HIMT365_MidtermExamLessons1-7_Tucker

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Johnathan Tucker HIMT 365 March 16, 2024 Midterm Exam: Lesson 1-7 1. (15 points) The three basic goals for a health care system are broad access, high quality, and affordability. Explain which of these is most need of improvement in the U.S. and why. Describe a policy change that could improve this outcome and why. Out of the three goals (access, quality, affordability), affordability is the most concerning aspect of the US healthcare system. High costs create access barriers, even with insurance, due to high deductibles and copays. Additionally, rising costs strain government budgets and businesses that provide employer-sponsored insurance. One policy change could be implementing a universal healthcare system. This would spread the financial risk across a larger population, potentially leading to lower overall costs through government negotiation with drug companies and healthcare providers. Additionally, such a system could eliminate administrative waste from private insurance companies. 2. (15 points) EpiPen is commonly used to treat severe, life- threatening allergic reactions. In 2007, the price of an EpiPen was about $60; the price in 2016 was about $600. Given the inelastic demand for this product, the result has been that the quantity demanded decreased very little and consumers simply pay higher prices for the product. Note that, while the EpiPen is a name-brand product, it has been in existence for some time and there is no patent preventing similar products from being introduced in the market. a. Suppose the government imposed a $60 price ceiling to make the product more affordable. Explain why this would not help all patients who benefit from this product. A $60 price ceiling wouldn't necessarily help all patients. Lower prices might incentivize manufacturers to reduce production or shift focus to more profitable drugs, leading to potential shortages and reduced access for those who rely on EpiPens.

b. Suppose the government did not intervene and simply allowed the EpiPen producer to keep their prices high in order to maximize profits. Explain what impact the high profits would have on this market in the long run. High profits in the short term might lead to increased research and development for improved allergy treatments. However, in the long run, it could discourage competition from generic versions or alternative products, hindering innovation and keeping prices high. c. Based on your answers to parts a and b, explain whether you think the government should intervene to force lower prices for EpiPens. Based on the potential negative consequences of both no intervention and price ceilings, some form of government intervention might be necessary. This could involve tax breaks or subsidies for manufacturers producing generic EpiPens and regulation to prevent price gouging while allowing reasonable profits to incentivize production. 3. (15 points) Suppose there are a number of treatment options for a specific, life-threatening medical disorder. The treatment costs and expected QALYs gained are given for each treatment option below: Treatmen t Cost QALYs Gained A 0 0 B 200 8 C 400 10 D 500 12 E 600 9 F 700 14 G 850 15 4.

a. Identify all dominated treatment options and explain why each is dominated. Treatment B (Cost: $200, QALYs: 8): This option is dominated by Treatment D (Cost: $500, QALYs: 12). Treatment D offers more QALYs (better outcome) for a higher but still reasonable cost increase compared to B. Treatment C (Cost: $400, QALYs: 10): This option is dominated by Treatment D (Cost: $500, QALYs: 12). Similar to B, Treatment D offers more QALYs for a manageable cost increase compared to C. Treatment E (Cost: $600, QALYs: 9): This option is dominated by Treatment F (Cost: $700, QALYs: 14). Here, Treatment F offers significantly more QALYs (better outcome) for a relatively smaller cost increase compared to E. b. Calculate the Incremental Cost-Effectiveness Ratios (ICERs) for each non-dominated treatment. ICER for Treatment D: Incremental Cost = Cost_D - Cost_A = $500 - $0 = $500 Incremental QALYs Gained = QALYs_D - QALYs_A = 12 - 0 = 12 ICER_D = Incremental Cost / Incremental QALYs Gained = $500 / 12 QALYs = $41.67 per QALY gained ICER for Treatment F: Incremental Cost = Cost_F - Cost_A = $700 - $0 = $700 Incremental QALYs Gained = QALYs_F - QALYs_A = 14 - 0 = 14 ICER_F = Incremental Cost / Incremental QALY Gained = $700 / 14 QALYs = $50.00 per QALY gained ICER for Treatment G: Incremental Cost = Cost_G - Cost_A = $850 - $0 = $850 Incremental QALYs Gained = QALYs_G - QALYs_A = 15 - 0 = 15

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ICER_G = Incremental Cost / Incremental QALY Gained = $850 / 15 QALYs = $56.67 per QALY gained 5. (15 points) Explain what actuarially-fair premiums measure. Provide one explanation for why insurance companies charge more than actuarially-fair rates. Provide one explanation for why consumers are willing to pay more than actuarially-fair rates. Actuarially-fair premiums measure the expected costs of providing insurance coverage. Insurance companies may charge more due to administrative costs, profit margins, and risk loading. Consumers may pay more due to risk aversion and the perceived value of insurance coverage. 6. (10 points) Provide two explanations for why workers who value having health insurance prefer to receive employer-sponsored insurance over purchasing a policy as an individual. Lower premiums: Employers often negotiate lower group rates with insurers due to bargaining power and predictable group size. Payroll deduction convenience: Paying premiums through payroll deductions simplifies budgeting and avoids the need to manage separate bills. 7. (10 points) Participants in the Medicare Advantage have lower average health care costs than those in traditional Medicare. Explain why this result might not be due to enhanced efficiency within the Medicare Advantage plans. Lower average costs in Medicare Advantage might not be due to efficiency: Selection bias: Healthier individuals might be more likely to choose Medicare Advantage plans, leading to artificially lower costs compared to traditional Medicare. Skimping on care: Medicare Advantage plans might limit access to certain services or negotiate lower rates with providers, potentially compromising the quality of care. 8. (10 points) Explain what the term crowding out mean as it relates to health insurance coverage. Crowding out refers to a situation where public/Government based insurance programs like Medicaid discourage individuals from purchasing

private insurance. This happens when public plans offer generous benefits, making private plans less attractive. 9. (10 points) Uninsured populations obviously face more risk being able to afford medical care. Explain how the presence of the uninsured population is also harmful to the health care system as a whole. The presence of uninsured populations can be harmful to the health care system as a whole because when uninsured individuals inevitably need care, the costs of that care are often passed on to other payers in the form of higher prices, leading to higher insurance premiums for everyone else.

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