Chapter 24, Problem 3P

Subpart (a):

To determine

The preventive health care cost effectiveness.

Answer to Problem 3P

The total cost of 100 tests is $10,000.  The total future medical expense averted is $15,000. The medical expense saved after setting up of the screening system is $5,000.

Explanation of Solution

The preventive health care measures are those medical precautionary measures which help the people to stay healthy and free from diseases. The screening system helps the people to easily identify and detect various diseases in their early stages which will help them to treat the diseases easily and affordably without much hassle.

The cost of one screening test is $100 according to the given information and the number of persons taking the screening test is 100. Thus, the total cost of taking the medical screening test can be calculated by multiplying the cost per screening test with the total number of persons taking the screening test as follows:

$\begin{array}{c}\text{Total expense of screening test}=\text{Per test cost}\times \text{Total number of persons}\\ =100\times 100\\ =10,000\end{array}$

Thus, the total expense of 100 screening tests is $10,000.

The given percentage of persons having the test result positive is 15%. Thus, the total number of persons having positive test results can be calculated by multiplying the total number of persons with the given percentage as follows:

$\begin{array}{c}\text{No}\text{. of persons having positive results}=\text{Total no}\text{. of persons}\times \text{Percentage of positiev results}\\ =100\times 0.15\\ =15\end{array}$

Thus, there will be 15 persons having the positive results from the screening test.

The amount of the future medical expense saved by the individual when the test result is positive is $1,000. Thus, the total future medical expense that can be saved by the people having the positive test results can be calculated by multiplying the per person medical expense saved with the total number of persons having positive test results as follows:

$\begin{array}{c}\text{Total medical expense saved}=\text{Per person savings}\times \text{Total no}\text{. of persons }\\ =1,000\times 15\\ =15,000\end{array}$

Thus, the total future medical expense saved by the persons having the positive test results is $15,000.

The cost of setting up the screening system is $10,000 and the total future medical expense saved is $15,000. Thus, the net future medical expense saved can be calculated by subtracting the cost of setting up the screening system from the total medical expense saved as follows:

$\begin{array}{c}\text{Net medical expense saved}=\text{Total medical expense saved}-\text{Cost ofd setting screening }\\ =15,000-10,000\\ =5,000\end{array}$

Thus, the net medical expense saved after reducing the cost of setting up the screening test is $5,000.

Economics Concept Introduction

Concept introduction:

Preventive health care: They are the measures taken in order to prevent the occurrence of a disease rather than treatment of a disease.

Sub part (b):

To determine

The net medical expense loss after reducing the cost of screening test.

Answer to Problem 3P

The total cost of 100 tests is $10,000.  The total future medical expense averted is $5,000. The medical expense lost after setting up of the screening system is -$5,000.

Explanation of Solution

The cost of one screening test is $100 according to the given information and the number of persons taking the screening test is 100. Thus, the total cost of taking the medical screening test can be calculated by multiplying the cost per screening test with the total number of persons taking the screening test as follows:

$\begin{array}{c}\text{Total expense of screening test}=\text{Per test cost}\times \text{Total number of persons}\\ =100\times 100\\ =10,000\end{array}$

Thus, the total expense for 100 screening tests is $10,000.

The given percentage of persons having the test result as positive is 5%. Thus, the total number of persons having positive test results can be calculated by multiplying the total number of persons with the given percentage as follows:

$\begin{array}{c}\text{No}\text{. of persons having positive results}=\text{Total no}\text{. of persons}\times \text{Percentage of positiev results}\\ =100\times 0.05\\ =5\end{array}$

Thus, there will be 5 persons having the positive results from the screening test.

The amount of the future medical expense saved by the individual when the test result is positive is $1,000. Thus, the total future medical expense saved by the people having the positive test results can be calculated by multiplying the per person medical expense saved with the total number of persons having positive test results as follows:

$\begin{array}{c}\text{Total medical expense saved}=\text{Per person savings}\times \text{Total no}\text{. of persons }\\ =1,000\times 5\\ =5,000\end{array}$

Thus, the total future medical expense saved by the persons having the positive test results is $5,000.

The cost of setting up the screening system is $10,000 and the total future medical expense saved is $5,000. Thus, the net future medical expense saved can be calculated by subtracting the cost of setting up the screening system from the total medical expense saved as follows:

$\begin{array}{c}\text{Net medical expense saved}=\text{Total medical expense saved}-\text{Cost ofd setting screening }\\ =5,000-10,000\\ =-5,000\end{array}$

Since the result is having a negative sign, it shows that the expense of setting up the screening system is higher than the benefit received from the use of the screening system. Thus, the net result is a loss. Thus, the net medical expense loss after reducing the cost of setting up the screening test is -$5,000.