Economics of health care, please help me?
Derek just got into an accident while skiing, and he needs hospitalization and post hospital recovery. Every week he is in recovery is a week’s salary he loses. He has three options for treatment:
Option 1 has $2,000 of hospital costs and a one-week recovery period with one doctor’s visit.
Option 2 has $1,500 of hospital costs and a two-week recovery period with two doctor’s visits.
Option 3 has $1,000 of hospital costs and a four-week recovery period with four doctor’s visits.
7.1. Derek might have any of a number of different kinds of health plans. Which kind of health plan would make him most likely to choose option 1?
A. An HMO plan with zero copayment
B. A PPO plan with a 20% copayment
C. A high-deductible plan that accompanies a Health Savings Account
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Derek just got into an accident while skiing, and he needs hospitalization and post hospital recovery. Every week he is in recovery is a week’s salary he loses. He has three options for treatment:
Option 1 has $2,000 of hospital costs and a one-week recovery period with one doctor’s visit.
Option 2 has $1,500 of hospital costs and a two-week recovery period with two doctor’s visits.
Option 3 has $1,000 of hospital costs and a four-week recovery period with four doctor’s visits.
7.2. Derek’s doctor might recommend one plan or another, depending on the way in which he or she is paid. Which type of doctor would be most likely to recommend option 3?
A. A doctor who works for a public health service at a fixed salary
B. A doctor who works for an HMO and is paid according to how many patients she sees per year regardless of how many times she sees them
C. A fee-for-service doctor who is paid each time he or she sees a patient
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Derek just got into an accident while skiing, and he needs hospitalization and post hospital recovery. Every week he is in recovery is a week’s salary he loses. He has three options for treatment:
Option 1 has $2,000 of hospital costs and a one-week recovery period with one doctor’s visit.
Option 2 has $1,500 of hospital costs and a two-week recovery period with two doctor’s visits.
Option 3 has $1,000 of hospital costs and a four-week recovery period with four doctor’s visits.
7.3. Consider three scenarios: (1) Derek earns $100 per week, (2) Derek earns $400 per week, and (3) Derek earns $1,000 per week. From society’s point of view, does it matter how much Derek earns when figuring out the most efficient treatment option?
A. Yes – if Derek’s salary is higher, it’s more efficient for him to have the more expensive treatment with the shorter recovery time.
B. No – it’s always most efficient for Derek to have the option that involves the least recovery time.
C. Yes – if Derek’s salary is higher, it’s more efficient for him to have the less expensive treatment with the longer recovery time.
D. No – it’s always most efficient for Derek to have the option that involves the lowest monetary cost.
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Derek just got into an accident while skiing, and he needs hospitalization and post hospital recovery. Every week he is in recovery is a week’s salary he loses. He has three options for treatment:
Option 1 has $2,000 of hospital costs and a one-week recovery period with one doctor’s visit.
Option 2 has $1,500 of hospital costs and a two-week recovery period with two doctor’s visits.
Option 3 has $1,000 of hospital costs and a four-week recovery period with four doctor’s visits.
7.4. Suppose Derek earns $1,000 per week. Suppose further that he belongs to an HMO, which is trying to minimize its monetary costs, so it is only willing to pay for option 3. The HMO claims that by doing so, it is reducing the cost of health care, which is a drain on the U.S. economy. Is this an accurate representation of what the HMO is doing in this case? (Hint: Refer to your previous answer. Is it efficient for Derek to have option 3 if he earns $1,000 per week?)
A. Yes; the HMO has reduced society’s overall cost
Y
7.1 A – since he pays nothing, he does not care about cost, and will choose the plan with fastest recovery & least doctor visits.
7.2 C – since doctor is paid per visit, she will pick the option with the most visits.
7.3. A – recovery means lost salary, so high salary makes long recovery very expensive.
7.4 No, when compared to option 1, option 3 saves $1000 in medical costs, but leads to $3000 in lost salary.