Question

True or False Questions:

Please answer true or false.

1. Even when care is free at the point of service, we would expect low and high-income individuals with the same level of need to demand different quantities of health care.

2. We would expect the demand curve for physician visits to be more price elastic than the demand curve for inpatient hospital care.

3. A decision by the provincial governments to include counseling by psychologists within the public insurance plan would decrease the demand for physician services.

4. The actuarially fair premiums are the same for two individuals who have identical probabilities of being ill and identical monetary losses associated with being ill, but who have differing risk preferences.

5. A risk-averse individual prefers all situations with certainty compared to a risky prospect.

6. A community-rated premium is always less than a risk-adjusted premium.

7. Designing a funding system necessitates a trade-off between encouraging productive efficiency and discouraging strategic selection.

8. Changing from fee-for-service payment to capitation payment transfers risk from the funder to the funded provider.

9. Because participation is mandatory for all residents within a universal, public insurance system, risk selection is not a concern when providers in such a system are funded using capitation payment.

10. Variables used to risk-adjust capitation payments should be under the control of providers.

Answer 1

1. True

A number of factors may cause differences in demand across the groups, other things equal.

Health is more valuable for a high-income person because the lost incomeassociated with lost work time from illness is higher. This would lead demand to be higher.

The time cost of seeking care would be higher for high income individuals loweinlo their demand other things equal.

2. True

Because physician can be imperfect agent for patient, then (under FFS) physician can induce demand for some medical care
Theory of physician-induced demand or supplier-induced demand predicts that increases in supply of physicians will also induce increases in demand for care
Modifications to reimbursement mechanisms (e.g. capitation) can be used to reduce physician-induced demand.

Outpatient visits more responsive (more elastic) than hospital admissions.

3. True

The potential role of psychologists in a restructure public health care system that goes beyond hospital and physician care to home care and a revamped primary care system. Public plans would also benefit from the use of psychological alternatives to prescription drug therapies.

4. True

The fair premiums are the same for two individuals who have identical probabilities of being ill and identical monetary losses associated with being ill, but who have differing risk preference.