Question

1. Compared to fee-for-service payment, what are the advantages and disadvantages of payment based on diagnosis-related groups?

2. What is Medigap insurance? How does the existence of Medigap policies affect the cost of providing medical services to the elderly? Was Mark Pauly correct when he observed that the provision of some insurance might be suboptimal? (See “The Economics of Moral Hazard: Comment,” American Economic Review 58(2), June 1968, 531–538.)

3. If members of a society have transitive preferences, then that society as a whole must also have transitive preferences.

True

False

4. The goal of health policy is to maximize health, wealth, and equity.

True

False

Answer 1

1. In response to the increasing healthcare needs, most countries have sought to increase public sector spending. Evaluations of the current healthcare structures are frequently carried out to ensure quality of healthcare provision. Decentralisation of planning and devolvement of power to local authority levels is one set being taken to tackle inefficiencies in health care systems. Rationalisation of financial resources often takes the form of cost containment strategies, which can take two main forms; these include the regulation of prices and capping of budgets in healthcare spending.

The DRG system offers a number of advantages for healthcare providers but also creates a number of challenges for medical device manufacturers. The DRG system is feared to increase the regional hospital purchasing trend, which strengthens their bargaining power and gives providers the advantage of leveraging cost advantages by placing large purchasing orders.

Due to the stringent healthcare constraints in place we can see a significant decline in bed numbers and patient stay in European hospitals. The change has been facilitated by a significant growth in the day care, home care and ambulatory care sectors, which avoid costs associated to inpatient care. The provision of healthcare available outside hospital environments offers significant cost advantages for hospitals. The cost reduction achieved through providing out of hospital treatment, allows maximum utilisation under the DRG reimbursement systems.

2. A Medicare Supplement Insurance (Medigap) policy helps pay some of the health care costs that Original Medicare doesn't cover, like:

• Copayments
• Coinsurance
• Deductibles

Medigap policies are sold by private companies.

Some Medigap policies also cover services that Original Medicare doesn't cover, like medical care when you travel outside the U.S. If you have Original Medicare and you buy a Medigap policy, here's what happens:

• Medicare will pay its share of the

  Medicare-approved amount

Medigap premiums vary considerably among the geographic markets included in our sample. Measures of premiums from different insurers and for different types of Medigap policies were generally highly correlated across markets.Medigap premiums have a significant effect on seniors' participation in Medicare HMOs. Policy initiatives aimed at lowering Medigap premiums will likely discourage enrollment in Medicare HMOs, holding other factors constant. Although the Medigap premiums are just one factor affecting the future penetration rate of Medicare HMOs, they are an important driver of HMO enrollment and should be considered carefully when creating policy related to seniors' supplemental coverage.

Yes Mark Pauly was correct Insurance-based discrimination in health care is associated with delays in needed care and receipt of suboptimal services. In Oregon, pregnant women who were Medicaid enrollees or uninsured were more likely to experience insurance-based discrimination than those who had private insurance. In addition, among mothers with employer-sponsored insurance, experiencing insurance-based discrimination was associated with receiving suboptimal care, such as having fewer breastfeeding support actions.16 In North Carolina, insurance-based discrimination was associated with an increased likelihood of going without needed care among Latino immigrants

3. The answer is False, Ken Arrow proved that societies do not necessarily have transitive preferences even when all its members do. His theory is known as Arrows impossibility Theorem.

4. FALSE. In an ideal world, all three goals would be attainable at once, but in practice, it is impossible to have everything. Any attempt by a nation to move closer to one of these three goals necessarily involves a tradeoff that moves that nation further away from some other goal.

• Then, your Medigap policy pays its share.