Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Chapter 3, Problem 8E
To determine
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Indicate whether the statement is true or false, and justify your answer.The fact that older people spend more on health care is evidence against theGrossman model, which predicts that spending will decline as δ increases.
True or false? According to the Grossman model, if a new drug were discovered that eliminated the steady deterioration of health that accompanies aging – but does not eliminate sudden events like heart attacks or being hit by a bus – then the demand for jelly donuts, french fries, and physical activity in the presence of buses would decline. Justify your answer.
Indicate whether the statement is true or false, and justify your answer.In real life, investments in health can generate long-lasting benefits, but the Grossman model neglects this aspect of health.
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- Suppose that in the fictional country ASU in 2012, a mandate was passed where everyone between the ages of 23-25 will receive health insurance at a discounted rate, while individuals aged 27-29 were not impacted by this policy. You, a researcher, want to study the effect of offering discounted health insurance coverage on the use of mental health services. You have data on the average number of visits for these two age groups over time. Using the information in the table below, a quick difference-in-difference calculation suggests that the mandate led to Time Periods Age group Avg. Avg. Number of Number of visits visits Pre-2012. Post-2012 23 to 25 2.3 27 to 29 2.5 approximately 0.3 more visits. approximately 0.7 more visits. approximately 0.4 fewer visits. approximately 0.7 fewer visits. approximately 0.3 fewer visits. 020202 337 SUCHARY 3.0 2.9 P 1302 126 70 5572 25 20120822 2012 Carrow_forwardOne of the most robust, fundamental “facts” of health economics is the SES and health gradient. a) Define the SES and health gradient. b) Give three ways in which the SES and health gradient is robust. c) Provide evidence that some of the gradient is correlational (i.e., give a potential confounder) and evidence that the gradient is in fact causal. d) i. Give an interpretation of Figure 1 below in layperson terms. ii. What pattern do you see for men vs women? iii. “The education and mortality gradient does not depend on healthcare spending or whether the country has universal healthcare.” Use Figure 1 to support or refute this claim.arrow_forwardConsider that you want to apply the difference-in-differences approach to evaluate the Health Insurance Subsidy Program (HISP). In this scenario, you have two rounds of data on two groups of households: one group that enrolled in the program, and another that did not. You know that you cannot compare the average health expenditures of the two groups because of selection bias, thus you decide to compare change in health expenditures as follows: Table 7.2 Evaluating HISP: Difference-in-Differences Comparison of Means After Before (baseline) (follow-up) Difference Enrolled 7.84 14.49 -6.65 Nonenrolled 22.30 20.79 1.51 Difference DD = -6.65 – 1.51 = -8.16 Note: The table presents mean household health expenditures (in dollars) for enrolled and nonenrolled households, before and after the introduction of HISP. How should you interpret this difference ($USD -8.16)? What are the basic assumptions required to accept this result from difference-in-differences?arrow_forward
- [A] High-income Canadians tend to choose a higher desired health stock, even though they can afford more healthcare goods. Using the Grossman model, explain why this is the case. Use an appropriate graph to support your answer. [B] Suppose the funding agency switches both physicians' and hospitals' prospective payment to a system of retrospective payment, i.e., from salary to fee-for-service for physicians, and from global budget payment to activity-based funding for hospitals. Clearly explain each of these terms and how these changes will impact the utilization of physician and hospital services.arrow_forwardThe Grossman model emphasizes the important roles that education, health knowledge, and expectations about future income and health play in the choices that determine health in both the short and long runs. Education both increases the likelihood of having higher income, which is good for health, and can compensate for lower income in which of the following ways: a. Education is associated with better health literacy, knowledge and execution of healthy diets and lifestyles b. Education enables people to communicate better with well-educated doctors and so they learn better how to manage their own health over time c. Education enables people to read about side effects and avoid unnecessarily risky procedures d. All of the above e. None of the abovearrow_forward1. True or False (and why): Recessions are good for your health. 2. In the framework of the Grossman model, suppose there is an increase in the return in alternate non-health market investments. Draw what happens to the MEC curve and the optimal level of health. Explain intuitively why this might be the case in reality.arrow_forward
- Indicate whether the statement is true or false, and justify your answer.In the Grossman model, the marginal efficiency of investment in health care declines as health improves.arrow_forwardOne major premise of the Rothschild–Stiglitz model is that there is a perfectly competitive market for health insurance. Suppose instead that the market is not perfectly competitive, and in fact competitor firms have a hard time entering the market. Could a pooling equilibrium occur in this case? What is it about competition that prevents pooling in the Rothschild–Stiglitz model? No formal proof is necessary, but do make your reasoning clear. Evaluate the following statement: competition in health insurance markets is harmful.arrow_forwardOne hypothesis for exploring socioeconomic status health disparities is the allostatic load hypothesis. This hypothesis states that repeated (or chronic) stress creates a cumulative physiological burden known as allostatic load. The theory predicts that people on the lower end of the socioeconomic status will have a higher allostatic load, negatively impacting health outcomes.In the context of the Grossman model, we could say that individuals with lower levels of stress face a rate of health depreciation and will have optimal health as a result. lower; higher higher; higher lower; lower higher; lower O Oarrow_forward
- Which of the following is NOT a defining characteristic of the Beveridge model? a. universal, public health insurance b. community rating c. publicly provided health carearrow_forwardOne major premise of the Rothschild-Stiglitz (RS) model is that there is a perfectly competitive market for health insurance. Suppose instead that the market is not perfectly competitive, and in fact competitor firms have a hard time entering the market. Could a pooling equilibrium occur in this case? What is it about competition that prevents pooling in the RS model? No formal proof is necessary, but do make your reasoning clear. Evaluate the following statement: competition in health insurance markets is harmful.arrow_forwardIndicate whether the statement is true or false, and justify your answer.The Rothschild–Stiglitz model predicts that people who own life insurance should have fewer unobserved traits (that is, unobserved by insurance companies) that lead to a higher risk of death when compared against people with the same level of income but who do not own life insurance.arrow_forward
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