Economics 436/530 Quiz #2 Professor Thornton
Health Economics Fall 2017
On the answer sheet provided, write the letter that corresponds to the best answer. Each question is five points.
1. Suppose that when purchasing a house, consumers consider two characteristics: number of square feet
and number of bedrooms. Suppose house A has 2,000 square feet and 4 bedrooms. House B has 2,500 feet and 3 bedrooms. Which house is the higher quality house?
a. House A because it has more bedrooms.
b. House B because it has more square feet of living space.
c. House B because the ratio of living space to bedrooms is larger than house A.
d. To compare the quality of the two houses, we need to know the value that consumers place on
bedrooms and square feet of living space.
2. Which of the following do medical researchers not consider to be a characteristic of a medical care
service when evaluating quality?
a. Structural characteristics
b. Process characteristics
c. Patient characteristics
d. Outcome characteristics.
3. Prior to the publication of the Institute of Medicine report To Error is Human in 1999, most people
believed that the quality of care in the U.S. was high and better than other countries. Which of the following was the main reason for this belief?
a. Prior studies found strong evidence of high quality care in the U.S.
b. The higher the cost of medical care the higher the quality, and the U.S. has the highest cost of medical care in the world so we must have the highest quality.
c. Life expectancy in the U.S. is much higher than other countries.
d. The U.S. has hundreds of medical schools, which is more than other countries.
4. Studies on the quality of medical care indicate that if medical errors and injury were included in the
list of leading causes of death in the U.S. it would rank:
a. third.
b. fifth.
c. tenth.
d. twentieth.
5. Which of the following is a problem in the U.S. healthcare system that results in lower quality of care?
a. Most residency programs are too short to adequately teach doctors the practice of medicine.
b. Many patients don’t get medical care that is medically necessary and could improve their health.
c. Many patients cannot afford to pay for an adequate amount of medical care.
d. Both b and c
6. Less than 50% and possibly as little as 20% of medical care services have been shown to be effective
by scientific studies. Which of the following is a reason for lack of scientific evidence of many medical care services?
a. The best evidence of effectiveness comes from randomized controlled experiments that take
many years and cost millions of dollars.
b. The government does not require studies of effectiveness for most types of medical services
other than drugs.
c. There is little financial incentive for the private sector to do studies of the effectiveness of
procedures and surgeries because they cannot be patented and sold for a profit.
d. All of the above.
7. In 1993, the Agency for Healthcare Research and Quality (AHRQ) organized a panel of experts to
develop guidelines for spinal fusion back surgery based on the best available scientific evidence. The panel concluded that this surgery was no more effective than less invasive alternatives and discouraged its use. What was the result of this recommendation?
a. Congress increased the amount of money it appropriated AHRQ to support the development of evidence-based guidelines for other types of surgeries.
b. Orthopedic surgeons started to perform significantly fewer spinal fusion back surgeries.
c. Orthopedic surgeons continue to perform hundreds of thousands of spinal fusion back surgeries each year even though there is no new evidence of effectiveness of this procedure.
d. Both a and b.
8. One reason why many doctors don’t use evidence-based medicine is:
a. evidence-based guidelines do not exist for them to use.
b. scientific evidence applies to an average or typical patient, and they believe there are
significant differences among individual patients.
c. they believe it would result in a substantial increase in medical care cost and spending.
d. they would be required to return to medical school to learn how to use evidence-based
medicine in their medical practice.
9. The adoption of medical information technology by doctors and hospitals increases the quality of care
by:
a. allowing hospitals to admit more patients.
b. decreasing administrative inefficiency.
c. decreasing errors that injure patients.
d. Both b and c.
10. Economists believe that the fee-for-service method of paying doctors lowers the quality of care
because:
a. it pays doctors for the quantity of care they give to patients not the quality of care.
b. it does not pay doctors to treat illness.
c. it pays doctors too little for the services they provide, which has an adverse effect on quality.
d. it pays primary-care doctors too much and specialists too little for the services they provide.
11. Suppose you argue that we should increase taxes on high-income people and use the tax revenue
obtained to pay for health insurance of uninsured low-income people as a way to redistribute income.
a. This is an economic argument for extending health insurance to the uninsured.
b. This is a fairness argument for extending health insurance to the uninsured.
c. This is a moral argument for extending health insurance to the uninsured.
d. This is an incontrovertible argument for extending health insurance to the uninsured.
12. Which of the following studies analyzes the effect of Medicaid insurance on medical care utilization
and health?
a. Institute of Medicine study
b. Thornton and Rice Study
c. Rand health insurance study
d. Oregon health insurance study
13. The institute of Medicine study estimates that extending health insurance to the uninsured would
result in economic benefits of between $65 billion and $130 billion per year. The Thornton and Rice study estimates the economic benefits would be between $510 and $580 billion per year. Which of the following is a reason these estimates differ?
a. The Institute of Medicine estimates is based on the results of randomized controlled
experiments while the Thornton and Rice study is an observational study.
b. The Institute of Medicine estimate includes production benefits only while the Thornton and
Rice estimate includes both production and consumption benefits.
c. The Institute of Medicine estimate includes both production and consumption benefits
while the Thornton and Rice estimate includes only production benefits.
d. The Institute of Medicine estimate is obtained from data on states while the Thornton and Rice
estimate is obtained from data on individuals.
14. Which of the following is a mechanism contained in the Affordable Care Act to extend health
insurance coverage to the uninsured?
a. Creation of state health insurance exchanges.
b. Creation of accountable care organizations.
c. Placing restrictions on health plan medical loss ratios.
d. Both a and b.
15. One objective of the Affordable Care Act is to increase the quality of care. Which of the following is
a way it attempts to do this?
a. Replace fee-for-service payment for providers with methods of payment that give providers
economic incentives to deliver higher quality care.
b. Develop and promote new types of medical care delivery systems that better coordinate care.
c. Increase the amount of scientific evidence available to providers and patients about the
effectiveness of medical care services.
d. All of the above.
16. The Affordable Care Act:
a. requires health plans to charge a higher premium to younger people and a lower premium to
older people to force young people to subsidize the care of older people.
b. allows health plans to charge a higher premium to sick people than to healthy people.
c. places a cap on annual out-of-pocket expenses that insured people are required to pay for
the deductible, copayment, and coinsurance.
d. requires health plans to have a copayment of not exceeding 5% on preventive medical care.
17. One mechanism in the Affordable Care Act intended to extend health insurance to the uninsured is
expansion of Medicaid. What is the economic incentive for states to expand their Medicaid program to cover more low-income people?
a. If a state does not expand its Medicaid program, the federal government requires it to pay
100% of the cost of Medicaid.
b. If a state does not expand its Medicaid program, the federal government eliminates the money
it provides to the state to repair highways, roads, and bridges.
c. If a state expands its Medicaid program, the federal government provides the state with more
money for schools and universities.
d. If a state expands its Medicaid program, the federal government will pay 90% or more of the
cost of the additional people that are now eligible for Medicaid.
18. The Affordable Care Act created the Independent Payment Advisory Board (IPAB) to:
a. provide funding for research on the comparative effectiveness of medical care services.
b. recommend new innovative methods of payment that Medicare can use to reimburse hospitals and doctors to give these providers an incentive to better coordinate the care for patients.
c. recommend policies to decrease the growth of Medicare spending if it exceeds a threshold stipulated by the act.
d. regulate insurance companies that sell health plans on state exchanges.
19. The Affordable Care Act extends health insurance to millions of previously uninsured individuals.
Having health insurance:
a. increases an individual’s ability to pay for medical care and the demand for medical care.
b. guarantees that an individual will have access to medical care.
c. is the most effective way for an individual to maintain and improve his/her health.
d. All of the above.
20. Many young people are choosing not to buy health insurance on the state exchange market and
instead pay a penalty. Many insurers are losing money on health plans sold on the state exchange market and are exiting. Health insurance premiums on the state exchange market have increased significantly. These are indications of:
a. adverse selection on the state exchange market.
b. moral hazard on the state exchange market.
c. supplier induced demand on the state exchange market.
d. an efficient allocation of resources to the state exchange market.
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