MHA 710 HEALTHCARE ECONOMICS EXAM 2024

ACTUAL EXAM COMPLETE 130 ACCURATE

QUESTIONS WITH DETAILED VERIFIED

Suppose your assignment is to use the standard time trade-off approach to measure
quality of life. You are given the following information. An individual is faced with leaving
the remaining 10 years of their life suffering from severe osteoporosis. The individual
reveals that they would be willing to give up four of those years to live hte remaining six
in perfect health. What is the utility of one year in a chronic health state relative to
perfect health?
A. 0.6
B. 40
C. 4
D. 6
E. 0.4 - ANSWERA. 0.6

Which of the following would likely lead to the greatest improvement in the health status
of the population in the United States?
A. More spending on public health
B. Higher per capita incomes
C. More rural hospitals
D. Improved lifestyles changes
E. More medical care spending overall - ANSWERD. Improved lifestyles changes

There are substantial differences in medical care use by demographic characteristics

such as age, sex, and marital status. Which of the following statements is true?
A. Infant girls are healthier than infant boys are and consume fewer medical resources
B. Average hospital stays are longer for women than men
C. Single individuals regardless of age are hospitalized less than married people are
D. People aged 80 or more spend about the same amount on medical care as 60 year
olds do
E. Adult women spend more money on medical care than men do - ANSWERE. Adult
women spend more money on medical care than men do

The primary tasks required to conduct a successful cost effectiveness study are all of
the following except:
A. Identifying the overall cost of a health condition on society
B. Establishing the relevant alternative(s) for comparison
C. Ranking the alternatives in terms of overall costs
D. Identifying and measuring all relevant costs
E. Adequately measuring the effectiveness of the procedures evaluated - ANSWERA.
Identifying the overall cost of a health condition on society
Suppose you must rely exclusively on cost-effectiveness analysis (CEA) to determine
whether a category of people receives an expensive, potentially life-saving, intervention.
Which of the following considerations must you keep in mind when making your
decision?
A. CEA studies are subjective and rely on the judgment of clinicians and researchers
B. CEA studies take a long time to conduct and are expensive to evaluate
C. CEA determines the efficient threshold above which treatments are unnecessarily
expensive
D. CEA ignores the possibility that certain unidentified individuals in a group may have a
greater than normal positive response to the treatment
E. CEA studies are considered the gold standard as far as evaluation studies are
concerned - ANSWERD. CEA ignores the possibility that certain unidentified individuals
in a group may have a greater than normal positive response to the treatment

Under which of the following circumstances is the principal-agent relationship likely to

be most problematic?
A. Between physicians and lawyers
B. Between general practitioners and patients
C. Between hospitals and nurses
D. Between dentists and physicians
E. Between surgeons and patients - ANSWERE. Between surgeons and patients

The direct costs in an economic evaluation include all of the following except:
A. The cost of home remodeling to accommodate a physical handicap
B. Reduced productivity at work
C. Hospitalization
D. Transportation to and from the physician's office
E. Medical devices - ANSWERB. Reduced productivity at work

When area income increases by 20 percent, what occurs?

A. Quantity demanded does not change
B. Quantity demanded falls by 10%
C. Quantity demanded rises by 7.5%
D. Quantity demanded rises by 10%
E. Quantity demanded falls by 7.5% - ANSWERD. Quantity demanded rises by 10%

Factors affecting the level of medical care demand include all of the following except:
A. Economic standing
B. Demographic characteristics
C. Health status
D. Physician factors
E. Price of medical care - ANSWERE. Price of medical care

Which of the following is least responsible for the reduction in mortality rates in Europe
and North America?
A. More effective medical interventions
B. Reduced exposure to diseases
C. Clean water and waste disposal
D. Improved sanitary conditions
E. Better nutrition and housing - ANSWERA. More effective medical interventions

When measuring the effectiveness of a treatment, surrogate measures reflect clinical

efficacy and include:
A. Hip fractures
B. Death
C. Scores on standard evaluative exams such as EuroQol or SF-36
D. Bone-mass density (BMD)
E. Recurrence of the disease - ANSWERD. Bone-mass density (BMD)

Which of the following measures of effectiveness is an intermediate measure?

A. Cholesterol level
B. Hip fracture
C. Blood pressure
D. Bone-mass density (BMD)
E. Tumor size - ANSWERB. Hip fracture

Many economists consider medical care a superior good. Which of the following
statements is true regarding a superior good?
A. When the price of a superior good increases, consumers demand more of it.
B. Consumers want more of a superior good regardless of its price.
C. Superior goods are considered necessities.
D. A superior good has an income elasticity of demand less than one.
E. As consumer income increases, consumers spend more on superior goods. -
ANSWERE. As consumer income increases, consumers spend more on superior
goods.

According to Grossman (1972), how is the demand for medical care determined?
A. Insurance coverage is the most important factor
B. It is derived from the demand for health
C. It is determined primarily by the age of the individual
D. Genetic factors are all that matter - ANSWERB. It is derived from the demand for
health

Researchers use cost-of-illness studies for all of the following except to:
A. Determine the low-cost option to treat a disease
B. Study the burden of a disease
C. Increase public awareness of the cost of treating certain diseases
D. Compare two or more treatment options when the medical outcome is identical
E. Compare the relative efficiency of treating various conditions - ANSWERE. Compare
the relative efficiency of treating various conditions
The intangible costs associated with reduced quality of life include:
A. Lost productivity at work
B. Pain and suffering
C. The cost of home remodeling to accommodate a physical handicap
D. Potential income lost due to premature death
E. Household services that must be replaced, such as housework - ANSWERB. Pain
and suffering

A physician's ability to induce demand is greatly enhanced when:

A. Treatment options are limited
B. The physician follows strict treatment guidelines
C. Patients have difficulty gathering and processing information
D. Patients pay their own medical bills
E. Patients request follow-up visits - ANSWERC. Patients have difficulty gathering and
processing information

The concept of quality-adjusted life year (QALY):

A. Is used extensively in the United States to evaluate health care programs
B. Has little application to medical decision making
C. Is a multidisciplinary approach to measuring health status
D. Is used extensively to evaluate medical care resource allocation within government-
run programs on fixed budgets, especially in Europe
E. Is given an arbitrary value when applied to a real world problem - ANSWERD. Is
used extensively to evaluate medical care resource allocation within government-run
programs on fixed budgets, especially in Europe

The standard cut-off for cost per quality-adjusted life year (QALY) used by most
governmental decision makers is set in terms of a multiple of national per capita
income. The value of the threshold is usually what percent of national per capita
income?
A. 200
B. 150
C. 300
D. 250
E. 100 - ANSWERE. 100

The direct costs in an economic evaluation include the all the following except
A. hospitalization.
B. medical devices.
C. transportation to and from the physician's office.
D. reduced productivity at work.
E. all of the above. - ANSWERD. reduced productivity at work.

When measuring effectiveness of a treatment, surrogate measures reflect clinical

efficacy and include
a. recurrence of the disease.
b. death.
c. bone-mass density (BMD).
d. hip fractures.
e. scores on standard evaluative exams such as EuroQol or SF-36. - ANSWERC. bone-
mass density (BMD)

Which of the following measures of effectiveness is not a surrogate measure?

a. Cholesterol level
b. Blood pressure
c. Tumor size
d. Hip fracture
e. Bone-mass density (BMD) - ANSWERD. Hip fracture

The intangible costs associated with reduced quality of life include

a. pain and suffering.
b. lost productivity at work.
c. The cost of home remodeling to accommodate a physical handicap.
d. potential income lost due to premature death.
e. all of the above. - ANSWERA. Pain and suffering

Suppose that you are asked to use the standard time trade-off approach to measuring
quality of life and are given the following information. An individual is faced with living
the remaining 10 years of her life suffering from severe osteoporosis. She reveals that
she would be willing to give up four of those years to live the remaining six in perfect
health. What is the utility of one year in the chronic health state relative to perfect
health?
a. 0.4
b. 0.6
c. 4
d. 6
e. There is not enough information to determine the utility of life in this case. -
ANSWERB. 0.6

Researchers estimate QALYs in a number of different ways. One popular approach is

called the
a. probability approach.
b. QoL approach.
c. standard gamble.
d. standard measure of well-being.
e. utility of life approach. - ANSWERC. Standard gamble

The standard cut-off for cost per QALY is ______ per capita income.
a. equal to
b. 2 times
c. 3 times
d. 4 times
e. 5 times - ANSWERa. equal to

Cost-effectiveness considerations are more formally integrated into health policy making
in
a. the UK.
b. Australia.
c. Europe.
d. Canada.
e. b, c, and d. - ANSWERe. b, c, and d

Steps in performing a cost-effectiveness analysis include all of these EXCEPT

a. ranking the alternative treatment options.
b. prioritizing the alternative treatment options.
c. calculating the ICER between each treatment option and the next most expensive
one.
d. eliminating treatment alternatives that are strictly dominated. - ANSWERb. prioritizing
the alternative treatment options

Researchers use cost-of-illness studies to

a. study the burden of a disease.
b. determine the low-cost option to treat a disease.
c. compare two or more treatment options when the medical outcome is identical.
d. increase public awareness of cost of treating certain diseases.
e. do all of the above. - ANSWERe. do all of the above

Many economists consider medical care a superior good. Which of the following
statements is true regarding a superior good?
A. Consumers want more of a superior good, regardless of its price.
B. When the price of a superior good increases, consumers demand more of it.
C. As consumer income increases, a larger percentage of that income is spent on
superior goods.
D. A superior good has an income elasticity of demand greater than 1.
E. Both c and d are true of superior goods. - ANSWERE. Both c and d are true of
superior goods

A critical assumption in the model of demand and supply is the independence of

demand and supply curves. If the two are not independent, a shift in the supply curve
can lead to a shift in the demand curve referred to as
A. supply-side economics.
B. supplier-induced demand.
C. supply shocks.
D. ceteris paribus.
E. the fallacy of supply. - ANSWERB. supplier-induced demand

The top ten causes of death in the United States in 2010 included all of the following
except
A. heart disease.
B. cancer.
C. suicide.
D. kidney failure.
E. AIDS. - ANSWERE. AIDS

The accompanying diagram depicts the relationship between health status and medical
care spending for a particular country. Which of the following statements is true?

A. At the current spending level of S1 on TP1, this society can get a greater
improvement in health status by increasing spending to S2 than by shifting TP to TP2.
B. S1 levels of spending may be described as spending on the flat-of-the-curve.
C. Social pressures will move the health care system to spend S2.
D. All statements are true.
E. All statements are false. - ANSWERC. Social pressures will move the health care
system to spend S2.

Health care that actually harms the patient, such as an adverse reaction to a
prescription drug, is called
A. morbidity-related response.
B. defensive medicine.
C. adverse selection.
D. iatrogenic disease.
E. moral hazard. - ANSWERD. iatrogenic disease.

The number one cause of death in the United States in 1980 was
A. AIDS.
B. heart disease.
C. cancer.
D. stroke.
E. homicide and accidents. - ANSWERB. heart disease

Health insurance features that tend to reduce moral hazard include

A. deductibles.
B. coinsurance
C. copayments
D. all of the above. - ANSWERD. all of the above

The concept quality-adjusted life year (QALY)

A. is a multidisciplinary approach to measuring health status.
B. has little application to medical decision making.
C. is used extensively in the United States to evaluate health care programs.
D. is used extensively to evaluate medical care resource allocation within government-
run programs on fixed budgets, especially in Europe.
E. none of the above. - ANSWERD. is used extensively to evaluate medical care
resource allocation within government-run programs on fixed budgets, especially in
Europe.

Suppose the recipient of a kidney transplant has stated that she would prefer 5 years of
perfect health to the 10 years she expects to live with her transplant. For this person,
each of her remaining 10 years of life has a QALY value of
A. ½.
B. 2.
C. 5.
D. 10.
E. 50. - ANSWERC. 5

If health care spending is already on the flat-of-the-curve, it may not be possible to buy
improved health status by increasing spending. In this situation, the best way to improve
health status may be to
A. increase the availability of government health insurance.
B. invest in biotechnology to determine the genetic factors that improve health.
C. improve life-style decisions by reducing smoking, alcohol consumption, and drug
use.
D. improve access to medical care.
E. improve overall educational attainment so people can better follow the advice from
the medical community. - ANSWERC. improve life-style decisions by reducing smoking,
alcohol consumption, and drug use.

McKeown's (1976) research attributed the majority of the secular decline in mortality
rates in Europe and North America to
A. better nutrition and housing.
B. improved sanitary conditions.
C. clean water and waste disposal.
D. reduced exposure to diseases.
E. better medical care. - ANSWER

Factors affecting medical care demand include

A. health status.
B. demographic characteristics.
C. economic standing.
D. physician factors.
E. all of the above. - ANSWERE. all of the above

A physician's ability to induce demand is greatly enhanced when

A. patients pay their own medical bills.
B. patients request follow-up visits.
C. patients have difficulty gathering and processing information.
D. the physician follows strict treatment guidelines.
E. treatment options are limited. - ANSWERC. patients have difficulty gathering and
processing information.

The RAND Health Insurance Study

A. examined cross-section data to estimate the demand function for medical care.
B. was the most extensive controlled experiment in health insurance ever conducted in
the United States.
C. was based on individual decisions in voluntarily choosing health insurance coverage,
like most economic studies.
D. was flawed due to severe self-selection bias.
E. was set up to study medical outcomes when individuals were free to choose the type
of health coverage they desired. - ANSWERB. was the most extensive controlled
experiment in health insurance ever conducted in the United States.

The following diagram depicts the market for physicians' services that is originally in
equilibrium at point a with demand and supply at D0 and S0. As physician supply
increases from S0 to S1, a concurrent shift in demand from D0 to D1

A. may be the result of physician-induced demand.

B. will cause overall spending on physicians' services to increase.
C. will force physicians to limit the number of patients they see.
D. both a and b.
E. all of the above. - ANSWERD. both a and b

Value of the resources spent on a particular disease category; often called the burden
of disease. - ANSWERCost-of-illness studies

A procedure that compares the cost of undertaking a course of action and the resulting
benefits expected to flow from that action. - ANSWERCost benefit

Measuring the change in the cost of undertaking a specific course of action (compared
to the next best alternative action) relative to the change in the health outcome of that
action (compared to that same alternative). - ANSWERCost-effectiveness analysis
(CEA)

Guide to evidence-based medical practice used to direct clinicians to follow

recommended clinical procedures when treating patients with certain conditions. -
ANSWERClinical pathway

The incremental benefit to society of producing and consuming an additional unit of a

particular good. - ANSWERMarginal social benefit

The incremental cost to society of producing and consuming an additional unit of a

particular good. - ANSWERMarginal social cost
The amount earned on an investment translated into an annual interest rate. -
ANSWERRate of return

Research whose purpose is to advance fundamental knowledge. - ANSWERBasic

research

A ratio used in cost-effectiveness analysis that compares the difference in the expected
costs of two interventions relative to the difference in expected outcomes. -
ANSWERIncremental cost-effectiveness ratio (icer)

The ability to achieve the desired result in an ideal setting under controlled conditions. -
ANSWEREfficacy

The ability to achieve the desired result under real-world conditions. -

ANSWEREffectiveness

A mathematical model used to depict a situation where outcomes are partially

determined by disease progression and partially under the control of a decision maker. -
ANSWERMarkov decision model

A utilitarian construct promoted by certain bioethicists that places a chronological age

limit on the life worth living. After we reach a certain age (some say 75 years), our
physical and mental capacity diminishes and we should not waste scarce medical
resources to prolong life. - ANSWERComplete life

A cost that reflects the value the time taken from normal activities to receive medical
care and recover from a procedure. - ANSWERIndirect cost

A cost that is not easily quantified, such as pain and suffering, anxiety, and
disfigurement. - ANSWERIntangible cost

A marker, or reliable substitute, for a disease process. Usually a laboratory measure

such as high blood pressure and elevated cholesterol levels as a surrogate for heart
disease. - ANSWERSurrogate measure

An outcome that occurs on the way to the final outcome, including heart attack, stroke,
and scores on evaluative exams. - ANSWERIntermediate measure

The long-term results of a medical intervention, such as medical events prevented,

deaths avoided, or life years saved. - ANSWERFinal outcome

Usually represents a clinical outcome, such as survival, disease mitigation, or

avoidance of a clinical event (such as heart attack or stroke). Often, more subjective
measures, such as symptom scores or quality of life measures, are used. -
ANSWERClinical endpoint
Serves as the theoretical basis for expected utility theory. A measure of a person's
willingness to accept the risk of certain death to avoid the disutility of a particular health
state. - ANSWERStandard gamble

A tool that depicts a model of decisions and their consequences visually depicted by a
treelike diagram that traces cause and effect. - ANSWERDecision tree

A model used in health care evaluation to depict a disease process that evolves and
progresses over time. - ANSWERMarkov model

An injury or illness resulting from medical treatment. - ANSWERIatrogenic disease

The probability of death at different ages, usually expressed as the number of deaths for
a given population, either 1,000 or 100,000, or the expected number of years of life
remaining at a given age. - ANSWERMortality

The incidence and probability of illness or disability. - ANSWERMorbidity

The valuation of life expectancy weighted in terms of the lost value of the years marked
by disability. - ANSWERDisability-adjusted life expectancy (DALE)

Collective action undertaken by government agencies to ensure the health of the

community. These efforts include the prevention of disease; identification of health
problems; and the assurance of sanitary conditions, especially in the areas of water
treatment and waste disposal. - ANSWERPublic health

The risk associated with contractual obligations that require fixed monetary outlays. -
ANSWERFinancial risk

The amount of money that an insured person must pay before a health plan begins
paying for all or part of the covered expenses. - ANSWERDeductible

A standard feature of health insurance policies that requires the insured person to pay a
certain percentage of a medical bill, usually 10 to 30 percent, per physician visit or
hospital stay. - ANSWERCoinsurance

A standard feature of many managed care plans that require the insured person to pay
a fixed sum for each office visit, hospital stay, or prescription drug. -
ANSWERCopayment

A relationship in which one person (the principal) gives another person (the agent)
authority to make decisions on his or her behalf. - ANSWERPrincipal-agent relationship

A situation in which providers take advantage of uninformed consumers by providing

services that are largely unnecessary. - ANSWERPhysician-induced demand
The sensitivity of consumer demand for good A as the price of good B changes. -
ANSWERCross-price elasticity

The sensitivity of demand to changes in consumer income, determined by the

percentage change in quantity demanded relative to the percentage change in
consumer income. - ANSWERIncome elasticity of demand

Goods are considered superior if an increase in consumer income causes the

percentage of the consumer's income spent on the good to increase and vice versa. -
ANSWERLuxury or superior goods

A good or service with an income elasticity between zero and one. - ANSWERNecessity

True or false:
Kindig and Stoddart (2003) defined population health as "health outcomes of an entire
population, including the distribution of such outcomes within a group of individuals." -
ANSWERFalse

Which of the following is not the World Health Organization (WHO) index to measure
health system performance?
A. Disability-adjusted life expectancy
B. Morbidity
C. Health disparities
D. Responsiveness
E. Fairness - ANSWERB. Morbidity

Which of the following is not part of the three dimensions of health care delivery known
as the "triple aim"?
A. Improving patients experience of care
B. Improving the health of the population
C. Expanding health insurance
D. Reducing the per capita costs - ANSWERC. Expanding health insurance

True or false:
Mortality rate and morbidity are the most popular metrics used to evaluate population-
based health outcomes. - ANSWERTrue

From 2001 to 2011, life expectancy for the total U.S population increased from:
A. 75.3 to 79.0 years.
B. 77.2 to 81.4 years.
C. 78.7 to 81.4 years.
D. 77.2 to 78.7 years. - ANSWERD. 77.2 to 78.7 years.

Early in U.S. history, most health insurance policies covered

A. income loss due to disability or disease.
B. hospital expenses.
C. routine physicians' services.
D. the catastrophic cost of medical care, including hospitalization and physicians'
services.
E. medical costs due to specific diseases such as tuberculosis and alcoholism. -
ANSWERA. income loss due to disability or disease.

A prepaid hospital plan created by Baylor Hospital for a group of Dallas public school
teachers in 1929 is considered the forerunner of what was later called
managed care.
A. Blue Cross.
B. Blue Shield.
C. the health maintenance organization.
D. major medical insurance. - ANSWERA. Blue Cross.

Mid-1960s amendments to the Social Security Act created

A. managed care.
B. Medicare and Medicaid.
C. major medical insurance.
D. Blue Cross and Blue Shield.
E. tax exemptions for health insurance as an employee benefit. - ANSWERB. Medicare
and Medicaid.

Indemnity insurance
A. reimburses for certain types of losses including fire and theft.
B. is the basis for most of the health insurance coverage in the U.S.
C. is often experience-rated, with premiums based on expected losses.
D. is sometimes called "casualty insurance."
E. is correctly defined by all of the above. - ANSWERE. is correctly defined by all of the
above

Social insurance
A. is the basis for most government redistribution programs.
B. is usually community-rated, with premiums based on ability to pay.
C. is the basis of the provision of medical care to the poor, elderly, and other vulnerable
population groups in the U.S.
D. requires mandatory participation to be effective.
E. is correctly defined by all of the above. - ANSWERE. is correctly defined by all of the
above.

Premiums based on experience ratings

A. are uniform across age groups.
B. are based on the loss experience of the insured.
C. vary depending on the income of the insured.
D. are illegal in most states in the U.S.
E. are only used in property-casualty insurance underwriting. - ANSWERB. are based
on the loss experience of the insured.
People buy insurance
A. because they are risk averse.
B. to defer consumption.
C. because of externalities.
D. to maximize their welfare.
E. to ensure against poor health. - ANSWERA. because they are risk averse.

One result of asymmetric information in health insurance markets is

A. an optimal number of insurance policies sold.
B. adverse selection.
C. externalities in consumption.
D. a low marginal benefit of additional information for the buyer of insurance.
E. the principal-agent problem. - ANSWERB. adverse selection.

Moral hazard and adverse selection are both examples of

A. the principal-agent problem.
B. externalities in consumption.
C. efficiency in markets.
D. perfect information.
E. asymmetric information. - ANSWERE. asymmetric information.

Insurers try to minimize moral hazard by

A. only selling policies to individuals with high ethical standards.
B. requiring advance payments of premiums.
C. charging higher premiums to individuals than to groups.
D. charging deductibles and coinsurance.
E. refusing to sell insurance to individuals with chronic illnesses. - ANSWERD. charging
deductibles and coinsurance.

Insurance works best in situations where

A. there is a high probability of a small loss.
B. there is a low probability of a small loss.
C. there is a high probability of a large loss.
D. there is a low probability of a large loss.
E. the level of probability and the size of the loss are irrelevant. - ANSWERD. there is a
low probability of a large loss.

Analysts cite figures on the number of uninsured in the United States as low as 10
million and as high as 60 million. Which of the following is a true statement?
A. The uninsured are all free riders.
B. Most of the uninsured have health problems and are not able to get private health
insurance.
C. Most of the uninsured have some labor-force connection—either working or as a
dependent of someone who is working.
D. The lack of health insurance means that the individual has virtually no access to
medical care.
E. Once you lose your health insurance, it is extremely difficult to get reinsured. -
ANSWERC. Most of the uninsured have some labor-force connection—either working
or as a dependent of someone who is working.

The highest incidence of those without health insurance occurs in which age category?
A. Under 18 years of age
B. 18-34 years of age
C. 35-44 years of age
D. 45-64 years of age
E. Over 65 years of age - ANSWERD. 45-64 years of age

Many individuals without health insurance receive "free" care. What are the sources of
most of the care they receive?
A. Public hospitals and clinics
B. Private, not-for-profit hospitals
C. Private, for-profit hospitals
D. Multi-specialty physicians' practices
E. Solo practitioners and their associates - ANSWERA. Public hospitals and clinics

The percentage of a population that has a specific disease at a point in time. -

ANSWERDisease prevalence

Premature death that could have been avoided with timely access to high-quality health
care. - ANSWERAmenable mortality

The insurance practice of determining whether or not an application for insurance will be
accepted. In the process, premiums are also determined. - ANSWERUnderwriting

A medical condition caused by an injury or disease that existed prior to the application
for health insurance. - ANSWERPreexisting condition

Insurance based on the principle that someone suffering an economic loss receives a
payment approximately equal to the size of the loss. - ANSWERIndemnity insurance

Serves as the basis of all government redistribution programs. An insurance plan

supported by tax revenues and available to everyone regardless of age, health status,
and ability to pay. - ANSWERSocial insurance

Basing health insurance premiums on the utilization experience of a specific insured

group. Premiums may vary by age, gender, or other risk factors. - ANSWERExperience
rated

Basing health insurance premiums on the health care utilization experience of the entire
population of a specific geographic area. Premiums are the same for all individuals
regardless of age, gender, risk, or prior use of health care services. -
ANSWERCommunity rated

A state in which multiple outcomes are possible but the likelihood of any one outcome is
not known. - ANSWERUncertainty

The likelihood or chance that an event will occur. Probability is measured as a ratio that
ranges in value from zero to one. - ANSWERProbability

The weighted average of all possible outcomes, with the probabilities of those outcomes
used as weights. - ANSWERExpected value of an outcome

Describes a person who prefers to avoid uncertain outcomes. - ANSWERRisk-averse

Health insurance to provide coverage for major illnesses requiring large financial
outlays, characterized by payment for all expenses above a specified maximum out-of-
pocket amount paid by the insured (often $2,000-$5,000). - ANSWERMajor medical

A group of medical providers that has contracted with an insurance company or

employer to provide health care services to a well-defined group according to a well-
defined fee schedule. By accepting discount fees, providers are included on the list of
preferred providers. - ANSWERPreferred provider organization (PPO)

A group practice of not buying health insurance but setting aside funds to cover the
projected losses incurred by one member of the group. - ANSWERSelf-insurance

An arrangement between a self-insured employer sponsored health plan and an outside

vendor, a third-party administrator, who manages all health insurance claims. -
ANSWERAdministrative services only (ASO)

Stop-loss insurance purchased by a health plan to protect itself against losses that
exceed a specific dollar amount per claim, per individual, or per year. -
ANSWERReinsurance

A paradox in game theory where players acting in their own self-interest choose their
dominant strategies and do not achieve the optimal outcome. In such cases,
cooperation, not competition, will result in a more profitable outcome. -
ANSWERPrisoner's dilemma

A situation that emerges when all players in a non-cooperative game choose their
dominant strategy and have nothing to gain (and can only lose) by changing from their
initial strategies. - ANSWERNash equilibrium

When parties to a transaction practice some form of deliberate deceit to take selfish
advantage to promote personal gain. - ANSWEREconomic opportunism
A practice of designing insurance policies so that healthy (low-risk) individuals will
purchase coverage and those with a history of costly medical problems (high-risk) will
not. - ANSWERCream skimming

A requirement that employers must offer a qualified health plan to every employee or
pay a penalty (usually in the form of a payroll tax). - ANSWEREmployer mandate

A payment adjustment under Medicare and Medicaid that pays hospitals that serve a
large number of indigent patients. - ANSWERDisproportionate share

2 Types of Economic Evaluation - ANSWERCost-benefit analysis and cost-

effectiveness analysis

Involves two aspects: valuing benefits (always in monetary terms, but in practice, it uses
the willingness-to-pay approach) and choosing a discount rate (the appropriate discount
rate-the risk-adjusted rate of return on the next-best investment alternative-used to
evaluate an investment depends on the opportunity cost of funds). One of the early
applications of this analysis in medical care is the classic study of poliomyelitis. -
ANSWERCost-benefit analysis

A way to quantify trade-offs between resources used and health outcomes achieved
without having to value in monetary terms. The incremental analysis ratio compares the
differences in costs and effectiveness of two treatment options. - ANSWERCost-
effectiveness analysis

Is a method that evaluates the benefits and harms of alternative methods to prevent,
diagnose, treat, and monitor a clinical condition or improve the delivery of care (say, in
terms of efficacy and effectiveness or using the Markov decision model) -
ANSWERComparative effectiveness research

Which of the following statements are true of economic evaluation?

a. It can be used to compare treatment alternatives.
b. It can help make decisions on how to best use resources.
c. It can help identify efficient allocations of resources.
d. It can compare a treatment to doing nothing. - ANSWERa. It can be used to compare
treatment alternatives.
b. It can help make decisions on how to best use resources.
c. It can help identify efficient allocations of resources.

Which of the following types of economic evaluation compares only the costs of
treatment alternatives and ignores their benefits?
a. Cost-of-Illness Studies
b. Cost-Benefit Analysis
c. Cost-Effectiveness Analysis
d. Comparative Effectiveness Research - ANSWERa. Cost-of-Illness Studies
Which of the following are intermediate measures of effectiveness in terms of the
associated improvement in health?
Heart attack
Stroke
Hip fracture
Tumor size - ANSWERTumor size

Which of the following methods can help determine whether uncertainty influences the
results of an economic evaluation study?
a. Decision tree
b. Markov model
c. Markov decision model
d. Sensitivity analysis - ANSWERd. Sensitivity analysis

A doctor's decision to order three different scans relates most to which information
problem?
a. Adverse selection
b. Consumer information problem
c. Moral hazard
d. None of the above - ANSWERc. Moral hazard

Which of the following entities pays for the majority of uncompensated care?
a. Federal government
b. Municipalities
c. State governments
d. Medicaid subsidies - ANSWERb. Municipalities