by consumers. 
B) The tax system discourages the purchase of healthcare through employers, while offering advantages to those who purchase healthcare plans directly. 
C) State regulations often force insurers to cover items such as in-vitro fertilization, drug rehabilitation, and marriage counseling, which drive up insurance costs. 
D) State regulations make it attractive for health insurers to provide only low-cost, catastrophic health insurance. 
A) An increasing share of healthcare costs is paid for directly by consumers. 
B) The tax system discourages the purchase of healthcare through employers, while offering advantages to those who purchase healthcare plans directly. 
C) State regulations often force insurers to cover items such as in-vitro fertilization, drug rehabilitation, and marriage counseling, which drive up insurance costs. 
D) State regulations make it attractive for health insurers to provide only low-cost, catastrophic health insurance.

Question 11

Third-party payments by either the government or an insurance company accounted for ____ of the 2009 healthcare expenditures, compared to ____ paid by third parties in 1960.

Accepted Answer

A) 40 percent; 20 percent 
B) 20 percent; 40 percent 
C) 86 percent; 45 percent 
D) 96 percent; 73 percent 
A) 40 percent; 20 percent 
B) 20 percent; 40 percent 
C) 86 percent; 45 percent 
D) 96 percent; 73 percent

Question 12

Which of the following would help control the future growth of healthcare prices and expenditures?

Accepted Answer

A) greater reliance on government financed healthcare reimbursement plans 
B) an increase in the share of healthcare expenditures financed with low co-payment insurance 
C) an increase in the share of healthcare cost paid for either directly or from personal medical savings accounts 
D) the finance of prescription drugs for the elderly with a low co-payment insurance plan under Medicare 
A) greater reliance on government financed healthcare reimbursement plans 
B) an increase in the share of healthcare expenditures financed with low co-payment insurance 
C) an increase in the share of healthcare cost paid for either directly or from personal medical savings accounts 
D) the finance of prescription drugs for the elderly with a low co-payment insurance plan under Medicare

Question 13

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

Accepted Answer

A) shifting Medicare at least partially from a reimbursement service to a defined-benefit plan 
B) placing more emphasis on the demand side of the health-care market 
C) encouraging the purchase of health insurance policies with first-dollar coverage and small co-payments 
D) All of the reforms listed above could help to improve the situation. 
A) shifting Medicare at least partially from a reimbursement service to a defined-benefit plan 
B) placing more emphasis on the demand side of the health-care market 
C) encouraging the purchase of health insurance policies with first-dollar coverage and small co-payments 
D) All of the reforms listed above could help to improve the situation.

Question 14

Why is the current U.S. tax-treatment of health insurance purchased through one's employer discriminatory?

Accepted Answer

A) Health insurance should not be a tax-deductible expense for anyone. 
B) The system gives preferential tax treatment to self-employed individuals. 
C) The system imposes higher taxes on the direct purchase of health insurance because it is not tax deductible. 
D) The system gives preferential tax treatment to people who purchase health insurance directly from a provider. 
A) Health insurance should not be a tax-deductible expense for anyone. 
B) The system gives preferential tax treatment to self-employed individuals. 
C) The system imposes higher taxes on the direct purchase of health insurance because it is not tax deductible. 
D) The system gives preferential tax treatment to people who purchase health insurance directly from a provider.

Question 15

Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will

Accepted Answer

A) place downward pressure on the prices of healthcare services. 
B) lead to higher healthcare prices. 
C) increase the incentive of consumers to economize on their purchases of healthcare services. 
D) increase the incentive of healthcare providers to provide their services at economical prices. 
A) place downward pressure on the prices of healthcare services. 
B) lead to higher healthcare prices. 
C) increase the incentive of consumers to economize on their purchases of healthcare services. 
D) increase the incentive of healthcare providers to provide their services at economical prices.

Question 16

In 2007, health-care expenditures were approximately what percent of GDP?

Accepted Answer

A) 6 percent 
B) 16 percent 
C) 26 percent 
D) 36 percent 
A) 6 percent 
B) 16 percent 
C) 26 percent 
D) 36 percent

Question 17

If a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that

Accepted Answer

A) the total expenditures (including those made by the third party) on the good will decline. 
B) the demand for the good will decrease. 
C) consumers will have a stronger incentive to economize on their use of the good. 
D) suppliers will have less incentive to provide the good at low prices. 
A) the total expenditures (including those made by the third party) on the good will decline. 
B) the demand for the good will decrease. 
C) consumers will have a stronger incentive to economize on their use of the good. 
D) suppliers will have less incentive to provide the good at low prices.

Question 18

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

Accepted Answer

A) The demand for health-care services will decrease. 
B) The prices of health-care services will grow less rapidly than has been the case during the last three decades. 
C) The real (adjusted for inflation) expenditures on Medicare and the taxes to finance the program will tend to decline. 
D) The health-care inflation and spending growth of recent decades will continue or even accelerate. 
A) The demand for health-care services will decrease. 
B) The prices of health-care services will grow less rapidly than has been the case during the last three decades. 
C) The real (adjusted for inflation) expenditures on Medicare and the taxes to finance the program will tend to decline. 
D) The health-care inflation and spending growth of recent decades will continue or even accelerate.

Question 19

Which of the following would help control the future costs of healthcare?

Accepted Answer

A) a new government program that would cover the cost of prescription drugs purchased by all healthcare consumers 
B) an increase in the share of healthcare expenditures financed with low co-payment insurance 
C) allowing consumers to purchase healthcare insurance from out-of-state providers 
D) an increase in the tax benefits of purchasing healthcare through one's employer 
A) a new government program that would cover the cost of prescription drugs purchased by all healthcare consumers 
B) an increase in the share of healthcare expenditures financed with low co-payment insurance 
C) allowing consumers to purchase healthcare insurance from out-of-state providers 
D) an increase in the tax benefits of purchasing healthcare through one's employer

Question 20

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

Accepted Answer

A) equalizing the tax treatment of out-of-pocket medical expenses and the direct purchase of health insurance with that of health insurance purchased through an employer 
B) encouraging consumer use of health savings accounts and the direct payment of medical bills from the accounts 
C) encouraging the purchase of catastrophic health insurance and discouraging the purchase of policies with first-dollar coverage and small co-payments 
D) All of the reforms listed above could help to improve the situation. 
A) equalizing the tax treatment of out-of-pocket medical expenses and the direct purchase of health insurance with that of health insurance purchased through an employer 
B) encouraging consumer use of health savings accounts and the direct payment of medical bills from the accounts 
C) encouraging the purchase of catastrophic health insurance and discouraging the purchase of policies with first-dollar coverage and small co-payments 
D) All of the reforms listed above could help to improve the situation.

Exam 22: Appendix: the Economics of Healthcare

When health insurance is purchased primarily through one's employer,

Which of the following is true regarding employer-provided health insurance?

As the share of healthcare expenditures paid for by third parties has grown, both healthcare prices and total expenditures have increased rapidly. Is this surprising?

Economic analysis indicates that the increasing government expenditures and growth of third-party payments accompanying the Medicare and Medicaid programs

The growth of third-party payments (payments by insurers and the government) of healthcare services during the last four decades has been accompanied by

Special savings accounts that individuals would pay into and then use to pay for medical expenses (or use to purchase a catastrophic health insurance policy) are called

"When a third party (for example, an insurance company or the government) pays all or most of the cost of a good or service, the incentive of consumers to shop for the best value per dollar spent and of producers to offer the item at an economical price is substantially reduced." This statement is

Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example)?

Relative to the general index of consumer prices, medical-care prices have

Which of the following contributes to the poor performance of the healthcare industry?

Third-party payments by either the government or an insurance company accounted for ____ of the 2009 healthcare expenditures, compared to ____ paid by third parties in 1960.

Which of the following would help control the future growth of healthcare prices and expenditures?

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

Why is the current U.S. tax-treatment of health insurance purchased through one's employer discriminatory?

Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will

In 2007, health-care expenditures were approximately what percent of GDP?

If a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

Which of the following would help control the future costs of healthcare?

Which of the following reforms could help to improve the operation and efficiency of health-care markets?

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

Filters

Third-party payments by either the government or an insurance company accounted for of the 2009 healthcare expenditures, compared to paid by third parties in 1960.