The Economics of Healthcare

Question 1

Types of Health Insurance

Answer 1

Universal health Insurance; hospitalisations and private care

Pharmacuetical benefits scheme; subidies for medication with a capped co-contribution

Funding; medicare levy + revenue

Private insurance; private and acillary, duplicate
Medicare levy surcharge

Question 2

Reading; Johnson 2001; economic issues in health policy

Answer 2

to read

Question 3

Randomized Field Experiments

Answer 3

Oregano Health Insurance Lottery; avoids self selection and adverse selection, randomly assigned people to coverage or Not coverage.

The lottery found statistically significant increase in emergent presentable, primary care, nonemergent, and a decrease in out of pocked and catastrophic spending, decrease to debt, decreased bills, less depression.

Question 4

Moral Hazard

Answer 4

Adverse selection; self selection into insurance iwth high risk
Ex Ante; increased risk post insurance
Ex post; use services they wouldnt before

e.g. MC = O, MB = MC at all points, leading to overuse of insurance.

Solutions;
- Cost sharing w/ deductible / excess, copayments

Reduced regulation increases quantity decreases cost and quality

Question 5

Externalities + Solutions

Answer 5

Private benefit is less than public benefit (see. vaccination and heard immunity, economic growth). Better health services improve growth, underinvestment. Healthcare is a derived demand.

Subsidies
Hard to determine, create economic disincentives, financies through revenue. Increases quanitty.

Penalties; impose cost on those who dont receive care, however its regressive, undermine free choice

Deregulation
Increase supply, decrease quality, cost of compliance in fees

Question 6

Public Good

Answer 6

Benefits from healthcare are non rival and non excludeable; heard immunity + economic growth

Question 7

Assymetric imformation

Answer 7

A doctor knows more than her patient - incentive to overtread, physician induced demand
Insurance markets are hampered by imperfect information. Due to adverse selection people with higher risks are more likely to self select into private insurance, increasing the cost of insurance. May be mitigated by higher fees for certain levels of coverage.

Question 8

Johnson. (2001). Economic Issues in Health Policy. The Australian Economic Review, 34(3): 295-311. (Only sections 1-3 are required)

Question 9

Finkelstein, Taubman, Wright, Bernstein, Gruber, Newhouse, Allen, and Baicker. (2012). The Oregon Health Insurance Experiment: Evidence from the First Year. Quarterly Journal of Economics, 127(3): 1057-1106.