Institute of Health Management and Health Economics English
Faculty of Medicine
University of Oslo
Institute of Health Management and Health Economics
University of Oslo
Written Exam, Friday 29 May 09.00-13.00
HME4302- Health Economics
English dictionary is allowed.
Results will be available three weeks after the exam, see the board at the Institute of Health Management and Health Economics. The results will also be posted on Studentweb.
The receiving day of the results is the day the results are postedon the board outside the Institute.Appeals must be submitted within three weeks of this date.
The Written Exam consists of 3 pagesincluding this one.
Remember to write down your candidate number so that you have when the results are made available.
Exam spring 2009 HME 4302 (Health economics)
All questions are to be answered. Be sure to allocate your time according to the weights given in the parenthesis below.
Question I (about 40%)
a) Discuss important characteristics that make markets for health care services different from markets for other goods and services.
b) Discuss two specific allocation rules (equity theories or equity positions) being relevant for health care services.
c) According to a version of the Grossman model, the (first-order) condition describing an individual’s optimal choice of health stock (H) is as follows:
(*)
where;
W = the wage rate
= The marginal productivity of health
= Lagrange multiplier (shadow price)
P = Price per unit of medical services
E = Educational level (stock of knowledge)
= Discount rate (interest rate)
= Depreciation rate
Why does the wage rate (W) affect the demand for health?
Question II (about 60%):
a) Genetic factors may predispose persons to a particular health problem (implying a situation with different health risks e.g. low-risk individuals and high-risk individuals). Explain now what the equilibrium will be (type of insurance contracts) if the insurance company in such a world is fully informed (can identify each risk type) and the insurance premiums are actuarially fair.
To answer the above question, one may apply the concepts of expected wealth (EW) and expected utility (EU):
where:
p is the probability of a loss occurring (e.g. due to an illness). is wealth in the good state; is wealth in the bad state, where L is the loss occurring in the bad state.
b) What would happen if insurance companies were less informed about individual risks than the individuals (the purchasers of insurances) themselves?
c) Finally, try and discuss whether it is desirable that insurance companies have full information, at an individual level, about genetic risk factors.