Question

1. Which of the following statements about the doctor-patient relationship is incorrect?

1. Physicians are guided entirely by a desire to maximize patient welfare and never consider personal financial gain.
2. It creates physician-induced demand.
3. It is a classic case of the principal agent problem.
4. Physicians have the power to generate significant health benefits, but are also sometimes responsible for great losses.
5. It is driven by differential information and trust.

2. Price elasticity of demand for medical care measures the:

1. value society places upon good health.
2. ratio of the percentage change in quantity demanded of medical care and the percentage change in the price.
3. change in price resulting from a given change in quantity.
4. fact that consumers have a greater need for medical care than any other goods or services in society.
5. the extent of physician-induced demand in the U.S. health care system.

3. Data from the Rand Health Insurance Experiment indicated that:

1. price has no impact on the utilization of health care.
2. increased price is related to increased use of health care.
3. increased price is related to decreased use of health care.
4. increased price first increases, then decreases use of health care.
5. None of the above.

Answer 1

1. In doctor patient relationship “It is a classic case of the principal agent problem” is an incorrect option.

The principal-agent problem in health care is a big issue which asserts that private providers in health care are the imperfect agents for patients (which are known as the principal). They act to maximize their profits at the outflow of the patient’s concern. Principal-agent problem in health care is well recognized as high earning settings. It commonly exist in a private health market and private providers are engaged in prescribing injection drugs to the patients and they can able to persuade demand by prescribing more drugs than open providers for alike disease and patient profile.

Hence this statements about the doctor-patient relationship is incorrect.

B. Price elasticity of demand for medical care measures the: ratio of the percentage change in quantity demanded of medical care and the percentage change in the price.

As we know, the elasticity of demand is a measure of the receptiveness of product demand to changes in one of its determinants. In the medical care sector the array of price elasticity estimations is relatively extensive. Which means if there is 1% increase in the price of medical care then it will lead to a 0.17% reduction in medical care expenditures.