Chapter 1 Copyright 2013 John Wiley Sons, Inc.

Chapter 1 Copyright © 2013 John Wiley & Sons, Inc.1

Chapter 1 Choices: Money, Medicine, and Health

True/False

1) Over the past 100 years, out of pocket expenditures for health care services by individuals have decreased from about 50% to less than 10%.

Answer: False.

Response: 81% personal expenditures in 1929; 11% personal expenditures in 2012.

Reference: 1.2 Flow of Funds/Sources of Financing.

Level: Easy

2) Third party payers account for 60% of all health care expenditures in 2012.

Answer: False.

Response: 89% of all health care expenditures in 2012 are through third-party financing.

Reference: 1.2 Flow of Funds/Sources of Financing.

Level: Easy

3) Ranking everyone by the amount spent on medical care, 70 percent of the total (all expenditures for all people) is accounted for by the top 10 percent of patients. This phenomenon is called cost shifting.

Answer: False.

Response: The statistics are correct; the explanation is incorrect. The situation describes only the fact that medical expenses are incurred unevenly across all of the population, and does not specify who pays that 70 percent share of the nation’s healthcare bill. The term cost shifting, however, incorporates the comparison of who incurred the expenses versus who paid the bill.Reference: 1.1 What Is Economics?/Financing Health Care AND 1.2 Flow of Funds/Sources of Financing.

Level: Medium

4) Not only is the share of the GDP going to health care higher in 2012 than in 1929, the wages of health care workers have risen more rapidly than for other types of labor.

Answer: True.

(Health Economics and Financing 5e Thomas Getzen) (Test Bank all Chapters) 1 / 4

Getzen’s Health Economics and Financing, Fifth Edition Test Bank Chapter 1 Copyright © 2013 John Wiley & Sons, Inc.2 Reference: 1.2 Flow of Funds/ Health Care Providers: The Uses of Funds.

Level: Easy

5) The Flow of Funds idea emphasizes that total dollars spent by individuals, government and other third party payers for health care must equal total income earned by health care providers, administrators and other health care workers.

Answer: True.

Reference: 1.2 Flow of Funds.

Level: Easy

6) The hospital opens a cancer center in an adjacent abandoned building. Since it was an abandoned building, there are no opportunity costs of this decision.

Answer: False.

Response: The building, as well as all other resources that were invested into the cancer center, could have been used in an alternate way; to open a women’s health center, for instance. The foregone benefits from opening a women’s health center would be the opportunity cost of this decision.

Reference: 1.3 Economics Principles as Conceptual Tools/Opportunity Cost

Level: Medium

7) Socioeconomic differences in mortality found in the U.S. are most likely attributable to lack of universal health insurance coverage.

Answer: False.

Response: Socioeconomic differences in mortality are noticed in other OECD countries as well as in poorer countries like Ghana and Bangladesh.

Reference: 1.4 Health Disparities.

Level: Medium

8) When a drug company advertises it will provide a prescription drug at no charge to certain individuals who cannot afford a doctor prescribed drug, costs are most likely being shifted away from individuals who are paying high prices to those who are paying nothing.

Answer: False.

Response: Costs are being shifted to individuals who are paying high prices from those who are paying nothing. 2 / 4

Getzen’s Health Economics and Financing, Fifth Edition Test Bank Chapter 1 Copyright © 2013 John Wiley & Sons, Inc.3

Reference: 1.1 What Is Economics?/Financing Health Care.

Level: Easy

9) A hospital system is rewarded with higher profits in the short term when it implements electronic health records which increase the timeliness of physician and patient communication.

Answer: False.

Response: While it is possible that a hospital might realize higher patient revenues in the long term if it increases its quality of service in the area of communication, it is unlikely that an investment in electronic health records would result in a short term return. Further, the idea of a hospital realizing a “profit” is questionable. Most hospitals are “not for profit” institutions, which brings into question the maximizing goal of the hospital. This highlights the difference between hospitals and the neoclassical profit-maximizing firms.

Reference: 1.1 What Is Economics?/Financing Health Care.

Level: Medium

10) As access to high-quality care has been steadily improving across the world, inequalities in health can still be found only in relatively poor countries.

Answer: False.

Reference: 1.4 Health Disparities

Level: Easy

Multiple Choice

11) In which of the following examples does the fundamental theorem of exchange not apply?

a) You pay your optometrist $500 for a new pair of eyeglasses.

b) You donate your old, used eyeglasses to the Lions Club, a charitable organization which

recycles and distributes the glasses to needy people.

c) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which does

not result in pregnancy.

d) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which

results in pregnancy.

e) Unknown to you, your neighbor is tapping into your cable TV service and sharing your

service.

Answer: e 3 / 4

Getzen’s Health Economics and Financing, Fifth Edition Test Bank Chapter 1 Copyright © 2013 John Wiley & Sons, Inc.4 Response: The fundamental theorem of exchange rests on the idea that both parties engage in a transaction because they expect to be made better off by entering it. In case (e), one neighbor is stealing service that the other neighbor has not agreed to provide.

Reference: 1.1. What is Economics?

Level: Medium

12) To reduce the ache in your knees when you work out, you buy an elastic knee brace from the pharmacy section at the grocery store. This transaction differs from paying a surgeon to replace your knee joint because

• the price of the knee brace is the same at all the local markets; however, the price for a knee

replacement cannot be determined.

• the knee brace is basically the same product regardless of where you buy it or who you buy it

for, even though there may be different manufacturer brand names. However, each knee replacement surgery is different, and its specifics vary according to the individual patient’s needs and the individual physicians’ assessment and skills.

• you are able to pay for the purchase of the knee brace from your health savings account.
• you require a physician’s expertise to determine your need for the knee brace.
• you expect that the transaction will result in alleviating your pain.

Answer: b

Response: Answer (b) highlights the idea that surgery involves expectations on the patient’s part about the expertise and judgment of the physician, that the price of the surgery may not be fully known in advance because the amount of work required may vary by patient case characteristics, and that the physician agrees to a certain quality of performance and follow up in the case of any adverse reactions to the surgery.

Reference: 1.1. What is Economics?/Terms of Trade

Level: Difficult

13) Buying a hip replacement surgery is different from the assumptions of a purchase in the perfectly competitive market because

• the seller has an ethical duty to care for you.
• all buyers are price makers.
• product characteristics do not vary significantly across providers.
• information is freely available about surgeons specializing in hip replacements.
• obtaining Board Certification in Orthopedic Surgery is a relatively quick and uncomplicated

procedure.

Answer: a

Reference: 1.1. What is Economics?/Can We Pay Somebody to Care?

Level: Medium

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