Question

When insurance companies establish policies for covering screening tests for diseases, one important factor is the value of the test predicting the disease. For example, for a certain type of disease, insurance companies may only cover the test costs if the test improves the prediction of having the disease by 90%. To help decide coverage policy for a new test, use the following data to help decide whether the test should be covered. What is your conclusion? Justify your answer. 

Answer 1

P(A) = (24+5)/(24+5+9+104) = 0.204

P(A|B) = 24/(24+9) = 0.727

The percent increase from P(A) to P(A|B) is:

= (0.727-0.204)/0.204 * 100

= 256% which is greater than 90%.

Thus, the test should be covered.

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