Question

For each of the following, answer True or False. If false, very briefly explain why it is false.

5. By statute, the government is not permitted to take cost-effectiveness criteria into account when deciding to cover new technologies under Medicare. 6. The purpose of a Diagnosis Related Group (DRG) is to prioritize patients who need care most urgently. 7. Suppose a politician suggests means testing the Medicare program. This will have no adverse effects on working or savings decisions.

Answer 1

5. By statute, the government is not permitted to take cost-effectiveness criteria into account when deciding to cover new technologies under Medicare.

Correct answer is "TRUE"

Rationale: Medicare pays for any treatment that is "safe, effective, non-investigational, and appropriate" . The cost of medical services is not taken into account when deciding medical coverages.

6. The purpose of a Diagnosis Related Group (DRG) is to prioritize patients who need care most urgently.

Correct answer is "FALSE"

Rationale: A diagnosis-related group (DRG) is a patient classification system that standardizes prospective payment to hospitals and encourages cost containment initiatives. DRG does not prioritize patients based on medical needs.

7. Suppose a politician suggests means testing the Medicare program. This will have no adverse effects on working or savings decisions.

Correct answer is "FALSE"

Rationale:

Means-testing is easy to see would dramatically reduce entitlement spending, and in a way that could be justified since benefits will be given only to people who need them most. Means-testing also has some serious drawbacks, especially when it comes to how the policy might shape financial and savings decisions. Means-testing entitlement benefits could punish the very people who work the hardest and save the most, depressing economic activity and discouraging good behavior.

Hence means testing would have an adverse effect on working or savings decisions.

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