TEST BANK for Health Policy Issues: An Economic Perspective 7th Edition by Paul Feldstein. ISBN 9781

Chapter 1 1. What does Medicare Part C do? a. Provides the aged with home health care b. Provides the aged with prescription drugs c. Enables low-income aged to participate in Medicaid

*d. Provides a voluntary managed care option for the aged

2. How is Medicaid administered?

*a. By each state b. By the federal government c. Jointly by each state and the federal government d. By insurers under contract with the federal government

3. How is Medicaid financed? a. It is financed entirely by the federal government. b. It is financed entirely by the state. c. States receive the same percentage of federal support.

*d. States with lower per capita incomes receive a greaterpercentage of federal support.

4. The Affordable Care Act a. did not make any changes to the Medicaid program.

*b. increased Medicaid eligibility. c. reduced funding for Medicaid. d. required adult Medicaid recipients to buy their insurance onhealth insurance exchanges.

5. Which of the following statements describes how the financing of UShealthcare

has changed over time? a. The federal government now finances 76 percent of totalhealthcare

expenditures. *b. Out-of-pocket payments represent less than 15 percent oftotal healthcare expenditures. c. Expenditures for prescription and over-the-counter drugs areas great as hospital expenditures. d. None of the above

6. In the past ten years, medical expenditures have risen more slowlyprimarily

because of a. the introduction of the Affordable Care Act. b. stringent Medicare price controls on hospitals and physicians. c. state regulation of health insurance premiums.

*d. a severe recession, greater number of uninsured people, andfewer employees with employer-paid health insurance.

7. In coming years, medical expenditures are expected to rise at afaster rate

because of a. the growing economy. b. increased demand as a result of the Affordable Care Act. c. the development of new technology and expensive specialtydrugs.

*d. All of the above

8. The growth in private health insurance was stimulated by a. federal and state subsidies.

*b. higher per capita income and tax-exempt employer-paid healthinsurance. c. the growth of private managed care organizations. d. federal and state regulatory policies.

9. An effect of government regulating physician-fee increases to reducerising Medicare

physician expenditures was that a. physician participation rates in Medicare declined. b. physician participation rates in Medicare increased. c. access to care for Medicare patients declined.

*d. A and C 10. Managed care relies on which of the following to reduce enrollees’

premiums? a. Dramatically increasing enrollees’ out-of-pocket expenses

*b. Having providers compete to join limited provider networks c. Increasing specialists’ fees to provide them with an incentive to become more productive d. B and C

Chapter 2 1. Why is there a concern that this country is spending too much onmedical care? a. Insurers’ administrative costs are too high. b. Hospitals and physician prices are much higher than in othercountries.

*c. The country is not receiving sufficient value for what itspends on healthcare. d. The healthcare system is too regulated.

2. Consumer sovereignty is based on the concept that

*a. consumers know best what they want. b. consumer out-of-pocket payments should be higher so thatconsumers become more price sensitive. c. consumers should have greater representation on hospital andinsurer boards of directors. d. consumers should have more comprehensive insurance so thatthey have more control over their choice of provider.

3. The relationship between the benefits of an additional visit and thenumber of visits is a. constant. b. increasing.

*c. decreasing. d. A and B 4. What is the “right” or “optimal” amount of spending for a person? a. When the additional medical benefit provided to the patient isworthwhile, as

determined by a health professional *b. When the benefit of the last visit to the physician is equalto the cost to the consumer for that visit c. When the additional medical benefit of that visit isworthwhile, as determined by the patient d. When the benefit of the last visit to the physician isconsidered appropriate according to clinical guidelines

5. Economic waste occurs when

*a. the expected benefits of an intervention are less than theexpected costs. b. the expected benefits of an intervention have very littleperceived value to the health professional. c. the expected benefits of an intervention have very littleperceived value to the patient.

d. the expected benefits of an intervention do not meetestablished

clinical guidelines.

6. Competitive markets in healthcare assume that a. government determines the appropriate training and number ofcompetitors. b. purchasers have information on the benefits of a treatment,provider

quality, and the costs of care. c. purchasers have a price incentive when making their choices. *d. B and C 7. If a healthcare system is “free” to everyone, and the government

provides all the care demanded, then a. everyone receives the “appropriate” amount of care.

*b. the benefits of an additional visit are very low. c. the benefits of an additional visit are very high. d. the benefits of an additional visit in relation to the cost ofproduction are unknown.

8. If a healthcare system is “free” to everyone, and the governmentlimits the

amount of care provided, then a. those who can afford it go elsewhere—to another country—fortheir care. b. a shortage occurs. c. “too few” visits result.

*d. All of the above

9. State and federal governments typically try to limit medicalexpenditure

increases by a. encouraging insurers to use limited provider networks. b. incentivizing Medicare beneficiaries to enroll in managed careplans.

*c. instituting provider price controls. d. promoting high-deductible health plans.

10. The government’s concern over rising healthcare costs is to ensure

that a. universal coverage occurs.

*b. the government doesn’t have to increase taxes or reduce politically popular programs. c. the voting public receives value for its money. d. appropriate new technologies are not overused.

Chapter 3 1. If the objective of an organization, such as a managed care firm, isto increase its

enrollees’ health, then the organization should spent more money on a. medical services. b. prevention. c. changing its enrollees’ lifestyle.

*d. Cannot tell without further information

2. A health production function

*a. examines the relative contribution of each factor thataffects health to determine the most cost-effective way toimprove health. b. is an economic phrase that has little relevance to healthcare. c. examines which health inputs are most effective in improvinghealth. d. examines the relative cost of each input used to decreaseneonatal infant mortality.

3. As more is spent on a health input, the marginal (additional)improvement in

health a. increases at an increasing rate.

*b. increases at a decreasing rate. c. is constant. d. None of the above

4. If everyone agrees that additional lives could be saved if more infants were

admitted to neonatal intensive care units (NICUs), then a. NICUs should be given the highest priority for additionalfunding to

decrease neonatal infant mortality rates. b. NICU funding should be the same as funding for other approaches to reduce neonatal infant mortality rates. c. NICU funding should be based on which programs achieve thelargest decrease in neonatal infant mortality. *d. NICU funding should be based on which program has the lowestcost per life saved.

5. Studies examining the various factors that improve life expectancyhave found that

the marginal contribution of medical care is a. relatively high. b. fairly constant over time.

*c. relatively low. d. unknowable.

6. The medical care people receive today is far superior to treatmentsreceived 30

years ago. Does that mean that the medical care system is more efficient today than in the past? a. Yes, because people have shorter lengths of stay in thehospital and

live longer b. No. People use too much medical care because their insurancepays for most of their care c. No, because payments to hospitals and physicians do notprovide them with appropriate efficiency incentives *d. B and C

7. According to the study by Corman and Grossman, what factors weremost

important in lowering the neonatal infant mortality rate for whites since 1965? a. Increased availability of NICUs and abortion

*b. Increased educational levels and subsidized nutritionalprograms c. Family planning services for low-income women and increasedavailability of NICUs d. Subsidized obstetric services and abortion

8. What is the leading cause of death in the United States?

*a. Cardiovascular disease b. Homicide c. Cancer d. Accident

9. Since 1970, there has been a rapid decrease in mortality from heartdisease. What

has been the main contributor to this decrease? a. Improvements in medical technology, such as coronary bypasssurgery,

coronary care units, and angioplasty b. Development of new treatment techniques *c. Prevention (including new drugs to control hypertension andhigh cholesterol) and changes in lifestyle (such as smoking cessation, exercise, and diet) d. Increased insurance coverage

10. When government medical expenditures are analyzed, is it appropriate to conclude

that the main objective of such expenditures isto improve health and decrease mortality rates? a. Yes, because many more people—such as those who are low incomeand the

aged—are provided with subsidized coverage b. No, because very large subsidies are provided to the politically important aged and do not improve health levels as

much as if those funds were spent in other ways and on otherpopulation groups c. No, because an important role of government is to assist thosewith low income who cannot afford to buy medical services *d. B and C

Chapter 4 1. If the physician were a perfect agent for the patient, then thephysician would

prescribe medical services to the patient a. according to accepted clinical guidelines, regardless of theircost to the patient

or the insurer. b. taking into consideration which mix of services is leastcostly to society and/or the insurer. *c. taking into account the patient’s ability to pay and preferences, even though the choice may not be the least costlymix of services. d. using the latest medical advances and available technologyconsistent with the malpractice laws in that state.

2. In a market where physicians are perfect agents and physician supplyincreases faster

than demand for physicians, a. the price of physician service is expected to increase.

*b. the price of physician service is expected to decrease. c. the price of physician service is expected to be constant. d. the number of physician visits is expected to decrease.

3. Supplier-induced demand refers to which of the following? a. When physicians are a supplier of a service, they use theirinformation

advantage over patients and insurers to benefit themselves. b. If physicians’ income falls, they use their role as theirpatients’ agent to prescribe additional services. c. When supply increases faster than demand for physicians, the price of physician services does not decline but either increasesor stays the same. *d. All of the above

4. Demand inducement is more likely to occur among a. physicians in managed care plans, such as a health maintenanceorganization

(HMO). *b. physicians paid fee-for-service by their insurers. c. physicians whose patients are generally low income. d. physicians who have been in practice for a long time.

5. To prevent demand inducement, insurers have a. developed utilization review programs. b. created preferred provider organizations of physicians. c. instituted training programs for recently licensed physicians.

*d. A and B

6. Physicians are an imperfect agent in an HMO if they responded to aprofit

incentive *a. by serving a larger number of patients and providing fewerservices to each patient. b. by providing their patients with the appropriate medicalservices. c. by referring patients only to HMO providers. d. by referring patients to HMO and non-HMO providers.

7. Why does the physician have a role as the patient’s agent? a. Because the patient or the patient’s insurer pays the

physician for services rendered b. Because the patient lacks the necessary information to makemany medically related decisions c. Because only physicians are legally permitted to providecertain services *d. B and C

8. Which of the following is an example of a physician being a perfectagent for a

patient? a. A physician whose patient does not have insurance tells the patient she

must return for multiple office visits even thoughone office visit is sufficient. b. A physician whose patient has insurance containing a narrow provider network sends the patient to a non-network provider. *c. A physician whose patient only has insurance for hospital care hospitalizes the patient for a diagnostic workup rather thanperforming the service at an outpatient facility. d. A physician whose patient does not have prescription drug coverage prescribes a branded drug when a generic equivalent isavailable.

9. When is it rational for a physician to prescribe additional care to a patient even when

the resource costs of that care exceed the benefitsto the patient? a. When the patient has comprehensive insurance with no

copayments b. When the physician is paid fee-for-service c. When the physician acts as a perfect agent to the patient *d. All of the above

10. According to the theory of supplier-induced demand, when will asurgeon stop

inducing demand?

a. The surgeon will continue to induce demand until he believesthat his

reputation has begun to suffer. *b. The surgeon will continue to induce demand to the point atwhich the additional revenue she receives is not worth the psychological cost of prescribing additional services. c. The surgeon will continue to induce demand to the point at which the patient believes the additional benefits of further visits are not worth the additional costs incurred. d. The surgeon will continue to induce demand until the insurer threatens to exclude him from the insurer’s provider network.

Chapter 5 1. Why must every country have a system for rationing medical services? a. Health professionals believe they should be the ones to decidehow much care

is appropriate. b. Government tries to protect patients who are generallyuninformed as to what care is necessary. *c. Insufficient resources are available to provide all theservices that people need. d. Physicians are likely to overprescribe when they are paid fee-for-service.

2. What is the likely consequence when all medical services areprovided free

to everyone? a. The government will find it is too expensive and thus limitexpenditures. b. Shortages of services will occur, and patients will have towait longer

times to receive care. c. Patients with high income will skip the queue and seek care inanother country. *d. All of the above

3. When rationing occurs by ability to pay,

*a. those with high income have greater access to care than thosewith low income. b. everyone receives the same amount of medical services. c. shortages are more likely to occur than when medical servicesare free to all. d. waiting lines for receiving medical care are greater for thosewith high income.

4. What is the relevant price that a patient faces when going to aphysician? a. The amount the insurer pays the physician b. The out-of-pocket price the patient pays the physician c. The amount the physician charges the insurer

*d. The out-of-pocket price and any travel costs and waiting timeincurred by the patient

5. When determining how much medical care they use, consumers, onaverage,

decide according to a. what they believe their medical care needs are. b. the out-of-pocket price of the service. c. what their physician recommends.

*d. the additional benefit of the service as compared to theadditional cost of that service.

6. The patient’s marginal benefit curve

*a. shows the additional benefit the patient receives from anadditional visit. b. shows the average benefit the patient receives from all hisphysician visits. c. is the same for all patients of a certain age. d. is constant for all of the patient’s visits to the physician.

7. The price sensitivity of a patient is greater for a. all physicians than for a single physician.

*b. a single physician than for all physicians. c. all HMOs than for a single HMO. d. emergency services than for a routine office visit.

8. Price sensitivity is affected by

*a. how good a substitute one physician is to another. b. the physician’s fee. c. how long the physician has practiced in the community. d. whether the physician is young or old.

9. Which of the following reflects moral hazard? a. It is unethical for patients to overuse medical services. b. Having insurance causes the patient to use fewer necessaryservices.

*c. Having insurance changes the patient’s behavior. d. Having insurance results in the marginal benefit of anadditional visit equaling the full cost of that visit.

10. Insurers attempt to control moral hazard by a. increasing patient cost sharing. b. changing physician incentives away from fee-for-service tocapitation. c. requiring the patient to receive a physician’s referral before

seeing a specialist. *d. All of the above

Chapter 6 1. A health insurance deductible a. is a dollar amount the patient must pay before the insurerpays any

medical expenses. b. lowers the insurance premium because it eliminates many smallmedical expenses. c. can be a financial burden on low-income people. *d. All of the above

2. Cost sharing in an insurance policy a. increases the insurer’s administrative expenses. b. lowers the insurance premium. c. makes the patient more price sensitive.

*d. B and C

3. Catastrophic expenses are a. incurred by a large percentage of the insured population.

*b. incurred by a small percentage of the insured population. c. excluded from most insurance policies. d. mainly the result of young accident victims.

4. The purpose of health insurance is to

*a. eliminate the uncertainty of incurring a large financialexpense. b. save money by not paying taxes. c. have the insurer pay for small claims. d. All of the above

5. The “actual” premium differs from the “pure” premium in that a. the actual premium includes the insurer’s profit, whereas the

pure premium includes claims expenses and administrative costs. *b. the actual premium includes the insurer’s profit and administrative costs, whereas the pure premium just includesclaims expenses. c. the pure premium is the same for each insured group, whereasthe actual premium adjusts for differences in a group’s claims expenses. d. None of the above

6. People are more likely to insure against claims that

a. have a high loading charge relative to the pure premium. b. are small in size.

*c. have a low loading charge relative to the pure premium. d. are both small and large.

7. Tax-exempt employer-purchased health insurance a. is of equal value to all employees regardless of their income. b. is primarily preferred by low-income employees who cannotafford

health insurance. c. stimulates the demand for high-deductible coverage. *d. results in a greater reduction of health insurance price forhigh-income employees.

8. Tax-exempt employer-purchased health insurance

*a. decreases the patient’s incentive to be concerned about the cost and use of services. b. is being eliminated by the Affordable Care Act. c. provides physicians an incentive to be more concerned about their patients’ use of services. d. is also available to those who are self-employed.

9. Tax-exempt employer-purchased health insurance a. has no effect on federal revenues. b. is only available to employees who have worked five years forthe same

firm. c. is only available to highly compensated employees in largefirms. *d. costs the federal government lost tax revenues.

10. Expenses for vision services, such as an eye exam, are relativelysmall, yet they

are often included as a health insurance benefit because of this: a. Employers want to ensure that their employees’ productivity

would not be adversely affected by poor vision. *b. The price of vision benefits is reduced by tax-exemptemployer insurance. c. Eyesight is an essential need for people, and good eye care isworth paying for. d. Similar to dental services, vision services should be part ofa comprehensive insurance policy.

Chapter 7 1. Tax-exempt employer-paid health insurance a. raises the price of insurance to the employee. b. primarily benefits the employer.

*c. lowers the price of insurance to the employee. d. has no effect on the price of insurance.

2. The individual health insurance market a. covers most people who have health insurance.

*b. covers a small percentage of people with health insurance. c. is used by employers for their employees. d. has been eliminated by the Affordable Care Act.

3. The difference between community and experience rating is that anexperience-

rated premium is based on a. a risk pool composed of several large employer groups. b. the risk pool of all individuals in the individual market. c. a risk pool consisting all of the enrollees of an insurer.

*d. the risk pool of a single employer.

4. If an insurer incorrectly estimates an insured person’s premium,

then the insurer *a. will suffer a financial loss. b. can appeal to the state insurance commissioner for a subsidy. c. will drop people whose medical expenses exceed their premium. d. None of the above 5. The claims experience of an insurer’s enrollees does not include a. the benefits available to the enrollees. b. the demographic characteristics of the enrollees. c. the cost-containment provisions of the health plan.

*d. the insurer’s administrative costs.

6. Adverse selection occurs because a. large employee groups have older employees.

*b. individuals have more information about their risks than theinsurer does. c. large employee groups provide more health benefits andvacation time. d. insurers do not want to enroll high-risk people.

7. The Affordable Care Act eliminates the preexisting-conditionexclusion

and tries to prevent adverse selection by a. mandating “essential” benefits. b. mandating a modified form of community rating. c. establishing regulated health insurance exchanges.

*d. mandating insurance coverage or payment of a penalty.

8. The main reason that preferred risk selection occurs is this: a. Insurers are for-profit and try to increase their profits.

*b. The premium is the same for people with different risklevels. c. Premiums differ for different insured groups. d. The Affordable Care Act regulates the medical loss ratio.

9. Gender rating—whereby women pay the same premium as men— a. makes the health insurance market similar to the autoinsurance

market. b. is fair because women incur the same medical costs as men do. c. is the consequence of a price-competitive insurance market. *d. will increase premiums for men.

10. The Affordable Care Act a. expands health insurance benefits for the insured. b. results in some age groups subsidizing other age groups. c. results in insurers establishing low-cost, narrow providernetworks.

*d. All of the above

11. Medicare Part D (prescription drugs) is a voluntary program. Why isMedicare

concerned that adverse selection may occur in this program? a. Medicare beneficiaries will use too many drugs because thepremium is

subsidized. *b. Medicare beneficiaries will join the program only when theyrequire expensive drugs. c. Because the government subsidizes 75 percent of this benefit,too many Medicare beneficiaries will join the program. d. Medicare beneficiaries will attempt to enroll spouses who arenot eligible for Medicare.

Chapter 8 1. Medicare Part A (hospital services) is financed by a. a premium that is 75 percent subsidized by the government and

25 percent subsidized by the aged. *b. a payroll tax on both the employee and the employer. c. a premium that is 100 percent subsidized by the government. d. both a subsidized premium and a payroll tax.

2. Medicare Part B (physician and outpatient services) is financed by

*a. a premium that is 75 percent subsidized by the government and 25 percent subsidized by the aged. b. a payroll tax on both the employee and the employer. c. a premium that is 100 percent subsidized by the government. d. both a subsidized premium and a payroll tax.

3. Medicare serves the following population groups: a. Those with low income up to 138 percent of the federal povertylevel b. Children up to age 18 years whose parents have low income

*c. Those over age 65 years and all those with kidney disease d. Those over age 65 years who have low income

4. Accountable care organizations (ACOs) a. are another name for Medicare Advantage plans. b. have enrolled about 28 percent of all Medicare beneficiaries. c. are plan options chosen by Medicare beneficiaries.

*d. are responsible for the care of Medicare beneficiaries whoare unaware that they are enrolled in an ACO.

5. The Affordable Care Act changed Medicare by a. changing the percentage of the Part B premium that Medicareenrollees

have to pay. b. reducing the large Part A deductible. c. reducing the time Medicare beneficiaries can switch betweenplans from 1 year to 30 days. *d. reducing the “donut” hole in the Part D (prescription drugs) benefit.

6. Medicare is not considered to be a fair redistributive systembecause a. Medicare beneficiaries receive large subsidies regardless ofhow high their

income is.

b. low-income Medicare beneficiaries with high out-of-pocketexpenses

must enroll in Medicaid. c. low-income employees subsidize high-income Medicare beneficiaries. *d. All of the above

7. Medicare is criticized for being inefficient because a. Medicare supplementary insurance removes the patient’s

incentive to be concerned about the cost and use of services. b. providers who are paid fee-for-service have an incentive toprovide more services but no incentive to coordinate care. c. many aspects of managing chronic care are either not coveredby Medicare or require a physician office visit. *d. All of the above

8. The diagnostic-related group (DRG) hospital payment system changedhospital

incentives by making it more profitable to a. employ physicians. b. admit sicker Medicare patients.

*c. reduce a patient’s length of stay. d. charge more for lab tests.

9. Medicare is considered to be unsustainable because a. the female population is living longer than the malepopulation. b. the United States is competing within a global economy. c. the Affordable Care Act is expanding coverage to theuninsured.

*d. the aged are living longer and medical care costs continue toincrease.

10. Medicare is difficult to reform because a. pharmaceutical manufacturers benefit from drug sales underPart D. b. senior congressional leaders do not want their Medicarebenefits

changed. *c. the Medicare population is opposed to the reform and havehigh votingparticipation rates. d. Medicare reform would likely increase the federal deficit.

Chapter 9 1. Whom does the Medicaid program serve? a. Primarily low-income aged b. Primarily low-income children up to age 18 years c. Primarily low-income pregnant women

*d. Those with low income based on a means test

2. How is Medicaid administered?

*a. By each state, but policy is shared with the federalgovernment b. By the federal government and coordinated with the states c. By a joint commission composed of federal and state appointees d. None of the above

3. The Affordable Care Act made which of the following changes toMedicaid? a. It shifted greater responsibility for funding to the states.

*b. It expanded Medicaid eligibility. c. It enabled a greater number of people on Medicare to becomeeligible for Medicaid. d. It permitted undocumented immigrants to pay a premium to joinMedicaid.

4. What are some legitimate ways to spend down one’s assets to qualify

for Medicaid? *a. Fixing up one’s house, purchasing a new car, or setting up a special burial account b. Providing financial gifts to one’s children c. Transferring property to one’s children d. Setting up special retirement accounts that can be passed onto children or relatives after seven years 6. Those on Medicaid lose their eligibility once their incomes rise above their state’s

Medicaid cut-off level. The consequence of this isthat a person a. would try not to go on Medicaid if she expects her income toincrease in

the coming year. *b. might not accept a job that would cause him to lose hisMedicaid benefits. c. would rather remain on her employer’s health insurance than switch back and forth between Medicaid and private insurance asher income changes. d. would rather buy individual catastrophic coverage than takethe chance of being uninsured if his income increases.

7. To reduce rising Medicaid expenditures, many states have reduced physician

fees. What is the likely consequence of this cost-controlpolicy? a. Access to physicians by Medicaid beneficiaries has declined. b. The use of hospital emergency departments by Medicaid

beneficiaries has increased. c. Fewer physicians have decided to participate in Medicaid. *d. All of the above

8. Most states have shifted their Medicaid beneficiaries into private Medicaid managed

care/HMO plans. What is the advantage to the state fordoing so? a. Medicaid patients are more likely to receive coordinated careand preventive

services. *b. By paying HMOs a fixed fee per person per month, states areable to shift their risk for higher expenditures to a managed care plan. c. Medicaid patients are more likely to have access to aphysician within the HMO. d. The HMOs have entered the Medicaid market because they believethey can provide the care less expensively and earn a profit.

9. Why do a number of state governors favor receiving federal blockgrants instead

of the current system? a. Block grants would improve equity among some states because wealthier

states that can afford to spend more receive a greateramount of federal Medicaid funds. b. States would have greater flexibility in designing Medicaid benefits and would be more innovative in providing care to theirMedicaid population. c. A block grant would not require states to increase their Medicaid population when the country goes into a recession andincreased unemployment occurs. *d. A and B

10. Substituting an income-related voucher for the current Medicaidsystem would

not achieve the following: a. An income-related voucher would eliminate the large differences between

states in the percentage of their populationseligible for Medicaid. b. An income-related voucher would reinforce the movement toward Medicaid managed care, with its emphasis on coordinated care and incentives to provide care in less costly settings. *c. An income-related voucher would provide employees with anincentive to forego higher pay so that they qualify for the voucher subsidy.

d. An income-related voucher would provide those on Medicaid withan incentive to take higher-paying jobs because they would only lose part of their voucher subsidy.

Chapter 10 1. How is Medicare Part B financed? a. By a payroll tax on the working population, with the patientresponsible for

a deductible and copayment *b. By a premium paid 75 percent by the aged and 25 percent by the government, with the patient responsible for a deductible andcopayment c. By a premium paid 25 percent by the aged and 75 percent by thegovernment, with the patient responsible for a deductible and copayment d. By a payroll tax on the working population and a federalsubsidy, with the patient responsible for a deductible and copayment 2. How does Medicare’s physician fee-for-service payment system givephysicians

an incentive to act inefficiently? a. Physicians treating Medicare patients will collude on settingtheir fees. b. Physicians will hire nurse practitioners to treat Medicare patients given

that Medicare fees are lower than those in theprivate market. *c. The fee-for-service payment system encourages inefficiency by rewarding physicians who perform more services. d. A and B

3. The resource-based relative value scale (RBRVS) was based on thisconcept: a. Each physician specialty should determine the appropriate feesfor its

services. b. Physician fees should be based on the average physician fee ineach specialty within each community. *c. The fee for a physician service should approximate the costof performing that service. d. Physicians should be able to determine their own fees as longas they do not increase by more than the medical price index.

4. Under the sustainable growth rate (SGR) system, physician fee updates are

adjusted up or down, depending on whether actual spendinghas fallen below or has exceeded a target. Has the SGR proved to be effective in controlling Medicare physician expenditure increases? *a. No, because Congress does not follow the SGR updaterecommendations b. No, because medical societies have refused to implement theSGR recommendations c. Yes, because Congress has usually followed the SGR update recommendations

d. Yes, because the SGR methodology has been able to limit increases in

the use of medical imaging and laboratory tests

5. What is meant by balance-billing? a. At the end of each fiscal year, the physician and each insurerreconcile their

billings and payments. b. It is a financial reconciliation process between each insurerand Medicare. c. It occurs when the Medicare fee exceeds the physician’s feeand the patient’s copayment based on the Medicare fee. *d. It occurs when the physician charges the patient an amountabove the Medicare-approved fee.

6. When the RBRVS physician payment system was introduced, the

physicians whose fees increased were those who a. performed more procedures. b. were younger. c. were affiliated with hospitals.

*d. performed more cognitive services.

7. Physician fees for serving Medicare, Medicaid, and privately insuredpatients (with

the same diagnosis) differ. What criteria would a maximizing physician use in deciding which patients to serve? a. Patients who are willing to pay high copayments b. Patients whose insurers pay sooner

*c. Patients whose profit per hour of physician time was highest d. Patients whose paperwork costs were lowest

8. If Medicare fees are lower than fees paid by private insurers,physicians are

likely to see *a. fewer Medicare patients and accept lower private fees so that they can see more private patients whose fee is still higher thanMedicare’s. b. fewer Medicare patients and have more leisure time. c. more Medicare patients so that they can maintain theirMedicare income. d. fewer Medicare patients and raise the fees they charge privatepatients to make up for the lower fees paid by Medicare.

10. In 2015, Congress approved a new Medicare physician payment systemcalled

MACRA. What were the objectives of MACRA? a. To replace the SGR payment system requiring a 21 percentreduction

in Medicare physician payments

b. To change Medicare physician payment incentives from rewarding number of

visits, tests, and procedures performed to rewarding or penalizing physicians based on the value of the care provided c. To transition physicians away from fee-for-service to alternative payment models *d. All of the above

Chapter 11 1. What is the main reason that physicians are leaving primary care? a. It is less prestigious than being a specialist.

*b. Fees and income are lower than what specialists earn. c. There are too few primary care residency positions. d. Patients prefer to go to a specialist than a primary carephysician.

2. The physician-to-population ratio technique compares the current (or preferred) ratio

with the ratio likely to occur in a future period. Use of the ratio technique has what shortcoming(s)? a. It fails to consider increases in physician productivity. b. It fails to recognize that there may be factors that changethe demand for

physicians, such as new medical advances. c. It fails to indicate the importance of a divergence in the tworatios, such as the size of a shortage or a surplus. *d. All of the above

3. A physician shortage exists when a. all those who want to see a physician are unable to do so.

*b. the demand for physician services exceeds the supply ofphysician services at a given price. c. the demand for physician services is increasing faster thanthe supply of physician services. d. physicians are unable to supply more services in the face ofincreased demand.

4. How does a static shortage differ from a temporary shortage? a. A static shortage resolves itself when physicians realize they must increase

the supply of their services. *b. A static shortage resolves itself when the price of physician services is permitted to increase. c. A static shortage resolves itself when patients realize that demand exceeds supply and that they must go elsewhere for theircare. d. None of the above

5. In calculating the rate of return of a medical education, what isthe most

important opportunity cost that a student should include? a. Tuition b. The difference in income between primary care and specialtypractice

*c. The income that could have been earned had the student takena job

d. B and C

6. What is likely to occur if the demand for residencies exceeds thenumber of

residencies available? a. Teaching hospitals will recognize the imbalance and increasetheir number

of residencies. b. Medical schools will respond by increasing their number ofspaces. *c. Practicing physicians will earn higher rates of return, particularly in those specialties where the imbalance betweendemand and supply is greatest. d. A and B

7. If Medicare keeps physician fees lower than the fees in the privatephysician

market, then physicians will a. continue serving the same number of Medicare and privatelyinsured

patients. b. close their practice to Medicare patients and increase theirleisure time. *c. shift more of their time to serving privately insuredpatients. d. increase the number of Medicaid patients and see fewerMedicare patients.

8. How can a physician shortage continue to exist in the publicphysician

market but not in the private market when demand for physicians increases in both markets? a. Both markets are interrelated, and a shortage cannot continuein only one

market. b. The increase in demand by Medicare patients is greater thanthe increase in demand by privately insured patients. c. Privately insured patients will have access to a greaternumber of physicians than Medicare patients do. *d. Government-regulated physician fees are not increased, whilephysician fees are increased in the private market.

9. What is an indication that a physician shortage exists in theMedicare

market? a. Waiting times to make an appointment with a physician haveincreased. b. Physician visits with Medicare patients are shorter. c. Physicians may prescribe more imaging tests for Medicarepatients.

*d. All of the above

10. What is an important economic reason that medical associations areopposed to

retail medical clinics? *a. Retail medical clinics are substitutes to physicians andwould decrease physician income. b. Retail medical clinic staff are not as qualified as physicians(who have longer training times) and may misdiagnose a patient’s illness. c. Retail medical clinics do not coordinate a patient’s care withthe patient’s primary care physician. d. All of the above

Chapter 12 1. Why is there excess demand for medical schools? a. Medical schools can’t expand their spaces fast enough to

accommodate the increased demand. *b. Medical schools have no incentive to expand their spaces eventhough demand exceeds the number of spaces. c. No excess demand for medical schools exists. Students apply to multiple medical schools, so the net demand for spaces equals the number of spaces available. d. It takes many years and a great deal of money to expand medical school capacity, and medical schools must raise the fundsto do so. If the schools received more donations, they would expand their number of spaces.

2. If the market for medical education were like other markets, whatrole would

tuition play? a. Increased tuition would serve to ration student demand for theexisting

number of spaces. b. Increased tuition would provide funds to pay higher salariesto the administrative staff. c. Increased tuition would provide medical schools a financial incentive (and the funds) to invest in facilities and faculty sothat they could accommodate larger enrollments. *d. A and C

3. If medical education were like other markets, would low-incomestudents be

able to become physicians? a. No, they couldn’t afford the high tuition.

*b. Yes, they would be eligible for scholarship and loanprograms. c. Yes, they could go to medical schools overseas. d. No, medical schools would want students whose parents couldmake large donations for their children to be admitted.

4. How does the market for medical education differ from other markets? a. Medical schools operate inefficiently (high cost) and require

too many years of a student’s time. b. The method used to finance medical education (subsidized tuition) is inequitable; large subsidies go to students fromhigh-income families. c. Before taking licensing exams, students must first graduate from approved medical schools; this prevents competition from more efficient firms that do not meet the accrediting criteria. *d. All of the above

5. How has the medical education industry, with its record of poorperformance,

been able to survive? a. The industry, being not-for-profit, is able to produce veryhigh quality

medical graduates. b. The excess demand for medical education ensures the survivalof medical schools. *c. Medical schools are heavily subsidized and do not dependsolely on tuition for their revenues. d. Medical school faculty, an essential input to medical education, would not participate in competitive firms providing adrastically different form of medical education.

6. How would medical schools likely respond to subsidies being provideddirectly to

students, instead of the schools receiving the subsidies? a. Medical schools would have to compete for students to receivethe

subsidies. b. Nothing would change because there is excess demand formedical education. c. Medical schools would become more responsive to changing theircurricula and decreasing the years required to graduate. *d. A and C

7. What is the likely goal of many medical schools? a. Produce as many medical graduates as possible to increase thehealth of the

population b. Train primary care physicians who can practice in underservedareas *c. Achieve prestige by training academically gifted students tobecome specialists and educators d. Train students to become leaders in providing coordinated carein integrated delivery systems

8. What incentives exist for medical schools to respond cost-effectively to

changing medical education demand? a. Revenues are dependent on responding to changing demands. b. Faculty salaries would be adversely affected if the school wasnot responsive

to changing demand conditions. c. Students would enroll in other medical schools if the schoolwas not responsive to changing demands. *d. No such incentives currently exist.

9. What is a likely consequence of the accreditation requirement thatmedical schools

be not-for-profit?

a. The quality of nonprofit school graduates is higher than thequality of

graduates from schools with a profit motive. *b. Private organizations have no incentive to invest capital tostart a new medical school. c. For-profit medical schools find it more difficult to attractqualified faculty. d. All of the above

10. What would be a likely consequence of requiring periodic re- examination for

licensure rather than the current system of graduation from an approved medical school, a one-time licensing exam, and continuing medical education credits to achieve physician quality? (Physicians who are not board certified have to achieve a certain number of continuing education credits each year. Continuing education by itself is a process measure for ensuring quality and does not ensurethat physicians actually maintain and update their skills and knowledgebases.) a. All physicians—not just those who are board certified—have toupdate their

skills and knowledge. b. Re-examination determines the appropriate amount of continuingeducation on an individual basis. c. Periodic re-examination and relicensure determine what tasks an individual physician is proficient in performing. (Currently,all licensed physicians are permitted to perform a wide range oftasks, although they may have insufficient training in some of these tasks.) *d. All of the above

Chapter 13 1. What is the major downside to physicians leaving a group practice?

*a. They cannot take their patients with them if the group has acontract with an insurer. b. They lose the collegiality of their fellow physicians. c. They must go through the hassle of setting up a new office andstaff. d. They must learn a new software system for their office.

2. Generally, physicians who join an independent practice associationdo so because a. they want colleagues with whom they can discuss their cases. b. they want the security that comes from being salaried.

*c. they want to be associated with other physicians (on a nonexclusive basis) for the purpose of joint contracting with ahealth plan. d. they want to lower their overhead and office staff and save oninformation technology.

3. Which size of physician practice has been declining the most overtime? a. Largest b. Medium

*c. Smallest d. A and B

4. What was the effect on physicians of the growth in managed care? a. Managed care sought physicians as business executives to headup their

organizations. b. Managed care used closed provider networks that required physicians to discount their fees to be included in the network. c. Managed care relied on primary care physicians to determinewhether a patient would receive a specialist referral. *d. B and C

5. As medical groups sought capitation payments from health maintenance

organizations (HMOs), what was a major problem for these groups? a. They could not enroll a sufficient number of patients to befinancially

viable. *b. They were inexperienced in managing the financial riskassociated with capitation and suffered financially. c. They did not have the information technology to collectquality data to prove their performance to the HMOs.

d. They could not recruit a sufficient number of specialists todeliver the services their patients needed.

6. What economic advantages do large medical groups have over othersize groups

of physicians? a. They have more bargaining power with insurers and HMOs. b. They are able to take advantage of economies of scale, such aswith supplies,

equipment, and staff. c. They are able to achieve informational economies of scale, given patients’ lack of information on the quality of individualphysicians in the community. *d. All of the above

7. Which of the following was not a reason for the difficulties largemultispecialty

groups faced? a. Lack of capital

*b. Their location in relation to their patient population c. Lack of management expertise d. Difficulty of developing a group culture

8. What is an important reason for the growth of single-specialtygroups?

*a. The emergence of new imaging and surgical technologies made it possible to provide imaging and surgical services outside thehospital where the specialists could receive the facility fees. b. There are a greater number of residency positions forspecialty than for primary care. c. Specialists have a much higher income than primary carephysicians do. d. Single-specialty groups are able to take advantage ofeconomies of scale.

10. Why are hospitals interested in employing physicians? a. It ensures that hospitals receive their employed physicians’

referrals. b. It indicates employed physicians’ vote of confidence in the hospital, particularly when the hospital is raising funds fromthe community. c. It increases the hospital’s Medicare payments when employedphysicians are able to bill Medicare under Part A rather than under Part B. *d. A and C

Chapter 14 1. What has been the purpose of most malpractice reform legislation?

*a. To limit malpractice awards and claims filed b. To ensure that low-quality physicians are prevented fromperforming surgery c. To fairly compensate injured patients d. To ensure that expert medical witnesses are unbiased

2. Is the number of malpractice claims generally uniform among allphysicians? a. Yes. b. No. About 30 percent of physicians incur about 90 percent ofall

malpractice claims. *c. No. About 1 percent of physicians incur about 30 percent ofmalpractice claims. d. No. Internists incur the largest percentage of claims.

3. Malpractice proposals that seek to impose damage caps aim to limit a. the adjustment of the lost wages of a patient recovering fromthe malpractice

injury. b. malpractice legal defense costs. c. economic costs, which include current and future medicalexpenses. *d. the costs of pain and suffering, which usually cover thephysical and emotional stress caused by an injury.

4. Which of the following is true regarding compensation for patientsinjured as a

result of malpractice? a. About 85 percent of patients who have filed malpractice claimsreceive a

settlement. *b. Less than 2 percent of patients injured by negligence filemalpractice claims. c. Settlements due to negligence are settled quickly so they don’t go to trial. d. Malpractice premiums have been high because of increasing settlement payments for negligence, which comprise 85 percent ofpremiums.

5. Tort law is the basis for medical malpractice. The purpose of tortlaw is to a. enable injured patients to sue for their injuries. b. provide injured patients the opportunity to have a jury trialto receive

compensation.

*c. compensate the victim for negligence and deter futurenegligence. d. punish physicians knowingly committing malpractice.

6. What is defensive medicine? a. When a physician refuses to accept high-risk patients b. When a physician performs fewer surgical procedures to reducethe risk of

being sued c. When a physician includes additional colleagues in the patient’s treatment to lessen the risk of being sued *d. When a physician prescribes additional tests and proceduresto protect against malpractice claims

7. The current malpractice system compensates a. most patients injured by negligence. b. about half of the patients injured by negligence. c. about 25 percent of the patients injured by negligence.

*d. a very small fraction of patients injured by negligence.

8. How well does the current malpractice system deter negligentbehavior by

physicians? a. Very well b. Depends on the physician’s specialty

*c. Not very well d. Well about half the time 9. Which approach(es) would not decrease a lawyer’s incentive to take

on a malpractice case? *a. Collateral offset rule b. Joint and several liability c. Special health courts d. No-fault malpractice system

10. Which of the following describes enterprise liability? a. The organization to which the physician belongs or is associated with has

the right to sue the negligent physician formalpractice. *b. The liability for a negligent physician’s action shifts to the organization the physician is a part of, such as a hospitalor managed care plan. c. Limits are placed on the liability of large organizations, such as hospitals or managed care plans, if a negligent physicianthey employ performs a negligent action.

d. Limits are placed on the liability of large organizations, such as hospitals or managed care plans, if they contribute to astatewide malpractice fund.

Chapter 15 1. The main legal distinctions between nonprofit and for-profithospitals are

as follows: a. Nonprofit hospitals are not permitted to make profits, and anyrevenue in

excess of their costs must be returned to the state. b. Nonprofit hospitals are not permitted to undertake capital expenditures without permission from a state hospital planningcommission. *c. Nonprofit hospitals cannot distribute profits to shareholders, and their earnings are exempt from federal andstate taxes. d. Nonprofit hospitals are not permitted to engage in profit- making activities that are unrelated to their charitable mission.

2. Which category has the largest number of hospitals? a. Short-term general state and local governments

*b. Short-term general not-for-profit c. Short-term general for-profit d. Long-term hospital

3. Which of the following is not a reason that hospitals are nonprofit? a. When hospitals were predominantly institutions that serve thepoor, they

were dependent on donations, and some believe that only nonprofit hospitals provide uncompensated care to those whoare unable to pay. b. A relationship based on trust is needed in markets in which information is lacking. Patients, who are not sure what servicesthey need, are more likely to rely on nonprofit providers, believing that because these providers are not interested in profit, they will not take advantage. Patients—especially those who lack information and are seriously ill—are dependent on the provider for their diagnoses and treatments. c. Nonprofit hospitals are in physicians’ financial interest. Being associated with nonprofits allows physicians to exercise greater control over their hospital’s policies, services, and investments in facilities and equipment.

Physicians also benefitfrom their hospital’s ability to receive donations. *d. Hospitals are nonprofit because at the time of theirdevelopment for-profit hospitals were illegal.

4. How would a nonprofit hospital engage in cost shifting?

*a. The hospital would set prices to private insurers below theirprofitmaximizing price but increase those prices when the government reduces the price it pays for Medicare or Medicaid patients.

b. To subsidize the charity care it provides, the hospital wouldset its prices so

that the markup over cost is greater for Medicare patients. c. The hospital would try to shift its high-cost emergencydepartment patients to another nearby hospital. d. When a high-cost emergency department patient is admitted to ahospital that does not have a contract with the patient’s insurer, the hospital would charge that insurer a higher rate than if the insurer had a negotiated contract.

5. Why do nonprofit hospitals merge with other hospitals? a. To achieve greater efficiency from being larger b. To be able to gain market power and increase prices c. To assist a failing hospital, in the case of a merger betweena financially

secure hospital and a failing hospital *d. All of the above

6. Do nonprofit hospitals with market power charge lower prices (smaller markup

over cost) than do nonprofit hospitals without marketpower? a. Yes

*b. No c. Depends on how they achieved their market power d. Can’t tell without further information regarding the size of the hospital

7. Do nonteaching, private nonprofit hospitals and for-profit hospitals, on average,

differ in the quality of care provided to theirpatients? a. Yes

*b. No c. Studies have not compared quality-of-care differences betweentypes of hospitals. d. All the empirical studies on this issue have beeninconclusive.

8. Do teaching hospitals, on average, provide higher-quality care thando for-profit

hospitals? *a. Yes b. No c. Studies have not compared quality-of-care differences betweentypes of hospitals. d. All the empirical studies on this issue have been inconclusive.

10. What is the difference between a hospital’s bad debts and its

uncompensated care? a. Bad debts are the difference between hospital charges and theamount

Medicare and Medicaid reimburse the hospital. b. Bad debts are the result of care for which payment is notexpected and patients are not billed. *c. Uncompensated care is the sum of bad debts and charity care. d. Uncompensated care includes the amount of patient education;prevention programs; medical research; and provision of money- losing services, such as burn units and trauma centers.

Chapter 16 1. What is the purpose of the Federal Trade Commission’s review of

hospital mergers? a. To assess whether the merger will enhance the quality ofhospital care b. To determine whether the merger will harm a particular hospital

competitor and possibly drive the hospital out ofbusiness *c. To see whether the merger will lessen competition in thehospital market d. To learn whether the merger will lower the costs of the merging hospitals by increasing efficiency and reducing costlyduplicative services

2. Why did hospitals engage in nonprice competition? a. Hospitals were intent on providing subsidies to those unableto pay for their

care. *b. Hospitals were reimbursed their costs, and purchasers hadlittle incentive to be concerned with the cost of care. c. Hospitals were able to receive large donations from their communities, which wanted their hospitals to have the latestfacilities and services. d. A and C

3. What was the effect of certificate-of-need (CON) regulations? a. CON was successful in reducing costly duplicative hospitalservices. b. CON enabled physicians to start lower-cost outpatient surgerycenters.

*c. Existing hospitals used CON in an anticompetitive manner toprevent entry by new hospitals. d. Communities that enforced CON had lower increases in hospitalexpenditures, compared to communities that did not enforce such regulations.

4. Which events led to price competition among hospitals andphysicians? a. Hospitals and physicians began to experience excess capacityand were

willing to compete on price to increase their volumes. b. Private insurers were pressured to reduce hospital costs by employers that were concerned about the rising costs of insuringemployees. c. The US Supreme Court ruled that the antitrust laws applied tothe healthcare sector. *d. All of the above

5. What problem results when a hospital is a monopolist (i.e., the onlyprovider of

hospital care in the market)? a. The hospital has no incentive to respond to purchaser demandsfor lower

prices, quality information, and patient satisfaction. b. Purchasers have no choice but to use the only hospitalavailable. c. The hospital may be unable to attract a sufficient number ofphysicians and nurses to care for their patients. *d. A and B

6. What is the likely effect of five hospitals in a market merging intoone hospital? a. The single hospital might be able to reduce duplicativefacilities and

services. *b. The single hospital might be able to raise prices. c. The single hospital might not have to use as many employees. d. A and C

7. Which of the following actions are anticompetitive? a. A hospital that lowers its price and thereby drives acompetitor

from the market b. Price-fixing agreements among competitors c. Barriers that prevent competitors from entering a market *d. B and C

8. What is the economic rationale that determines the number ofhospitals in a

market? *a. The cost–size relationship of hospitals (economies of scale)and the size of the market (population served) b. When the demand for hospital care equals the supply of care(an equilibrium situation) c. When none of the hospitals have an incentive to leave themarket d. When one observes that hospitals are not entering the market

9. Why have limited provider panels established by insurers led tolower provider

prices? a. When there are a large number of insurers in a market, theyface greater

price competition. *b. Providers have had to compete on price to be included inprovider panels. c. Enrollees prefer to choose among fewer providers becausegathering information on a large number of providers is difficult.

d. None of the above

10. What was the effect of the consumer backlash against managed carein the late

1990s and early 2000s? a. Health plans broadened their provider networks to give theirenrollees more

provider choice. b. As insurers included more hospitals in their networks, theirbargaining power over hospitals decreased. c. Insurance premiums increased more rapidly. *d. All of the above

Chapter 17 1. How are hospitals reimbursed by Medicare according to diagnosis-related

groups? a. Hospitals are paid their costs for treating a Medicare patientwith a particular

diagnosis. *b. Hospitals are paid a fixed price according to the Medicare patient’s diagnosis. c. Hospitals are paid a fixed price that is the same for all their publicly and privately insured patients—on the basis oftheir diagnoses. d. Hospitals are paid their fixed costs, which are the same forall their publicly and privately insured patients, plus their variable costs for Medicare patients— on the basis of their diagnoses.

2. Starting in the 1980s, why did hospitals experience excess capacity? a. Medicare patients’ length of stay decreased. b. Private insurers’ cost-containment programs decreased hospitaluse. c. Many states enacted regulations limiting hospital lengths ofstay for non-

Medicare patients. *d. A and B

3. Why did hospitals buy physician practices in the 1980s?

*a. To increase their admissions by securing physician referrals b. To become an integrated organization capable of providing anepisode of care at a fixed price c. To be able to compete with insurers by providing all medicalservices at a single capitated rate d. B and C

4. When hospitals had excess capacity, insurers were able to increasetheir bargaining

power over hospitals. What occurred to enable hospitals to reverse the situation? a. Hospitals merged and thereby decreased the number of hospitalcompetitors. b. Hospitals were successful in enacting legislation in manystates that

allowed them to bargain collectively with each insurer. c. Insurers expanded their provider networks to provide enrolleesgreater choice in providers and thereby reduced the patient volume going to lower-cost hospitals. *d. A and C

5. What has occurred since 2007 to account for the slowdown in hospitalspending? a. The Great Recession caused many people to become unemployedand lose

their health insurance. b. The percentage of employees with employer-paid healthinsurance declined. c. More employees chose high-deductible health plans with lowerpremiums. *d. All of the above

6. In coming years, why are hospital costs likely to increase fasterthan inflation? a. The large number of hospital mergers has lessened hospital

competition but will reduce hospitals’ incentive to be efficient. *b. Hospitals will have to invest in new treatment technology (including equipment, technicians, and expensive drugs) and incostly information technology. c. As hospitals employ more physicians, those physicians willprescribe more imaging tests and other services, thereby increasing hospital costs. d. Many hospitals will have to be rebuilt as they become older,and construction costs are greater than they were previously.

7. How has hospital payment changed over time? a. The private hospital sector has grown in importance,accounting

for more than half of all hospital revenues. b. Medicare has become the most generous payer of hospitalservices, and Medicaid has been the least generous. *c. Government has become the major payer, accounting for morethan 55 percent of hospital revenues. d. None of the above

8. What is the likely financial impact of the Affordable Care Act onMedicare

hospital payments? a. Medicare hospital payments will increase. b. Medicare hospital payments are unlikely to be affected by theAffordable

Care Act. c. Medicare hospital payments for teaching hospitals will begreatly increased. *d. Medicare hospital payments will decrease.

9. What does ACO stand for? a. American clinic organization

*b. Accountable care organization c. American care organization d. Accountable clinic organization

10. What strategies are hospitals likely to follow in coming years? a. Expand their inpatient bed capacity to be able to handle largeincreases in

admissions b. Increase their efficiency to be able to compete and be included in insurers’ narrow provider networks c. Work with physicians to be able to provide coordinated care aspayment is based on episode of care and capitation *d. B and C

Chapter 18 1. What is cost shifting? a. The belief that hospitals and physicians raise their prices when their labor

and supplies costs increase *b. The belief that when one purchaser, such as Medicaid, does not pay hospitals its full charges, hospitals will raise their prices to those who can afford to pay c. The belief among employers that when hospital and physician prices increase, the insurer will shift these higher costs to theemployer in the form of higher premiums d. The belief among employee unions that when health insurancepremiums increase, the employer will decrease the employees’ wages to pay for the increased premiums

2. What evidence do those who believe in cost shifting cite to supporttheir view? a. The lower rate of increase in employee wages when healthinsurance

premiums increase b. The positive relationship between increases in hospital and physician prices and the resultant increases in health insurancepremiums c. The positive relationship between rising hospital costs andhigher hospital prices *d. The payment-to-cost ratios by private payers increase (higherprice markups) when Medicare and Medicaid payers’ price markups decrease

3. Which hospital costs are likely to change when a hospital admits anadditional

patient? a. All of the hospital’s costs associated with that particular patient, including

depreciation of equipment, the nurses’ time,and the use of supplies b. Direct and indirect costs associated with the particularpatient *c. Just the variable costs associated with admitting anadditional patient d. A and B

4. Assuming a hospital sets a profit-maximizing price (the price that will achieve

maximum profits), what is likely to occur if the hospitalthen decides to increase its price? a. Volume will increase. b. Volume will be unchanged.

*c. Profits will decrease. d. Profits will increase.

4. Assuming a hospital sets a profit-maximizing price (the price that will achieve

maximum profits), what is likely to occur if the hospitalthen decides to increase its price? a. Volume will increase. b. Volume will be unchanged.

*c. Profits will decrease. d. Profits will increase.

6. If the relationship between price and quantity of hospital services is price inelastic

(less price sensitive), what would be the effect on the quantity and revenue if the hospital raised its price? a. Quantity would decrease, and revenue would decrease.

*b. Quantity would decrease, and revenue would increase. c. Quantity would increase, and revenue would decrease. d. Quantity would increase, and revenue would increase.

7. If the relationship between price and quantity of hospital servicesis price elastic

(more price sensitive), what would be the effect on the quantity and revenue if the hospital raised its price? *a. Quantity would decrease, and revenue would decrease. b. Quantity would decrease, and revenue would increase. c. Quantity would increase, and revenue would decrease. d. Quantity would increase, and revenue would increase.

8. Which of the following is an important determinant of how pricesensitive the

relationship is between the hospital’s price and quantity? a. How long the hospital has been serving the community b. The experience and training of the hospital’s administrative

staff c. Whether more than three hospitals are operating within a 20-mile radius of the hospital *d. The number of competing hospitals and how good a substitutethey are to the hospital

9. Economists who do not accept the cost-shifting hypothesis claim thatif Medicare

reduces the amount it pays physicians, profit-maximizing physicians would likely a. increase the prices they charge to higher-paying privatelyinsured

patients. b. increase the number of Medicare patients they see. *c. lower the prices they charge to higher-paying privatelyinsured patients. d. decrease the number of privately insured patients they see.

10. What is price discrimination, and how does it result in hospitalscharging

different price markups? a. Price discrimination means charging those who are least able to afford care

the highest prices. b. Price discrimination means charging Medicare and Medicaid programs as much as possible because the government does not spend its money wisely. c. Price discrimination means charging higher prices during peakseasons, such as the flu season when more people become ill, because the hospital must increase its staffing for those periods. *d. Price discrimination means charging a profit-maximizing priceto each group on the basis of the price sensitivity of each group.

Chapter 19 1. When the government places price controls on hospitals and physicians, what

is the next step the government must take to makethose controls effective? a. Inform the purchasers that it has imposed such controls.

*b. Impose global budgets to prevent increased numbers ofservices. c. Limit increases in the number of hospitals and physicians. d. Encourage entry of hospitals and physicians into the price-controlled market.

2. What was the consequence when price controls were imposed in theprevious

communist countries of Eastern Europe and Russia? a. Shortages of the goods and services produced b. Decreased quality of the goods and services produced c. Black markets for the price-controlled goods and services

*d. All of the above

3. Why are prices important in a market when there are no pricecontrols? a. Higher prices provide an incentive for demanders to decreasethe amount

they wish to demand. b. Prices bring about an equilibrium between the demanders andsuppliers in a market. c. Higher prices provide a signal (an incentive) to suppliers that they should increase supply to meet the increased demand. *d. All of the above

4. Why is a price-controlled price unable to equate the demanders andsuppliers so

that the demands for services equal the supply of services? a. Because the regulators have not been trained as economists b. Because the demanders and suppliers are unaware of whichservices

are subject to price controls *c. Because demand and supply are constantly changing d. Because of black markets

5. Assume that price controls are imposed on the healthcare sector. What problem

occurs when a new surgical technique is developed that reduces the time and effort required by a surgeon to perform the sameprocedure? a. The surgeon has an increased incentive to perform the surgeryusing the

previous technology.

b. The surgeon performing the procedure is unfamiliar with the new

technology and continues to bill for the procedure using theprevious technology. *c. The regulators are generally unaware of these changes in themedical product and technology; consequently, the controlled price will greatly exceed the costs of providing the service. d. A and B

6. How can price controls on the healthcare sector result in a decreasein services over

time? *a. As wages increase throughout the economy, price controls on the healthcare sector make it difficult for hospitals and medicalgroups to pay competitive wages and thus retain its employees to provide their current service. b. As prices and wages increase throughout the economy, pricecontrols on the healthcare sector make medical services less expensive than other goods and services; thus, demand will bemuch greater than if there were no price controls. c. Regulators are rewarded if they are able to use price controls to limit medical expenditure increases and to achieve a reduction in the absolute amount spent on medical services. d. B and C

7. Medicaid relies on price controls to set physician fees. What hasbeen the effect

of such price controls on physician services? a. Fewer physicians see Medicaid patients because these patientsare less

profitable than privately insured patients. b. Physicians who see Medicaid patients often decrease the timethey spend with each patient. c. Medicaid patients wait longer to make an appointment with thefewer physicians who accept Medicaid payment. *d. All of the above

8. Currently, Medicare physician fee increases are based on the sustainable growth

rate (SGR). Why have Medicare fees for primary carephysicians lagged behind those in the private sector? a. There are fewer Medicare patients than private-pay patients. b. One of the major components of the SGR is the growth in grossdomestic

product (GDP), which has increased more rapidly than private insurance premiums. *c. One of the major components of the SGR is the growth in GDP,which does not reflect changes in the demand and supply of physician services. d. In general, primary care physician fees have increased moreslowly than specialists’ fees.

9. What type of price-control measures did the Affordable Care Act(ACA)

impose on Medicare hospital reimbursement?

a. The ACA changed the method of hospital payment from diagnosis-related

groups to a partial cost-based method per admission. *b. The ACA imposed price reductions on hospitals on the basis ofan assumed productivity increase, whether or not these productivity increases occur. c. The ACA changed the hospital facility fee to be the same as the facility fee paid to physicians (for the same type of visit)who are not employed by the hospital. d. The ACA reduced the fees billed by medical residents innonteaching hospitals.

10. In countries that use price controls to limit medical expenditureincreases, what is

the effective price of care that patients face? a. The price-controlled prices charged by the physician and otherhealthcare

providers b. The out-of-pocket prices patients must pay for their use ofservices c. The patients’ time cost, which reflects the lost productivityto society or the value of that time to patients *d. The patients’ out-of-pocket price plus their time cost whilewaiting for care

Chapter 20 1. How did managed care come about? a. State governments provided incentives for hospitals andphysicians

to form managed care organizations. b. Consumer organizations developed nonprofit managed care organizations to slow the rapid rise in medical expenditures. *c. Entrepreneurs, who saw the potential for reducing medical system inefficiencies, started health maintenance organizations(HMOs) and marketed them to employers. d. Nonprofit hospitals, concerned about reduced hospital utilization and excess hospital capacity, saw HMOs as a way ofincreasing their revenue.

2. Why were hospitals and physicians willing to participate in an HMO’s

provider network? *a. Hospitals and physicians developed excess capacity and werewilling to discount their prices for more patients. b. Hospitals and physicians believed that they could reduce medical costs by joining together to better manage patient care. c. Some states provided hospitals and their employed physiciansan incentive to join or start HMOs to serve their Medicaid patients. d. B and C

3. What is the gatekeeper model used by managed care plans? a. The HMO’s primary care physicians determine the drug formularyto be used

by the HMO’s patients. b. An HMO’s gatekeeper determines whether an HMO enrollee hasaccess to experimental treatments to be paid for by the HMO. c. An HMO’s gatekeeper determines whether a patient can be referred to specialists and/or hospitals unaffiliated with theHMO. *d. An HMO enrollee chooses a primary care physician, who then controls the enrollee’s diagnostic and specialist referrals.

4. How did early managed care firms achieve their largest savings? a. By limiting access to very expensive specialty prescriptiondrugs

*b. By reducing hospital utilization of its enrollees c. By making enrollees wait long periods to see their primarycare physician d. By limiting enrollees’ access to the HMO’s specialists 5. How have managed care organizations in more recent years attempted

to lower their enrollees’ medical costs?

a. By receiving large provider discounts for the providers to

belong to the managed care plan’s provider network b. By using large data sets on physicians’ treatment patterns andinformation technology to analyze the data to determine which treatment patterns have better outcomes c. By relying more on changing physicians’ practice patterns, such as identifying high-risk enrollees early, decreasing the variation in physicians’ utilization patterns, and substitutingless-costly in-home services for continued care in the hospital *d. B and C

6. Managed care plans differ according to the restrictiveness of theirprovider network

and access to specialists. Which types of plans are likely to have the lowest premiums? a. Plans that have the largest ratio of primary care physiciansto specialists b. Plans that have the most experience and have been in existencethe longest

*c. Plans that have the most restrictive/narrow provider network d. Plans that have received the highest quality and outcomemeasures

7. How price sensitive are employees when choosing among competing HMOs(based

on the amount of the premium they must pay)? a. Not price sensitive at all

*b. Very price sensitive c. Somewhat price sensitive d. Results of the research on this subject show too great avariation to be definitive.

8. Have managed care cost reductions had a one-time or continuouseffect? a. One-time effect, just a large reduction in hospital use b. One-time effect, which included reductions in hospital use anddiscounted

provider fees *c. A continuous effect, because it slowed the rate at which newmedical technology that offered few benefits was adopted d. Results of the research on this subject have beeninconclusive.

9. What has happened to the relative bargaining power between HMOs andhospitals?

*a. Hospitals increased their relative bargaining power becauseof hospital mergers, which decreased the number of hospital competitors.

b. HMOs increased their relative bargaining power as HMOs

developed into national HMO chains. c. HMOs increased their relative bargaining power because theypartnered with large medical groups. d. HMOs increased their relative bargaining power because thenumber of HMO enrollees has increased.

10. As part of the Affordable Care Act, health insurance exchanges wereestablished.

What have been the most important cost-containment approaches used by health plans competing for insurance exchange enrollees? a. Health plans have used very narrow/limited provider networks. b. Health plans have dramatically reduced access to new medicaltechnology. c. Health plans have included large deductibles and out-of-pocketpayments.

*d. A and C

Chapter 21 1. When comparing two countries’ medical systems, which measures are

appropriate to use? a. Life expectancy b. Infant mortality rates

*c. Access to medical services d. Air pollution

2. Which of the following is not appropriate for evaluating whether amarket is

competitive? a. Information: Do consumers have sufficient information to choose the

quantity and type of services based on price, quality,and other characteristics of the service being supplied? b. Consumer choices: Does the market respond to what consumersare willing to pay? If consumers demand more of some services,will the market provide more of those services and respond to varied consumer demands? c. Supplier incentives: Do the suppliers of the goods and services have an incentive to produce those services (for a givenlevel of quality) at the lowest cost? *d. Redistribution: Do those who cannot afford to pay for theirmedical services receive medically necessary services?

3. Incentives exist in both competitive and regulated markets. Theincentives

appropriate to a competitive market are as follows: a. Purchasers bear the cost and receive the benefits of theiractions. b. Suppliers bear the cost and receive the benefits of theiractions. c. Producers have an incentive to provide their servicesefficiently.

*d. All of the above

4. Before the US Supreme Court ruled in 1982 that the antitrust lawsapplied to

healthcare, which of the following did not occur? *a. Restrictions prohibited physicians from moving into statesother than where they received their residency training. b. Restrictions were placed on any form of advertising. c. Entry restrictions prevented new hospitals and freestandingsurgery centers from entering hospital markets. d. State laws required all HMOs to be not-for-profit.

5. To control rapidly rising medical costs from the 1960s to the early 1980s, federal

and state governments used regulatory approaches. Which of these regulatory approaches was not used? a. Health planning legislation placed controls on hospitalinvestment.

*b. Federal legislation prohibited the development of for-profithospitals for five years. c. Many states used hospital rate regulation. d. Medicaid reduced payments to hospitals and physicians, andMedicare limited physician fee increases.

6. What has not been the effect on employees of tax-exempt employer-purchased

health insurance? a. As income tax rates and health insurance premiums increased over time,

more of the employees’ income went toward fringe benefits, such as health insurance, than toward increased wages. *b. As health insurance premiums increased, high-income employeeschose to leave those firms with the most comprehensive health insurance so that they could join firms that paid higher cash wages rather than generous fringe benefits. c. Tax-exempt employer-purchased health insurance lowered the price of insurance to the employee, resulting in employees purchasing more comprehensive insurance with lower copayments. d. Health insurance premiums increased more quickly because more comprehensive coverage resulted in high use rates and provider price increases.

7. Which type of employees benefited the most from tax-exempt employer-purchased

health insurance? *a. Employees in the highest tax brackets received the largesttax subsidy. b. Low-income employees would otherwise not have received any employer-paid health insurance if it wasn’t subsidized. c. Employees who also had an ownership interest in the firmbenefited most from the subsidy that went to the employer. d. All employees benefited equally given that they all receivedthe same tax subsidy.

8. Which of the following does not limit price competition? a. Hospital mergers, which increase provider consolidation b. State regulations, such as certificate-of-need laws and anywilling

provider laws *c. Managed care plans that develop narrow provider networks d. Physicians who lack information on how to best treat a patientand use resources to provide the service at lowest cost, for a given level of quality, as indicated by wide variations in use rates for the same diagnosis

9. In competitive markets, do all purchasers have to be informed orswitch in

response to changes in prices and quality for markets to perform efficiently? a. Yes, otherwise changes in prices and/or quality will not causea firm to lose

many customers, patients, enrollees, or market share b. Depends on the type of market; it’s not necessary in markets with homogeneous products (such as steel), but it’s necessary inmarkets where the product is complicated (such as electronics) c. Depends on the type of market; it’s not necessary in government priceregulated markets (such as Medicare) for everyone to be equally informed, but in nonregulated markets theyneed to be informed *d. No, just like in other markets, the more responsive (price orquality sensitive) purchasers drive the market toward greater efficiency

10. Are the poor disadvantaged in a competitive marketplace? a. Yes, because the poor are unable to buy the necessary goodsand services b. No, because in a competitive market, goods and services willbe more

affordable to those with low income c. No, because it is not the role of a competitive market to enable the poor to buy the goods and services they need; that’sthe government’s role *d. B and C

Chapter 22 1. Why is the government supporting comparative effectiveness research(CER)? a. The government wants to be able to specify how physiciansshould

practice. *b. The government is concerned that insufficient informationexists on which treatments work best for different diseases. c. The government wants Medicare physician payment to be based onwhat research claims to be the most appropriate treatment for a diagnosis. d. A and C

2. Advocates of government funding for CER claim that it is appropriatefor the

government rather than private organizations to fund CER because a. the government has access to more money than anyone else and

it’s the quickest way to finance CER. b. the government is a more trustworthy source than any privateorganization and the CER results would be more likely to be adopted by others. *c. CER information is like a public good, where everyone benefits from the information and it can’t be denied to anyoneonce it becomes available. d. the government has more money at stake—Medicare and Medicaid—and thus wants to ensure the findings will save money.

3. Critics of government funding of CER were concerned for what majorreason?

*a. Critics believed that the government would ultimately use the CER findings to specify medical practice guidelines, limit access to treatments, and refuse to pay for expensive drugs. b. Critics believed that the government already spends too much on medical services and didn’t want the government to start a newgovernment-funded program. c. Critics believed that government-funded research is rarely asgood as privately funded research conducted by private researchers. d. Critics believed that the government would bias the CERresults to reduce access to certain drugs.

4. Which of the following were academic concerns with CER? a. CER is a one-size-fits-all approach to medicine. Patients respond differently

to different drugs and would be disadvantagedby the recommended treatment. b. Comparative effectiveness studies may not adequately evaluatealternative treatments for patients with multiple chronic diseases or rare illnesses.

c. CER might lead to slower adoption of new, more effective technologies.

As new treatments and prescription drugs are developed, will patients have to wait until their comparativeeffectiveness has been determined? *d. All of the above

5. Which of the following describes cost-effectiveness analysis (CEA)? a. CEA compares the costs and benefits of a specific treatment,such as a new

drug. b. CEA results are presented in the form of a CEA ratio, where the numerator is the additional cost of the intervention and thedenominator is some measure of the outcome of interest. c. CEA compares the additional costs of alternative approaches toachieve a specific outcome designed to improve health. *d. B and C

6. What is the major conceptual problem if the government uses the CEAratio for

reimbursement? a. The CEA study may not have been appropriate for the particulartreatment

analyzed, so the CEA ratio is not useful. *b. The CEA ratio to the government may be different from the patient’s cost or evaluation of the treatment’s effectiveness. c. The CEA ratio may have been undertaken some time ago, so thedata are not as current as they should be. d. Gathering data on treatment costs is often difficult, so theCEA ratio may not include all the relevant treatment costs.

7. What is the advantage of using quality-adjusted life years (QALYs)rather than a

measure, such as infant mortality rate, in CEAs? a. QALY enables comparisons to be made across different diseaseconditions. b. QALY can more easily be converted into a monetary measure. c. QALY incorporates multiple outcome measures, such as increase in length

of life and quality of life, rather than just a singlemeasure. *d. A and C

8. When calculating a QALY, each additional year of perfect health foran individual

is assigned a value of 1.0, which is the highest value—acomplete QALY. The assigned value decreases as health decreases, with death equal to 0.0. If the patient has various limitations, the extra life years are assigned a value between 1.0 and 0.0. If a new intervention enables a person to live an additional five years, but with a quality of life weight of 0.7, then the QALY score for that intervention is a. 0.5 QALYs. b. 0.7 QALYs.

*c. 3.5 QALYs. d. 2.8 QALYs.

9. When comparing alternative interventions according to theiradditional

cost per QALY, which QALYs would be preferred? a. Those with a higher cost per QALY are preferred to those witha lower cost

per QALY. *b. Those with a lower cost per QALY are preferred to those witha higher cost per QALY. c. Those with the same cost per QALY are preferred over others. d. All QALYs are equally preferred; it depends on the economicvalue of a life used in the analysis.

10. When calculating QALYs, how are differences in a person’s income or

wealth included? *a. The calculation of a QALY is the same regardless of a person’s income or wealth. b. The calculation of a QALY uses four income quartiles foradjusting the QALY. c. The calculation of a QALY is based on ten income categories to adjust each person’s QALY. d. The calculation of a QALY uses the proportional difference inincome as an adjustment to the QALY.

Chapter 23 1. Who actually bears the burden of higher employee medical costs? a. The employer

*b. The employee c. The consumer d. The government

2. Does the employer care what percentages of its compensationemployees

want in cash wages and fringe benefits? a. Yes, because having more fringe benefits costs the employermore money b. Yes, because the employer must choose a health plan that allemployees

prefer *c. No, because the employer is only interested in the totalcompensation costs— cash and noncash fringe benefits—of each employee d. It depends on the employer whether it wants more of itscompensation spent on health insurance.

3. What happens over time when the fringe benefits portion of total compensation

rises sharply, as occurs when health insurance premiumsincrease? *a. Cash wages will rise by a smaller amount to offset theincrease in health insurance premiums. b. The employer must increase the prices for the goods and services it sells to compensate for the higher fringe benefitcosts. c. The employer will switch health plans to one that costs less. d. The employer will lay off those workers who have higherhealthcare costs.

4. What are the consequences to a firm if it paid the same cash wagesbut greater

fringe benefits to its employees than the other firms in the industry do? a. Employees from the other firms would shift to that firm.

*b. The firm would earn less profit, would not be able to raisecapital, and would shrink in size or go out of business. c. The firm would raise its prices for the goods and services itsells. d. The firm would reduce the number of older, higher-riskemployees and hire younger, lower-risk employees.

5. Are there any consequences to a firm in an industry if it raisesprices to pass on

higher health insurance costs?

a. No, as long as the firm’s products are heavily advertised b. No, because consumers are generally not very price sensitive,particularly

when prices increase by a small percentage c. Yes, because the health insurer will raise premiums even higher given that the firm can simply increase its prices to paythe higher premiums *d. Yes, because firms have competitors—either other firms in the industry or manufacturers in other countries; thus, the firm willlose sales

6. How can automobiles produced in Michigan be sold at the same price as

automobiles produced in the southern part of the country? Autoworkers in both places are equally productive, but autoworkers’ health insurance premiums in Michigan are much higher than autoworkers’premiums in the South. a. The profit per car produced in Michigan must be lower than theprofit per

care for cars produced in the South. b. The types of cars produced in the North and South aredifferent, so they are not comparable on price. *c. Cash wages of autoworkers in Michigan must be lower than cashwages of autoworkers in the South. d. Autoworkers in Michigan are unionized, while autoworkers in the South are not; unionized workers are able to negotiate higherhealth benefits.

7. If an industry were strongly unionized and the firms in that industry were not

permitted to hire nonunion labor, what would likelyoccur if health insurance premiums sharply increased? a. The burden of higher industry prices would fall entirely onthe firms and

have no effect on the unionized workforce. b. Foreign competitors would cause the firms to lose sales andprofits. c. Even if there was no foreign competition, higher prices wouldcause a loss of sales, and there would be fewer jobs in the industry. *d. B and C

8. In the past, many employers agreed to pay employees medical benefitswhen they

retired in return for wage concessions. These retiree medicalcosts were paid as they occurred and were not funded, as would occur with a pension obligation. A new accounting rule required these firms to set aside funds to pay for these retiree benefits.

These unfunded liabilities were huge. Did the firms raise their prices to pay off these liabilities, thereby hurting US competitiveness? a. No, the firms deducted these retiree benefits from employees’

wages and thus did not have to raise prices. b. Yes, to earn the funds to pay these unfunded liabilities, thefirms had to raise their prices, thereby making US products moreexpensive than foreign-produced products.

*c. No, the firms’ profit decreased as they had to pay these contracted liabilities as earned by their employees, and the value of the firms declined to account for this liability. d. No, the government agreed to subsidize these liabilities sothat the firms would not have to raise their prices and sell fewer products overseas.

9. Why have wages and salaries not increased as fast as total employeecompensation

over time? a. Taxes have taken up a greater part of employee compensation.

*b. Fringe benefits have increased more rapidly than have wagesand salaries. c. Employee productivity has not been increasing as fast as itdid before. d. Changes have been occurring in the composition of the employeeworkforce, with women now becoming a greater percentage.

10. When managed care occurred in the 1990s and reduced the rapid risein healthcare

costs and premiums, did any change occur in employees’ total compensation? *a. No, but employee cash wages increased. b. No, the employer spent less on employee health benefits andthus increased its profits. c. No, with lower medical costs, the managed care firms were ableto keep all the savings for the shareholders. d. Yes, employee compensation increased as more was spent onemployee health benefits.

Chapter 24 1. What is a commonly used measure of a nurse shortage? a. The hospital hiring all the registered nurses it wants

*b. The registered nurse vacancy rate in hospitals c. The hospital increasing wages to hire more registered nurses d. The hospital substituting some tasks of registered nurses toless expensive personnel

2. Rising registered nurse wages are indicative of what? a. A shortage of registered nurses b. A vacancy rate

*c. The demand for registered nurses exceeding the supply ofregistered nurses d. The substitution of less expensive personnel for registerednurses 3. Once registered nurses’ wages start rising, what would one expect to

observe? a. An increase in registered nurse employment b. A decrease in the hospital vacancy rate c. The hospitals not hiring as many registered nurses at thehigher wage as

they initially wanted *d. All of the above

4. Before Medicare was enacted, there was a severe shortage of registered nurses.

However, nurse wages did not increase as rapidly aswages in comparable occupations, which were not subject to the same shortage pressures. Why were nurse wages not rising faster? a. Registered nurses were unaware that they could increase theirwages by

switching hospitals. b. Hospitals were unaware that they could attract more nurses byincreasing their wages. *c. Hospitals colluded to prevent nurse wages from rising. d. Registered nurses did not want to uproot their families andmove to communities where they could earn higher wages.

5. What is the likely response when registered nurse wages increase? a. The number of students entering nursing schools grows. b. Part-time registered nurses increase their hours of work. c. Trained registered nurses who are not working begin to reenterthe workforce.

*d. All of the above

6. When a hospital is a dominant employer of registered nurses in a community and

wants to hire a new nurse by increasing the nurse wage,what is the cost of that new nurse? a. The higher wage paid to that nurse, including any fringebenefits b. The cost of advertising and interviewing and the higher wagepaid to that

nurse, including any fringe benefits c. The cost of advertising and interviewing; the higher wage paidto that nurse, including any fringe benefits; and the cost of training that nurse to learn the hospital’s procedures *d. The higher costs of that new nurse, plus the cost ofincreasing the wages of all the other nurses

7. During the early 1970s, President Nixon imposed wage and price controls on the

economy but then lifted those controls for the rest ofthe economy except for the healthcare sector. What was the effect of continuing these wage and price controls on the market for registered nurses? a. A shortage of nurses occurred. b. Nursing school enrollments declined. c. Nurses’ relative wages to comparable occupations declined.

*d. All of the above

8. What does rising unemployment in the economy have to do with theregistered

nurse market? *a. The registered nurse participation rate will increase. b. Hospitals will have to raise wages to recruit more nurses. c. Hospitals will have to use many fewer registered nurses. d. None of the above

9. What might be the likely effect of the Affordable Care Act (ACA) onthe registered

nurse market? a. The ACA provides generous federal subsidies to increase thesupply of

registered nurses. *b. The ACA reduces hospital Medicare payments, which will limit hospitals’ ability to increase nurse wages. c. The ACA promotes accountable care organizations, which will greatly increase registered nurses’ roles and responsibilitiesand thus their wages. d. A and C

10. What effect will an increase in immigration of foreign-trained registered nurses

(FTRNs) have on the US market for registered nurses? a. Hospitals will have to devote more resources (increased cost) to the training

of FTRNs once they are hired.

b. FTRNs will increase the supply of registered nurses, therebyslowing the

rate of nurse wage increase. c. FTRNs, by increasing the supply of registered nurses and slowing nurse wage growth, will reduce enrollment in nursingschools. *d. B and C

Chapter 25 1. In the past five years, what has been the out-of-pocket burden forprescription

drugs? *a. About 20 percent b. About 35 percent c. About 50 percent d. About 70 percent

2. Why have prescription drug expenditures increased? a. An increase in the number of prescriptions b. Increases in the price of prescription drugs c. Changes in the type of prescription drugs used

*d. All of the above

3. Why has the number of prescription drugs increased? a. More people have insurance coverage for prescription drugs. b. Physicians have a financial incentive to prescribe moreprescription

drugs. c. The number of aged has grown. *d. A and C

4. Why have Medicare prescription drug expenditures risen more slowlythan

expected? a. The federal government negotiates prescription drug priceswith the drug

manufacturer. *b. Medicare beneficiaries choose between competing prescriptiondrug plans based on premiums and drugs included in their formulary. c. The federal government, as part of the Medicare prescription drug benefit, controls the rise of prescription drug prices forMedicare patients. d. Medicare beneficiaries are provided with vouchers for prescription drugs, and they must pay the difference between theprice of the prescription drug and the voucher amount.

5. How has the Affordable Care Act (ACA) changed the Medicare

prescription drug benefit? *a. The ACA decreased the size of the “donut hole” that the Medicare patient must pay out of pocket. b. The ACA increased the cost-sharing percentage that a Medicarebeneficiary must pay for each prescription drug. c. The ACA made it easier for Medicare patients to buy any prescription drug their physician prescribed.

d. The ACA increased the amount retail drug stores receive forfilling a

Medicare beneficiary’s prescription drug order.

6. What has been the effect of increasing out-of-pocket prescriptiondrug prices

(copays)? a. Higher cost sharing results in greater use of emergencydepartments. b. Higher cost sharing decreases the demand for prescriptiondrugs. c. Higher cost sharing increases medical expenditures.

*d. All of the above 7. What happens when a “me-too” drug enters a market? a. The me-too drug is able to achieve the same high price markupas the

innovative drug already on the market. b. The me-too drug, because it is not innovative, is a waste of society’s resources and has no effect on the innovative drug. *c. The me-too drug becomes a good substitute for the innovativedrug and lowers the drug price markup on both drugs. d. The me-too drug, because it is not innovative, is marketed inless developed countries where innovative drugs are scarce.

8. What occurs when the patent on an innovative (brand) drug expiresand a generic

version of an innovative drug enters the market? a. The innovative drug maintains most of its market share becauseit has a high

reputation and patients are concerned about the quality of the generic drug. b. The generic drug must prove its safety and efficacy and isgenerally first prescribed to Medicaid enrollees. *c. Many patients switch from the higher-priced brand name drugto the lowerpriced generic. d. A and B

9. Why do drug manufacturers sell the same prescription drug to different

purchasers at different prices? For example, health maintenance organizations (HMOs) pay lower prices than retail pharmacies do, even though independent retail pharmacies sell moreprescription drugs than an HMO does. a. Higher costs are involved in selling prescription drugs toretail

pharmacies than to an HMO. *b. HMOs are more price sensitive; they are willing to switch toother drugs to receive a lower price. c. Drug manufacturers raise their prices for those who buy moreto make up for the losses from those who buy fewer drugs. d. Retail pharmacies buy the prescription drugs when they first come on the market and pay higher prices than do HMOs, which waituntil competitive drugs enter the market at lower prices.

10. Why is the price markup (over production costs) so high for aninnovative

drug that comes on the market? a. New prescription drugs cost almost $1 billion to develop, andthose costs

must be included in the price of the drug. b. The drug manufacturer sells the new drug at very low prices (markups) in poorer countries and in wealthier countries (like the United States); the higherpriced drug has to make up for thelosses of selling the drug in poorer countries. c. The drug manufacturer has to spend a great deal of money advertising a new drug and sending its agents to visit physicianoffices to introduce them to the new drug, all of which must be recovered in setting a high price markup for the drug. *d. The greater the therapeutic value and the lack of available good substitutes to the new drug, the greater the willingness topay for the drug and the higher its price markup.

Chapter 26 1. Are there any adverse consequences to ensuring that any new drugentering the

market is as safe as possible? a. No, any new drug entering the market should be as safe as possible so

that people taking the drug do not suffer any illeffects. b. No, it is for this reason that importation of foreign drugs into the United States is prohibited, because the public cannotbe assured that they are safe. *c. Yes, the longer it takes for the government to make sure the drug is safe, the longer the benefits of that drug are denied topatients who could benefit from it. d. A and B

2. What was the reason Congress strengthened drug safety requirementsin the 1930s

and 1960s? a. As drug development became more complex and drugs became more

powerful, Congress believed it would be in the public interest tostrengthen drug safety requirements. *b. Several very public drug tragedies occurred, and Congressreacted by strengthening drug safety requirements. c. The president, seeking reelection, requested that Congressenact stronger drug safety laws. d. The Food and Drug Administration (FDA), concerned with drug safety, proposed that Congress enact stronger drug safety laws.

3. What is the difference between the three stages of clinical trials?

*a. The number of people increases in each subsequent stage. b. A more powerful version of the drug is introduced in eachsubsequent stage. c. The first stage involves animal testing; the second stage useshuman trials; and the third stage allows the drugs to be used by the public while the use is monitored for side effects. d. In the first stage, the drug manufacturer must present laboratory data to the FDA to prove the drug’s safety; in the second stage, the drug is tested on animals for safety; and in the third stage, the drug is tested on a small group of humans.

4. What was the effect of Congress allowing generic drug manufacturersto

demonstrate that their drug was bioequivalent to an approved patented drug instead of having them prove the safety and efficacy of their generic drug? a. The cost of introducing a new generic drug was reduced becausethe drug did

not have to go through expensive clinical trials. b. Drug prices for the treatment that the drug was prescribed fordeclined.

c. The generic drug was able to come to market much sooner afterthe patent

expired on the patented drug. *d. All of the above

5. The FDA approval process for a new drug can be quite lengthy. Whatwas the

purpose of Congress enabling the FDA to grant “fast-track” approvals to certain experimental drugs? a. Expedited approvals were granted for drugs whose scientificresults were

obvious. *b. Expedited drug approvals were granted for patients who wereterminally ill or suffering from life-threatening diseases. c. Expedited approvals were granted for drugs whose cost to develop and price to the patient would otherwise be prohibitive. d. Expedited approvals were granted only for those drugs whosemanufacturers were willing to pay large expedited-drug fees.

6. What incentives does the FDA have regarding drug approvals,according

to some FDA critics? *a. The FDA is more concerned with preventing approval of a drugthat results in people dying than it is with approving a drug that benefits unidentifiable patients whose lives might be savedif the drug is approved earlier. b. The FDA is more concerned with preventing statistical deaths than with “visible” or “identifiable” lives. c. The FDA is too quick to approve new drugs because of pressurefrom drug manufacturers. d. The FDA spends too much of its resources on post-marketing surveillance of drugs instead of on the drug approval process.

7. Are there any adverse consequences to longer FDA approval times? a. Yes, longer FDA approval times reduce the effective patent life of a new

drug and hence the drug manufacturer’s profits andincentive to invest. b. No, longer FDA approval times result in greater safety ofthose drugs. c. Yes, longer FDA approval times delay the availability ofbeneficial new drugs to those patients who need them. *d. A and C

8. Are all new patented drugs profitable? a. Yes, otherwise the drug manufacturer would not invest in thedrug. b. Almost all new patented drugs are profitable.

*c. Just a few new patented drugs are profitable. d. Just one out of ten new patented drugs is profitable.

9. Are there any unintended consequences to requiring low price markupson innovative

drugs that would otherwise be a financial burden on low- income patients? a. No, because the actual cost of producing the pills is very low b. No, because the drug has already been developed and the drug

manufacturer will not find it profitable to stop producing the drug *c. Yes, because the drug manufacturer will not be able to make the profits that provide an incentive to invest in research anddevelopment d. A and B

10. Why are orphan drugs treated differently from other patented drugs? a. Orphan drugs are for low-income populations overseas, and thusthe safety

and efficacy requirements are fewer than if they were FDA approved for the United States. *b. Orphan drugs benefit only a small number of people and are unprofitable to develop unless drug manufacturers are providedfinancial incentives. c. Orphan drugs were previously designed to treat illnesses of certain orphan groups. d. Orphan drugs are a class unrelated to any broad therapeuticgroup of drugs.

Chapter 27 1. Do patients in the United States pay higher drug prices thanpatients in

other countries? a. Yes, studies have shown that retail prescription drug pricesin the United

States are higher than in other countries. b. No, comparative studies on drug prices in the United States and other countries do not include lower prices of generic drugs,which are used by many US patients. c. No, comparative studies on drug prices do not account for thelarge discounts received by large purchasers (such as insurers and drug plans, whose enrollees pay a small copayment) compared to the small segment of patients who buy drugs in cash at retailpharmacies. *d. B and C

2. Why are retail prescription drug prices lower overseas than in theUnited States? a. Because US purchasers must pay the high research and

development (R&D) costs of drug development b. Because other countries buy greater volumes of US drugs andthus are able to negotiate large price discounts *c. Because other countries are less able to afford US drugs butare willing to pay more than the costs of producing those drugs d. Because other countries would produce the drugs themselves if they weren’t given large price discounts

3. Once a drug is on the market, what is the lowest price the drugmanufacturer

can set while still ensuring it can make a profit? a. The price that covers both the fixed and variable costs ofproducing the

drug *b. The price that covers the variable cost of producing the drug c. The price that covers the production and R&D costs of bringingthe drug to market d. A and C 4. If a drug manufacturer sells the same drugs to different countries

at different prices, what is the drug manufacturer’s largest concern?

*a. That country receiving the lower-priced drugs does not resellthem to the United States b. That a country receiving the lower-priced drugs does not resell them to low-income countries, such as nations in Africa c. That a country receiving the lower-priced drugs does not copyand produce them d. That a country receiving the lower-priced drugs does notresell them to its own population at higher prices

5. What is the drug manufacturer’s objective when it is willing to sell

its drugs at lower prices to less wealthy countries? a. To receive good publicity b. To fulfill its humanitarian objective

*c. To make as much money as possible d. To avoid throwing away (or destroying) its excess drugs

6. What is an unintended consequence of countries that have tighthealthcare

budgets and regulated drug prices? a. The tight budgets and regulated prices result in delays in accessing (or

even unavailability of) innovative costly drugsfrom the United States. b. Foreign patients who can afford to do so travel to the UnitedStates to obtain drugs unavailable in their own country. c. Surgical and hospital expenditures are higher than they wouldbe if the innovative drugs had been available from the United States. *d. All of the above 7. What has been the Food and Drug Administration (FDA)’s position on

reimportation? a. The FDA is opposed to reimportation because it would lower theprices of US

prescription drugs and would make drug manufacturers less likely to invest in developing new drugs. *b. The FDA is opposed to reimportation because it would resultin counterfeit drugs being shipped into the country. c. The FDA is opposed to reimportation because patients in othercountries would not have access to US drugs if the drugs were shipped back to the United States. d. The FDA’s position on reimportation changes depending on the sitting president’s political party.

8. Why was reimportation an important political issue? a. Drug manufacturers were concerned that reimportation wasreducing

their profits. b. One political party believed that reimportation was a less costly approach to helping the aged than enacting a new Medicaredrug benefit. *c. The aged had high out-of-pocket drug expenses and wanted toimport cheaper drugs from Canada. d. Foreign pharmacies and drug wholesalers believed that permitting drug reimportation would greatly increase theirprofits.

9. How did drug manufacturers respond to reimportation?

*a. They reduced their drug shipments to countries whosepharmacies were reselling their drugs to US patients. b. They increased their sales to pharmacies overseas to makegreater profits. c. They established pharmacies overseas to resell the drugs to USpatients. d. They stopped selling their drugs to countries overseas, creating great concern among patients in those countries whoneeded the drugs.

Chapter 28 1. What is the difference between pharmaceutical manufacturers andgeneric

manufacturers? a. Pharmaceutical manufacturers and generic manufacturers investlarge sums

in research and development (R&D), but pharmaceuticalmanufacturers have branded drugs and generic manufacturers do not. b. Pharmaceutical manufacturers are US companies, whereas generic manufacturers are located overseas. *c. Pharmaceutical manufacturers invest large sums in R&D,whereas generic manufacturers do not. d. Pharmaceutical manufacturers are able to heavily advertise their drugs, whereas generic manufacturers are unable to do so.

2. How does a pharmaceutical manufacturer determine the price of itsdrug? a. The pharmaceutical manufacturer uses its costs of productionto determine

its profit-maximizing price. b. The pharmaceutical manufacturer’s price must be set so that it recovers its high R&D costs. *c. The pharmaceutical manufacturer bases its price on the demandfor a drug, which is determined by its therapeutic value and the availability of close substitutes. d. The pharmaceutical manufacturer’s price is based on negotiation with wholesale drug distributors and whether the drugis new or has been on the market for more than a year.

3. What are the likely effects of regulators reducing drug

manufacturers’ high price markups over cost? a. More patients will be able to buy drugs at lower prices. b. Drug manufacturers’ profits will be reduced. c. Drug manufacturers will have less money to invest in R&D, andfewer

innovative drugs will be discovered. *d. All of the above

4. Which of the following affects drug prices and/or incentives toinvest in R&D? a. Regulatory requirements to increase the safety and efficacy ofnew drugs b. Food and Drug Administration (FDA) approval times onceclinical

trials have been completed c. The length of a drug’s patent life *d. All of the above

5. Why do drug manufacturers engage in horizontal mergers?

*a. To take advantage of economies of scale in administrativecosts, distribution systems, and manufacturing b. To gain greater control of the market for drugs, by buyingpharmacy benefit managers (PBMs) that will substitute the manufacturers’ drugs for those of their competitors c. To have health maintenance organizations use their drugsinstead of those of their competitors d. B and C

6. How has the research strategy of drug manufacturers changed? a. Large drug firms have expanded the size of the research unitsand moved

them overseas. *b. Large drug firms have begun to depend on small biotech firmsto fill their drug pipelines. c. Large drug firms have merged with Indian drug manufacturers,which have lower R&D costs. d. Large drug firms have developed extensive collaborations withuniversities to jointly discover new drugs.

7. How competitive is the pharmaceutical industry? a. When measured by the market share of the top four pharmaceutical firms

(about 23 percent), the industry appears tobe relatively competitive. b. When measured by therapeutic categories, the degree of market concentration is relatively high, so the industry is not very competitive. c. The industry is very competitive, given the large share ofgeneric drugs on the market. *d. A and B

8. What major competitive advantage do large pharmaceutical

manufacturers have over small biotech firms? a. Large pharmaceutical manufacturers have greater expertise indeveloping

new drugs, given their large research staffs. b. Large pharmaceutical manufacturers have a better reputation than small biotech firms do, enabling them to develop close and long-term relationships with medical schools that are conductinginnovative research. *c. Large pharmaceutical manufacturers have the expertise to navigate the drug approval process and are better able to bring anew drug to market and to sell their drugs to health plans and pharmacy benefit managers. d. A and B

9. A controversial aspect of the Medicare Modernization Act, which provided the aged

with a drug benefit, is the relationship between the government and the pharmaceutical

industry. What was that relationship?

a. The federal government is permitted to negotiate drug prices with

pharmaceutical firms to prevent the pharmaceutical industryfrom making excess profits. b. The federal government was able to require pharmaceutical firms to set a maximum price on drugs used by Medicare patients. *c. The federal government is prohibited from negotiating drugprices with pharmaceutical firms. d. The federal government agreed to provide specified subsidies to the pharmaceutical firms for high-cost biotech drugs providedto Medicare patients.

10. State Medicaid programs, because of tight budgets, have used more restrictive

formularies than managed care plans have. What consequenceshave occurred as a result of these restrictive Medicaid formularies? a. Expensive new innovative drugs have been delayed by severalyears from

being included in state formularies. b. Limiting access to preferred drugs in state formularies hasresulted in costly hospital admissions. c. Newer drugs that are more expensive, but more effective, werelikely to be excluded in favor of less expensive generics. *d. All of the above

Chapter 29 1. Why is there a concern with the organ donation system, particularlykidneys? a. There are insufficient organ donations to meet the demand fororgans. b. Many people die each year because of the lack of donatedorgans. c. Medicare could save money if more patients on kidney dialysiscould

receive a kidney transplant. *d. All of the above

2. Has the supply of donated organs been increasing but just notkeeping up

with the demand for organs? a. Yes, but it needs to increase a little more to catch up withdemand.

*b. No, the supply of donated organs has barely increased, andthe shortage is getting larger each year. c. Yes, in the past, the number of donations did not keep up withdemand, but the recent growth in donations has been better and will soon match demand. d. A and C

3. Why has the demand for organs been increasing? a. More people have kidney disease today. b. Increased Medicare fees for organ transplantation have given surgeons and

hospitals an incentive to perform more transplants. *c. Improved transplant techniques and the development of better immunosuppressive drugs have greatly reduced the risk of organ rejection. d. The supply of donated organs has sufficiently increased to make it more likely for a person needing an organ transplant toreceive one.

4. Why is there a shortage of organs, particularly kidneys? a. Many people lack the altruism to donate their organs. b. There are more people who need donated organs than people whoare

willing to donate their organs when they die. *c. It is unlawful to pay people to donate organs. d. For psychological reasons (such as the thought of dismemberment of a loved one) and religious reasons, families of the deceased are often reluctant to donate the deceased’s organs.

5. Even if people who die in an accident have signed donor cards, whymight their

organs still not be harvested for a transplant?

*a. Fear of lawsuits and unfavorable publicity and the desire tomaintain the public’s trust prevent physicians from immediately harvesting a deceased donor’s organs. b. The donor cards may not have been updated, and no one knowsfor sure whether the deceased would have changed his mind. c. The police officers first on the scene of an accident or deathmay be unaware that the deceased signed a donor card. d. The time before the organ deteriorates is very short, andoften there is not enough time to salvage the organ after a death.

6. How might a kidney exchange increase voluntary organ donations? a. Patients who need a kidney can advertise on a kidney exchange and offer

some nonfinancial benefit to the donor. b. Patients who need a kidney can advertise on a kidney exchange overseas for voluntary donors. c. Donors willing to donate their kidney when they die sign up on a hospitalbased kidney exchange, and the hospital maintains thislist over time. *d. Two incompatible patient–donor pairs may exchange kidneys, with each patient receiving a compatible kidney from the other’sdonor.

7. Under what conditions can a black market in organs exist? a. Under most market conditions

*b. When prices are not permitted to rise or when sales areillegal c. When those needing an organ are uninformed about legalsuppliers d. When the wealthy are able to travel overseas to buy a kidney

8. If a legal market in organs were permitted, would only the wealthybe able to

afford kidney transplants once the price of a kidney is included in the already-high price of a transplant? a. Yes, only the wealthy would be able to afford the additionalprice of a

kidney. b. No, subsidies would be available to pay for those with lowincome, and Medicaid would also be available. c. Yes, the wealthy would be able to pay higher fees (than the government would) to the surgeon and the hospital, and they wouldhave greater access than those with lower income. *d. No, kidney transplants are currently paid for by Medicare.

9. Under the current system, do both the wealthy and the poor haveequal access

to a kidney transplant? a. Yes, because they both have to be placed on a wait list for a kidney to be

available.

*b. No, because a wealthy person can travel and obtain a kidneyfrom donors in less developed countries, such as India. c. Yes, because it is illegal for a wealthy person to buy a kidney from a donor and jump the queue to have the surgeon andhospital perform the transplant. d. No, because the wealthy are always able to bribe their way toget what they want.

10. Would paying donors for their kidneys exploit the poor to benefitthe wealthy? a. Yes, because those with low income would be more likely tosell their

kidney to make extra money b. No, because many low-income African Americans, who suffer fromkidney disease more than whites do and are less likely to receivea matched kidney donation, would have a greater chance of receiving a transplant c. No, because those with low income and others would have the choice of selling one of their assets if they believe doing sowould make them better off *d. B and C

Chapter 30 1. The accounting and economic definitions of “profits” differ because a. accountants deduct discounts from the price of goods sold fromgross

revenues and economists do not. *b. economists consider the return to investors to be the “cost of capital” (an implicit cost), not part of the firm’s profit. c. economists believe that, to be profitable, firms must earn excess profits, whereas accountants believe that normal profitsare sufficient. d. accountants believe that implicit costs must be considered an expense, whereas economists believe only explicit costs should bededucted from revenues.

2. When are a firm’s “excess” profits in the consumers’ interests? a. A firm’s excess profits are never in the consumers’ interests. b. A firm’s excess profits are always in the consumers’

interests. c. Only when the firm engages in socially responsible activities are a firm’s excess profits desirable. *d. A firm’s excess profits are beneficial to consumers when the firm produces innovative products desired by consumers.

3. Do not-for-profit hospitals earn a profit? a. No, generally there is no difference between a not-for-profit

firm’s net revenues and costs. *b. Not-for-profit firms can and do make a profit, but it is called “margin” or “net margin.” c. Not-for-profit firms are only allowed to make a profit whenpermission is granted by state regulatory authorities. d. Both A and C

4. What are some of the positive consequences of eliminating all profitfrom healthcare? a. Healthcare costs would be reduced. b. Quality and access to care would increase. c. Health insurance premiums would decrease, and benefits wouldincrease.

*d. None of the above

5. What would be a negative consequence of eliminating all profits inhealthcare? a. Incentives for providers/insurers to grow would be decreased. b. Incentives for reducing quality would be increased.

c. A firm’s incentive for differentiating itself would be

diminished. *d. Both A and C

6. What is the likely cause when a healthcare firm earns excess profitsin a competitive

market? a. The firm has been able to differentiate itself from itscompetitors. b. The firm has been able to improve its reputation for qualityover its rivals. c. The firm may have a more desirable location than its

competitors. *d. All of the above 7. When are a firm’s excess profits harmful to consumers?

*a. When a firm has been able to merge with its competitors,claiming it will reduce the costs of offering duplicative services b. When a new firm enters a market and successfully competes withthe existing firms c. When a second firm enters a rapidly expanding market while providing similar facilities and services to those of an existingfirm d. Both B and C

8. When insured patients have few or no copays, a. patients are less likely to be informed about providers’

prices. b. firms have less incentive to compete on quality of care. c. insurance premiums are more likely to be higher and increasemore rapidly. *d. All of the above

9. If all profit were eliminated from healthcare, the allocation of capital would be

accomplished by government. Which of the followingdescribes the likely effect? a. Greater efficiency, because the government would considercommunity

needs rather than where a greater profit could be earned *b. Less efficiency, because the allocation of capital would likely be influenced by politics rather than where the capital ismost useful c. Greater efficiency, because government regulators could becomemore experienced and could consider the long-run implications of their decisions, rather than focusing on where a quick profit could be earned

d. Less efficiency, because government regulators might not haveaccess to as much capital as they believe is necessary

10. If only not-for-profit firms were permitted in healthcare, a. healthcare costs would be lower, since the firms would nothave to pay

stockholder dividends. *b. healthcare firms would have less access to capital. c. the healthcare system would be little changed from the way itis currently. d. None of the above

Chapter 31 1. According to the traditional, or public-interest, role ofgovernment,

what are its policy objectives? a. Redistribution and reducing rising medical costs

*b. Economic efficiency and redistribution c. Economic efficiency and reducing rising medical costs d. Reducing rising medical costs and the number of uninsured

2. Which of the instruments to achieve the policy objectives can beapplied to the

demand side and/or supply side of the market? a. Expenditures on the demand side and taxation and regulation onthe supply

side b. Taxation and regulation on the demand side and expenditures onthe supply side *c. Taxation, expenditures, and regulation on both the demand andsupply sides d. Expenditures on the demand side and taxation and regulation onboth the demand and supply sides

3. Medicare for the aged and Medicaid for the medically indigent areconsidered

what type of policy objective? a. Economic efficiency

*b. Redistribution c. Reducing rising medical costs d. Reducing the number of uninsured

4. What is the basic assumption underlying the economic theory ofgovernment? a. Government exists to serve the interests of the public. b. Government exists to serve the interests of elected officials.

*c. Political markets are no different from economic markets;individuals and firms seek to further their self-interest. d. The elected administration seeks to enhance its party’s reelection chances.

6. According to the economic theory of government, why do healthpolicies

change over time? *a. Because groups who previously bore a diffuse cost develop aconcentrated interest b. Because economic conditions change, such as the economy goinginto a recession or prosperity c. Because the political parties in control of the administrationand Congress change d. Because public opinion changes

7. What do concentrated interests mean? a. Those who have a concentrated interest are generally largecorporations

who are generally unaffected by producer-type legislation. b. Those who have a concentrated interest find it worthwhile toincur the costs to organize, represent their interests before legislators, and raise political support to achieve the profitsfavorable legislation can provide. c. The legislation will have a large effect on those who have aconcentrated interest. *d. B and C

8. According to the economic theory of legislation, who provides the political

support for legislation to help those with low income, suchas Medicaid? a. Those who have low income b. Democrats

*c. The middle class d. Those with the highest income

9. What is the meaning of diffuse costs? a. When the legislative costs to a population group are visibleand affect a

large political group b. When the legislative costs are imposed on a small number ofpeople *c. When the legislative costs are not obvious and can be spreadover a large number of people d. When the costs of financing legislative benefits are imposedon a small number of high-income taxpayers

10. Why has there been so much health legislation affecting entry intothe health

professions, which tasks are reserved to certain professions, and how (and which) providers are paid under public medical programs, and why are subsidies for medical education given toschools but not to students? a. The public is very interested in having Congress enact healthlegislation, and

Congress has relied on health professionals to design the details of the legislation. *b. It is easier (less costly) for providers than for consumersto organize and provide political support to receive favorable legislation. c. Various health associations have provided personnel to becomeCongressional staff so that the design of the legislation benefits the health associations’ members. d. A and C

Chapter 32 1. What is a health association’s main objective? a. To ensure that its members provide the highest quality of careand faithfully

serve their patient populations b. To provide valuable membership services, such as continuingeducation c. To increase the number of dues-paying members, to unify itsmembership, and to limit entry of new members *d. To influence health legislation and regulations to advance its members’ economic interests 2. What is meant by the statement, “Healthcare organizations are

engaged in both political and economic competition”? *a. Healthcare organizations engage in economic competition amongthemselves for market share and revenues, and they compete politically against members of other health associations to gain an economic advantage. b. Healthcare organizations engage in political competition amongthemselves to gain an economic advantage, and they compete economically against members of other health associations to gainmarket share and revenues. c. Healthcare organizations engage in economic and political competition with everyone engaged in the financing and deliveryof medical services. d. None of the above 3. Why does each health association favor an increase in demand for its

member’s services?

a. To ensure that all those in need of healthcare have access tosuch care

*b. To enable its members to increase the prices they chargeand/or choose the clientele they prefer to serve c. To limit competition from competitive professions d. Both A and C

4. Why has the American Medical Association (AMA) favored subsidies to those with

low incomes (Medicaid) but opposed Medicare, which provided subsidized healthcare to all the aged? *a. The largest increase in demand would come from extending insurance to those unable to pay. Those with higher incomes presumably have private insurance coverage or can afford to pay physicians. Extending government subsidies to those currently able to pay would greatly increase the government’s cost, which would result in the government developing a concentrated interestin regulating physician fees.

b. The AMA was concerned that the aged already had comprehensiveprivate

health insurance, so subsidizing the aged would merely raise everyone’s taxes. c. The AMA opposed subsidizing the aged because the unions favored it and the AMA opposed the unions’ political agenda,which was to establish a single-payer system for the United States. d. The AMA believed it could use subsidized healthcare for allthe aged as a bargaining ploy to have the government also subsidize physicians’ malpractice insurance.

5. What approaches have associations used to enable members toestablish

high prices (mark-up over cost)? a. Seek legislation and/or regulation to eliminate competition b. Try to limit entry into the profession c. Engage in price discrimination by charging those who canafford to

pay more than those who are less able to pay *d. All of the above

6. Who would most likely oppose allowing nurse practitioners to becomeindependent

practitioners? a. Health Insurers b. Hospitals

*c. Physicians d. Urgent care centers

7. How are the terms economic complements and economic substitutes usedin

healthcare? a. When two health professionals work together, they areconsidered

to be economic complements. b. When one health professional can do the same tasks as anotherhealth professional but works at a separate location, they are considered to be economic substitutes. *c. When one health professional receives the payment for workperformed by another health professional, that other health professional is an economic complement. d. When a physician and a nurse practitioner work in the same organization performing the same tasks, they are considered to beeconomic substitutes

8. Which health associations would be more likely to oppose havingMedicare

reimburse nurse anesthetists? a. An association representing rural hospitals b. An association representing health insurers

*c. An association representing physicians d. An association representing nurse midwives

9. The American Medical Association’s approach toward improving quality

among its members has been a. to favor entry limits to becoming a physician. b. to favor those quality approaches that do not adversely affectthe income of

its members. c. to favor increased educational requirements for new members ofthe profession. *d. All of the above

10. Which of the following types of legislation is favored by healthassociations?

*a. Making economic substitutes illegal b. Making economic complements illegal c. Improving the quality of care delivered, regardless of the effect on members’ income or revenues d. A single-payer system

Chapter 33 1. When does the correct (optimal) rate of output occur in a market? a. When there are no barriers to entry or exit from a market b. When purchasers and providers (suppliers) are fully informed c. When those with low income are able to buy a sufficientquantity of

the goods or services in the market *d. A and B

2. Why is this statement important to achieving the optimal rate of output in a

market: “Individuals benefiting from the service pay thefull cost of producing that service”? a. If the statement were incorrect, then the cost of consuming more units

would exceed (or be less than) the benefits provided. b. When individuals pay the full cost of producing that service,then the additional benefits from consuming the last unit equal the cost of producing that last unit. c. If the statement were incorrect and the cost of consuming the last unit exceeded the benefits provided, then the resources usedin consuming the last unit could be better used to produce other goods whose benefits exceed their costs. *d. All of the above

3. Under what circumstances would a competitive market not allocateresources

correctly (optimally)? a. When those with low income are unable to buy a sufficient quantity of

goods and services needed to achieve a minimum levelof health b. When it may take several years before a new producer, such asa hospital, can be built and enter the market *c. When part of the product’s cost is imposed on a person who is not a participant in that market d. When part of the output from an industry is sold overseas andothers benefit from that output

4. What is the role of government when external benefits or costsoccur?

*a. The government should calculate the magnitude of the externalcosts (or benefits) and use subsidies and taxes to achieve the “right” rate of output in the affected industry. b. The government should not become involved in the market and should leave it up to market participants to settle any issues. c. The government should provide subsidies to those with lowincome in the case of external costs. d. The government should require producers who impose external costs to reduce their output and to increase their output in thecase of external benefits.

4. What is the role of government when external benefits or costsoccur? *a. The government should calculate the magnitude of the externalcosts (or benefits) and use subsidies and taxes to achieve the “right” rate of output in the affected industry. b. The government should not become involved in the market and should leave it up to market participants to settle any issues. c. The government should provide subsidies to those with lowincome in the case of external costs. d. The government should require producers who impose external costs to reduce their output and to increase their output in thecase of external benefits.

6. Evaluate this statement: “Pollution is harmful; therefore, thegovernment

should seek to eliminate all pollution.” a. Agree. Eliminating all pollution would save lives and providea benefit to all

people adversely affected by that pollution. *b. Disagree. Eliminating all pollution would require stopping all production of a good, even though the total benefits of thatproduct may exceed all of its costs. c. Agree. Eliminating all pollution would decrease external costsand achieve the optimal rate of output of that product. d. Disagree. It would become politically divisive if the government were to decide which firms could no longer remain inbusiness; too many jobs may be lost.

7. What does inframarginal externality mean when applied to the issueof financing

medical education? a. Assuming there are externalities in having a physician in case we need one,

by subsidizing medical education we would achieve an optimal number of physicians. b. Even in markets in which the external benefits are sufficiently small relative to the total private benefits, excluding subsidies will affect the optimal rate of output. *c. We all benefit from knowing that we have access to physicians if we become ill, but even if their education were not subsidized we would still have enough physicians should we need one. d. A and B

8. Refer to exhibit 33.1 in the book (copied below). Where the costsare C1 and the

benefits are B1, what is the correct rate of output?

*a. Q1 b. Q2 c. Q1–Q2 d. Cannot tell without further information

9. Refer to exhibit 33.1 in the book (copied below). When external costs are imposed

on others, as shown by C2, what is the correct rate

of output?

a. Q1

*b. Q2 c. Q1–Q2 d. C2–C1

10. Actual health policies that deal with externalities often divergefrom theoretical

solutions. Why does that occur? a. The divergence can often be explained by the fact that the externalities are

merely theoretical constructs and not possibleto measure. b. The divergence can often be explained by the lack of regulatory agencies’ resources that monitor and instituteappropriate policies. *c. The divergence can often be explained by a comparison of theamounts of political support offered by those with concentrated and diffuse interests. d. The divergence can often be explained by congressional partydifferences.

Chapter 34 1. When the Canadian healthcare system became a single-payer system, everyone was

provided with free access to hospital and medical services, and no one had to pay any deductibles or copayments. Patientsalso had free choice of physician and hospital. In what important way did Canada’s single-payer system differ from Great Britain’s single- payer system’s evolution? a. Great Britain’s system allowed people to be charged large

deductibles for using hospitals. *b. Great Britain’s system allowed people to “buy out”—purchaseprivate insurance for hospital and medical services. c. Great Britain’s system allowed people to use hospitals in other countries and paid those charges in full. d. Great Britain’s system requires patients to become part of managed care organizations, similar to HMOs. 2. What is the basic cost-control method used in Canada’s single-payersystem? a. Annual review and negotiation over each provider’s budget on

the basis of various outcome and quality measures b. Capitation payments per enrollee to HMO-type organizations *c. Expenditure limits on healthcare providers d. Limits on the number of physicians and hospitals licensed topractice

3. Are measures such as higher life expectancy at birth and lower infant mortality

rates appropriate for comparing different countries’medical care systems? a. Yes, because such measures are health outcomes that areimportant

to any medical system b. Yes, because such measures are readily available for differentcountries and mean the same thing in each country *c. No, because many factors other than medical services— including diet, exercise, smoking, and homicide—affect thesemeasures d. A and B

4. How relevant are measures such as cancer survival rates, preventive screening rates

for various types of cancer, and treatment outcomes fordifferent medical conditions for comparing different countries’ medicalsystems? a. These measures are not as useful as life-expectancy rates because data

on these measures are not usually available fromdifferent countries. b. These measures are good but not as useful as life-expectancy rates because the outcome to be achieved by any health system isimprovement in health levels.

*c. These measures are more useful than life-expectancy measures because they directly measure outcomes of the medical care systemand are not affected by lifestyle factors. d. A and B

5. Advocates of the Canadian system claim that, if the United States adopted the

Canadian system, the United States could greatly reduce itsadministrative costs because health insurance companies would no longerbe needed. Would there be any adverse consequences to eliminating insurance companies? a. Eliminating insurance companies would eliminate choice of health plans,

which offer different benefits and cost sharing atdifferent premiums. b. Choice is costly. However, without choice, less innovation would occur in benefit design, patient satisfaction, and competition on health plan premiums.

The diversity of insuranceplans reflects differences in enrollees’ preferences and willingness to pay for those preferences. c. Lower administrative costs are not synonymous with greaterefficiency.

Simply paying any bill submitted could result in higher healthcare expenditures because inappropriate use or overuse of services is not deterred or detected. *d. All of the above

6. Why are hospital lengths of stay shorter in the United States—particularly in

California—than in Canada? a. Canadian hospitals are used inappropriately; many services could be

provided in an outpatient setting, the physician’s office, or the patient’s home.

Given Canadian hospitals’ limitedbudgets, letting patients stay longer is less costly than admitting more acutely ill patients. b. Managed care systems in the United States have a financialincentive to use the least costly combination of medical services. Outpatient diagnostics and surgery are used to substitute for costly inpatient care. c. Canada has a much greater proportion of the population that isaged 65 and older. These people are sicker than the rest of the Canadian population and thus have longer lengths of stay. *d. A and B

7. Why does Canada experience wide swings in per capita medical

expenditures? *a. Because there was too little funding for healthcare, resulting in public complaints, followed by years of increasedfunding to make up for reductions in access to care b. Because of simple calculations involving changes in populationand yearly changes in total Canadian medical expenditures c. Because in years when per capita expenditures declined, innovations in care delivery have occurred, and in years when per

capita expenditures increased, the Canadian economy has improvedand the government has raised funding for medical services d. Because of changes in various diseases that normally occur inany country, such as respiratory illnesses in winter

8. Which country—Canada or the United States—has had a slower rate ofincrease in

per capita medical expenditures since 2004? a. Canada

*b. The United States c. Both countries d. Data are unavailable

9. What consequences are likely to arise when all medical and hospitalservices in a

country are free? a. Demand for medical care exceeds the available supply, and ashortage

develops. b. Access to care is rationed by long waiting lists. c. Patients go to other countries for their care. *d. All of the above

10. Because all Canadians belong to the same medical system and all hospital and

medical services are free, does Canada have an egalitariansystem? a. Yes, because people with high and low incomes have access tothe same

system, which is free to everyone b. No, because patients who live in wealthier provinces, withlarger healthcare budgets, have greater access to care than patients who live in poorer provinces c. No, because those who can afford to pay can travel to theUnited States for their care *d. B and C

Chapter 35 1. According to the Affordable Care Act (ACA), how does an employermandate

for health insurance work? a. It requires employers to buy health insurance for theiremployees.

*b. It requires employers to buy health insurance for theiremployees or pay a tax per employee. c. It is a voluntary program to encourage employers to buy healthinsurance for their employees. d. It requires employers to insure up to one-half of theiremployees or pay a tax.

2. Approximately how many Americans were uninsured when the ACA was

enacted? a. 10 million b. 30 million

*c. 60 million d. 90 million

3. The age group with the highest percentage of uninsured workers wascomposed of

those a. aged 24 years and under.

*b. aged 25 to 34 years. c. aged 35 to 44 years. d. aged 45 to 64 years.

4. Which size of firm had the largest percentage of employeesuninsured?

*a. Firms with fewer than 25 employees b. Firms with between 25 and 49 employees c. Firms with between 50 and 499 employees d. Firms with more than 500 employees

5. Which employee group was most likely to be uninsured?

*a. Workers earning less than $10 an hour b. Workers earning $10 to $14.99 an hour c. Workers earning $15 to $19.99 an hour d. Workers earning more than $20 an hour

6. What is an important reason that employees did not have healthinsurance?

a. Employees did not want the type of health insurance planoffered by

their employer. b. Employees refused their employer’s insurance because they were covered under a spouse’s insurance. c. Some firms offered health insurance to their executives butnot to all employees. *d. Firms unable to self-insure had to buy more expensiveinsurance, which included costly state-mandated benefits.

7. Who bears the cost of an employer mandate? a. Employer

*b. Employee c. Government d. Firm’s shareholders 8. What are the consequences of the ACA’s employer mandate? a. Employers are reluctant to hire more than 49 employees, because having

50 employees makes them subject to the employermandate. b. Employers decrease the number of full-time employees and hiremore parttime employees, because the employer mandate does not apply to employees working fewer than 30 hours a week. c. Many employees whose wages are at or near the minimum wage are discharged. *d. All of the above

9. Assume that there are two low-wage employees with the same income. Worker

A’s firm provides health insurance, while Worker B’s does not. Are they equally well off under the ACA’s employer mandate? a. Worker A is better off because she has health insurance.

*b. Worker B is better off because he can buy subsidizedinsurance on the health insurance exchange. c. Both workers are equally well off because one has employercoverage and the other has coverage from the exchange. d. Low-wage workers whose employers don’t provide health insurance will switch to employers that provide health insuranceand be equally well off.

10. Which interest groups have favored an employer mandate? a. Health insurers b. Small business groups c. Physician and hospital associations

*d. A and C

Chapter 36 1. What approach(es) has the Affordable Care Act used to increaseinsurance

coverage? a. Expanding Medicaid eligibility b. Expanding Medicare eligibility c. Providing insurance subsidies to those on health insuranceexchanges

*d. A and C

2. Which of the following aspects of the Affordable Care Act has beenrepealed? a. The individual mandate b. The CLASS Act, a voluntary long-term care program c. The employer mandate

*d. A and B

3. Which of the following criteria is inappropriate for judgingalternative

national health insurance proposals? a. Equitable redistribution—assisting those with low income tohave

coverage *b. Financing redistribution—providing health insurance benefitsto those with low income using a payroll or sales tax c. Efficiency in consumption—whether consumers consider the costsand benefits of their choices (such as health plan choices) d. Efficiency in production—whether the services (for a givenlevel of quality) are produced at the lowest cost

4. How does a single-payer system differ from an employer mandate? a. A single-payer system has one type of delivery system (fee- for-service),

while an employer mandate allows a choice of healthplans. b. A single-payer system has no cost sharing, while an employermandate does. c. A single-payer system provides universal coverage, while anemployer mandate does not. *d. All of the above

5. Is Medicaid an equitably financed program?

*a. Yes, because the benefits go to low-income groups and theprogram is funded by income taxes b. Yes, because Medicaid beneficiaries have a choice of providersand pay little or nothing out of pocket c. No, because Medicaid beneficiaries have difficulty accessingphysicians because Medicaid physician fees are so low

d. B and C

6. Some proponents of a single-payer system in the United States viewtraditional

fee-for-service Medicare (Medicare for All) as such an approach. Are there any drawbacks to expanding eligibility to traditional Medicare for everyone in the United States? a. No, Medicare would be an equitable system, with everyone having

equal access to care and free choice of any provider. b. Yes, Medicare fee-for-service is an inefficient system, with agreat deal of fraud and abuse. c. Yes, Medicare is currently expected to go bankrupt in the nearfuture, and expanding eligibility to all would hasten that bankruptcy. *d. B and C

7. Why do proponents of a universal refundable tax credit to replace the current system

of tax-exempt employer-paid health insurance believeit will be more equitable? a. Employees whose employers do not buy health insurance andthose

who are self-employed are not eligible for tax-exempt employer-paid health insurance. b. A refundable universal tax credit would be equitably financedby using the lost revenue from the tax-exempt employer-paid health insurance. c. Employees in a higher tax bracket benefit more from tax-exemptemployerpaid health insurance than those in a lower tax bracket. *d. All of the above

8. Would low-income people who do not owe any taxes be at a disadvantage if

national health insurance were based on a refundabletax credit? a. Yes, because if a low-income person’s tax liabilities are lessthan the tax

credit, she wouldn’t receive as much of the tax credit as someone whose tax liabilities exceed his tax credit b. Yes, because the refundable tax credit may not be sufficientlylarge to provide as much access to providers as people now receive under Medicaid *c. No, because if a person’s income is too low to pay taxes, the full amount of the tax credit would be used to provide him with a voucher for a managed care plan d. A and B

9. What was the reason for including an individual mandate in theAffordable

Care Act? a. To eliminate the “free rider” problem, whereby those who can afford

insurance don’t buy it and everyone else has to pay theircosts if they become ill

b. To expand the insurance pool and lower premiums by having low-risk

persons buy insurance to offset those who are high risk, because everyone—even those with a preexisting condition—can buy insurance c. To benefit larger employers that have to buy health insurancefor their employees so that they won’t be disadvantaged by independent contractors who are exempt from the employer mandate *d. A and B

10. Large differences regarding health policy exist between those on the political left

and those on the political right. Which of the following cost-containment approaches would those on the right oppose? a. Markets and price competition b. Individual choice of health plans, including health savingsaccounts

*c. Government negotiation with pharmaceutical companies d. Elimination of state mandates

Chapter 37 1. Which is the fastest growing group of the aged? a. People aged 65 to 74 years b. People aged 75 to 84 years

*c. People aged 85 years or older d. All age groups

2. Which age group has the greatest need for long-term care and nursinghome

services? a. All the aged are equally at risk b. People aged 65 to 74 years c. People aged 75 to 84 years

*d. People aged 85 years or older

3. In what setting do most long-term care services occur?

*a. In the person’s home b. In adult day care c. In a residential facility d. In a nursing home 4. When long-term care services are provided in the patient’s home, who

is the predominant caregiver? a. Registered nurses b. Nonregistered nurses c. Other paid assistance

*d. Family members and relatives

6. Who bears the largest cost for long-term care services? a. Public expenditures—Medicare and Medicaid b. Private long-term care insurance c. Private out-of-pocket expenditures

*d. Unpaid family caregivers

7. A private insurance market enables people to reduce their financial risk in exchange

for a premium. Given the growing number of aged at risk for financially catastrophic nursing home (and in-home) costs, thepotential market for long-term care insurance is huge. Yet fewer than 15 percent of the elderly have private long-term care insurance. Why doso few aged buy this type of insurance? a. Many aged are misinformed, believing that Medicare andMedicare

supplemental policies cover long-term care.

b. Many aged believe that Medicaid is a low-cost substitute toprivate long-

term care insurance. c. Many older aged have limited income and thus cannot affordlong-term care insurance premiums. *d. All of the above

8. Why are premiums for long-term care insurance much higher than theexpected

benefits? a. Administrative and marketing costs are high because long-termcare

insurance is sold primarily to individuals rather than to employer groups. b. Insurers are concerned with adverse selection—only those whoneed longterm care insurance will buy it. c. Insurers are concerned that, once people have long-term careinsurance, they will use it. *d. All of the above

9. Which of the following is an important concern for elderly peoplewho rely on

Medicaid for their long-term care needs? a. Family members will feel they have less responsibility toprovide care.

*b. They may have to spend down their assets to qualify forMedicaid. c. If they end up in a nursing home (because Medicaid is more likely to institutionalize a person needing long-term care thanprovide in-home support), they will be separated from their spouse. d. If they have to enter a Medicaid nursing home, the home willbe in a location away from family and friends.

10. The Community Living Assistance Services and Supports (CLASS) Act,a

voluntary federal insurance program for long-term care, was established as part of the ACA. Why was it repealed? a. The aged were opposed to the CLASS Act because they wanted greater

benefits and expected that its repeal would introduce amore generous longterm care program. b. The American Association of Retired Persons (AARP), a powerfulpolitical lobby, was opposed to the CLASS Act because it would have been a subsidized substitute to the long-term care insurancethe organization marketed to the aged. *c. Because the CLASS Act was a voluntary program, the federalgovernment was concerned that adverse selection would occur. d. The private insurance industry was opposed because it viewed the CLASS Act as competition to its products, and it successfullylobbied Congress to repeal the program.

Chapter 38 1. The Affordable Care Act (ACA) made significant changes to the US medical

system. How politically popular was the legislation when it wasfirst enacted? a. The ACA received strong bipartisan political support inCongress.

*b. The ACA received no bipartisan political support in Congress. c. The ACA received some bipartisan political support inCongress. d. The ACA received some bipartisan support in the Senate butnone in the House of Representatives.

2. The middle class is important politically. What did President Obamapromise the

ACA would do for the middle class? a. It would decrease health insurance premiums by $2,500. b. It would pay for itself and would not increase the federaldeficit. c. It would allow insured people to keep their current doctorsand health

insurance. *d. All of the above

3. Based on data from the US Census Bureau, how many Americans gained insurance

as a result of the Affordable Care Act between 2013 and 2016? a. 27.5 million b. 41.1 million

*c. 13.6 million d. 17.9 million

4. What incentive did the ACA offer to encourage states to expandMedicaid

eligibility? *a. The federal government would pay 100 percent of the state’s cost for expanding eligibility for the first three years and thenno less than 90 percent in subsequent years. b. The federal government would pay 100 percent of the state’s cost for all of its Medicaid patients for the first three yearsand then no less than 90 percent in subsequent years. c. The federal government would reduce its share of the state’s Medicaid costs if the state did not expand Medicaid eligibility. d. Each state was required by law to expand Medicaid eligibility,and this requirement was subsequently upheld by the US Supreme Court.

5. When the ACA expanded Medicaid eligibility, proponents expected thatpreviously

uninsured individuals would have a usual source of care and

therefore have fewer visits to the emergency department, leading tocost savings. Were these expectations realized? a. Yes, use of the emergency department decreased among thosenewly

insured on Medicaid. b. No, use of the emergency department stayed the same amongthose newly insured on Medicaid. *c. No, use of the emergency department actually increased amongthose newly insured on Medicaid. d. The data are mixed, and the results are uncertain.

6. How effective was the ACA’s employer mandate in increasing coverage

of uninsured employees? a. It was effective, because the employer was required to offeremployees an

affordable plan in which employees did not have tospend more than 2.5 to 9.66 percent of their wages (depending upon income) on the premium. b. It was not effective, because an uninsured employee could reject the employer’s offer and enroll in the insurance exchange,meaning that the employee could receive a cost-sharing subsidy inaddition to a premium subsidy. *c. It was not effective, because the affordable plan offered bythe employer included a large deductible ($6,000) and was only for single coverage. To include their family, employees would have to buy a separate plan for them and, in addition to paying the full premium, be responsible for another large deductible ($6,000). The out-of-pocket expense would have been too great to bear. d. Both B and C

7. How effective was the individual mandate in expanding the number ofinsured

individuals? a. It was relatively ineffective, because the ACA provided many exemptions

that allowed individuals not to buy insurance. b. It was generally effective, because the IRS would deduct the penalty for not buying insurance from any refund the individualwould have received. c. It was relatively ineffective, because the penalty for not buying an affordable plan was too low. *d. Both A and C

8. Why did premiums in the individual market increase after the

implementation of the ACA? a. The insured benefits were much greater than they werepreviously. b. The number of young people buying insurance was less thanexpected.

c. The ACA removed the preexisting condition requirement, resulting in a

disproportionate number of sick individuals buyinginsurance. *d. All of the above

9. Which of the following groups are most affected by rising healthinsurance

premiums? a. Exchange enrollees with incomes less than 250 percent of thefederal

poverty level b. Exchange enrollees with incomes between 250 to 400 percent ofthe federal poverty level *c. Exchange enrollees with incomes greater than 400 percent ofthe federal poverty level d. Employees who accept their employer’s offer to buy healthinsurance

10. Which of the following policies would likely result in a decreasein average

premiums in the individual market? a. Making open enrollment accessible throughout the year b. Increasing insurers’ medical loss ratios from 85 to 90 percent

*c. Using actuarially fair premiums and establishing a separatefederal high-risk pool for people with preexisting conditions d. Extending the formula for premium subsidies used in the exchanges to all individuals buying insurance in the individualmarket