Health Economics and Financing 5th Edition By Thomas E – Test Bank

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Complete Test Bank With Answers

 

 

 

Sample Questions Posted Below

 

 

 

 

 

File: c05; Chapter 5: Insurance Contracts and Managed Care

 

 

 

True/False

 

 

 

1)  Medicare is the most important health insurer in the U.S because it insures the most people, followed by employer sponsored private insurance, privately purchased health insurance, Medicaid and other federal insurance programs.

 

Answer: False

Response:  Medicare is most important because it sets procedure and standards which other insurers follow; however, it does not cover the most people.

Reference: 5.1 Sources of Insurance/Medicare

Level: Easy

 

 

 

2)  Medicaid is funded by a 1.45% tax on employers and a matching 1.45% tax on employees.

 

Answer: False

Response:  Medicare is funded by a combined 2.90% tax on wages.

Reference:  5.1 Sources of Insurance/Medicaid

Level: Easy

 

 

 

3)  Small group coverage mitigates the problem of adverse selection for the nine percent of the population who purchase health insurance individually.

 

Answer: False

Response: Covering large groups mitigates risk.

Reference: 5.1 Sources of Insurance

Level: Easy

 

 

 

4)  Medicaid is an important provider of funds for nursing homes.

 

Answer: True

Reference: 5.1 Sources of Insurance

Level: Easy

 

 

 

5)  High deductible plans increase consumer awareness of costs of medical care by forcing them to pay for expenses up to a deductible amount.  The negative aspect of this is that employees may not like having to spend extra time gathering information about price differences between providers.

 

Answer:  True

Reference: 5.3 Consumer-Driven Health Plans: High Deductibles And Health Savings Accounts

Level: Medium

 

 

 

6)  Health Savings Accounts may contribute to risk sharing problem as younger, healthier, better educated individuals tend to use the HSAs as savings accounts.

 

Answer:  True

Reference: 5.3 Consumer-Driven Health Plans: High Deductibles And Health Savings Accounts

Level: Easy

 

 

 

7)  An important feature of health insurance companies’ pricing policies is that in the long run, cyclical trends of overcharging and undercharging can be observed, with each cycle period lasting 1-3 years.

 

Answer: False

Response:  The underwriting cycle lasts 7 to 10 years.

Reference: 5.2 Contracting And Payments/The Underwriting Cycle

Level: Medium

 

 

 

For Questions 8 – 9

A state government is considering the following two alternative actions. The state can pass a law requiring all private health insurance contracts to cover a specific benefit for those diagnosed with addiction: a 14 day inpatient stay for drug rehabilitation. Or, the state could impose a new tax on all those buying private health insurance, which will allow the state to pay for those benefits directly.

 

8)  The public perception of either one of these two initiatives, and the willingness to vote for either initiative, would be exactly the same.

 

Answer: False

Response:  It is true that in either case it is the consumer who will end up paying for those benefits. However, people who would never vote to increase taxes will calmly vote to have government insist that every employer provide specified benefits.

Reference: 5.2 Contracting And Payments/ERISA, Taxes, and Mandated Benefits

Level: Difficult

 

 

 

9)  The effect of either one of these two initiatives on consumers’ welfare would be exactly the same.

 

Answer: False

Response:  It is true that in either case it is the consumer who will end up paying for those benefits. However, the public will ultimately lose more in forgone wages due to a mandate than in taxes avoided.

Reference: 5.2 Contracting And Payments/ERISA, Taxes, and Mandated Benefits

Level: Difficult

 

 

 

10)  The preferred provider organizations (PPOs) are the most comprehensive type of managed care organizations, providing all care, including building their own hospitals, hiring their own doctors and implementing sophisticated electronic record keeping systems.  Kaiser Permanente is an example.

 

Answer:  False

Response:  A closed-panel health maintenance organization (HMO) is the type described here.

Reference: 5.4 Managed Care/Closed-Panel Group Practice HMOs

Level: Easy

 

 

 

11)  A common criticism of HMOs, PPOs and other managed care organizations is that the sickest patients resist use of managed care because they are uncomfortable with the gatekeepers and managers involved in obtaining their health care.

 

Answer:  True

Reference: 5.5 Unresolved Issues: Split Incentives, Divided Loyalties

Level: Easy

 

 

 

12)  Medicare provides government insurance to the poor, while Medicaid provides government insurance for the elderly.

 

Answer:  False

Reference: It is vice versa: Medicare is for the elderly; Medicaid is for the poor.

Reference: 5.1 Sources of Insurance /Medicare

Level: Easy

 

 

Multiple Choice

 

13)  Which of the following statements about Medicare is false?

  1. a) Enrollment into Part A is automatic.
  2. b) Enrollment into Part B is optional, as it requires payment of an additional premium.
  3. c) Almost all Medicare enrollees (98 percent) participate in both Parts A and B.
  4. d) 88 percent of those with Medicare have supplemental insurance.
  5. e) Part A premiums are income-based.

 

Answer: e

Reference:  5.1 Sources of Insurance/Medicare

Level: Medium

 

 

 

14)  The proportion of an insurance company’s premium income spent on provision of treatments is called the

  1. a)
  2. b) capitation per member per month.
  3. c) point of service.
  4. d) medical loss ratio.
  5. e) total premium.

 

Answer: d

Reference:  5.2 Contracting And Payments/Medical Loss Ratios

Level: Easy

 

 

 

15)  Managed care organizations

  1. a) compete with each other on quality and low cost provision of services.
  2. b) exclude health maintenance organizations.
  3. c) exclude preferred provider organizations.
  4. d) exclude closed-panel HMOs.
  5. e) are often run by the federal government.

 

Answer: a

Reference:  5.4 Managed Care

Level: Easy

 

 

 

16)  All of the following are examples of substituting cheaper forms of care for more expensive ones, except

  1. a) prescribing a generic (vs. brand name) medication.
  2. b) recommending chiropractic care instead of back surgery.
  3. c) authorizing outpatient vs. inpatient surgery.
  4. d) recommending nursing home care vs. hip replacement surgery.
  5. e) using a physician assistant (vs. doctor) to see patients with uncomplicated health issues.

 

Answer: d

Reference:  5.4 Managed Care/Contractual Reforms To Control Costs

Level: Difficult

 

 

 

17)  A physician graduates from medical school and must decide whether to take a job as a junior member of a large group practice or work for an HMO directly.  For the physician, a positive aspect of working for the HMO is

  1. a) lack of utilization controls.
  2. b) very little peer review.
  3. c) higher salary than with the group practice.
  4. d) a steady stream of patients and income.
  5. e) lower salary than with the group practice.

 

Answer: d

Reference:  5.4 Managed Care

Level: Medium

 

 

 

18)  When it comes to attempts of managed care to control costs, cutting prices is one of the most popular methods. Which of the following is not among the valid explanations of the rationale behind this practice?

  1. a) Price cuts would put money directly into the pocket of patients.
  2. b) Compared to other methods, prices are easier to cut.
  3. c) Large insurers have bargaining power to negotiate lower prices with providers.
  4. d) When certain markets go through periods of excess supply, large insurers use it to negotiate lower prices.
  5. e) Large insurers can threaten providers with taking the patients away unless discounts are provided.

 

Answer: a

Reference:  5.4 Managed Care/Contractual Reforms To Control Costs

Level: Medium

 

 

 

19)  You give birth to healthy twins.  After two days in hospital, case control nurse reviews your records to determine if it is medically necessary for you to remain another day in hospital.  This is an example of

  1. a) pre-admission testing.
  2. b) concurrent review.
  3. c) retrospective review.
  4. d) discharge planning.
  5. e) database profiling.

 

Answer: b

Reference:  5.4 Managed Care/Managed Care Contract Provisions

Level: Medium

 

 

 

20)  An actuarial assistant at your HMO presents graphs and charts of the number of colonoscopies performed per 1,000 patients by each doctor in the plan.  This is an example of

  1. a) pre-admission testing.
  2. b) concurrent review.
  3. c) retrospective review.
  4. d) discharge planning.
  5. e) database profiling.

 

Answer: e

Reference:  5.4 Managed Care/Managed Care Contract Provisions

Level: Medium

 

 

 

21)  Requiring patients to have psychological exams, echocardiograms, mammograms, and blood tests before undergoing bariatric surgery (an elective surgery which induces weight loss) is an example of

  1. a) pre-admission testing.
  2. b)
  3. c) retrospective review.
  4. d) discharge planning.
  5. e) second opinion.

 

Answer: a

Reference:  5.4 Managed Care/Managed Care Contract Provisions

Level: Medium

 

 

 

22)  Your grandmother is admitted to the hospital with a heart attack at 8:00 a.m. By time you arrive for a visit at 4:30 p.m., the social worker is looking for you to schedule a meeting to discuss where your grandmother will go when she leaves the hospital.  This is an example of

  1. a)
  2. b) pre-certification.
  3. c) retrospective review.
  4. d) discharge planning.
  5. e) estate planning.

 

Answer: d

Reference:  5.4 Managed Care/Managed Care Contract Provisions

Level: Medium

 

 

 

23)  More than half of the U.S. population is covered by employer group health insurance. One of the underlying reasons is that

  1. a) covering a large group under a single contract increases transaction costs.
  2. b) group coverage increases adverse selection.
  3. c) employer payments towards health insurance premiums reduce tax benefits.
  4. d) many of the most expensive patients are heavily subsidized or excluded.
  5. e) it is both the most preferred and the most common method for part-time employees to obtain affordable coverage.

 

Answer: d

Reference:  5.1 Sources of Insurance/ Employer-Based Group Health Insurance

Level: Difficult

 

 

 

24)  The size of private health insurance premiums depends on all of the following except

  1. a)
  2. b) expected utilization volume.
  3. c) administrative costs.
  4. d) profit margin.
  5. e) number of carve-outs in a plan.

 

Answer: e

Reference:  5.4 Managed Care/Contractual Reforms To Control Costs

Level: Medium

 

 

 

25)  Which of the following assertions about the uninsured is incorrect?

  1. a) Many of the uninsured cannot afford coverage.
  2. b) Many of the uninsured are young and healthy individuals, for whom not having insurance is a rational economic decision.
  3. c) Some of the uninsured are unable to obtain coverage because of a preexisting condition.
  4. d) The number of the uninsured in the U.S. exceeds 30% of the population.
  5. e) The percentage of the population without coverage depends significantly on the efforts of local and state governments.

 

Answer: d

Reference:  5.1 Sources of Insurance/The Uninsured

Level: Easy

 

 

 

Essay

 

26)  In 2012, U.S. spending on health care totaled almost 18% of GDP. Near term projections by the Congressional Budget Office (CBO) and the Centers for Medicare and Medicaid (CMS) of the growth rate of national health care expenditures estimate that health care expenses will escalate to almost 20% of GDP within 10 years.  Why is this issue important to the federal government?  (Be sure to include the idea of opportunity cost.)

 

Answer:  If the escalation of healthcare costs continues unchecked, there is a danger of crowding out expenditures on other sectors of the economy.  The upper bound is surely not 100% of GDP; however, the upper bound remains unknown.  If government health care expenditures on Medicare and Medicaid “crowd out” non-health care expenditures, such as transportation or education, then long term economic growth could be adversely affected.  As of 2012, government already pays more than half of the total healthcare costs.

Reference: 5.1 Sources of Insurance

Level: Difficult

 

 

 

27)  If Medicare significantly lowers its reimbursement rates to physicians, discuss the likely consequences of this event for all parties.

 

Answer: For physicians, this would reduce their incomes, as many of them do not have an option to drop Medicare patients, who bring a significant proportion of physicians’ revenue (about 22%). In many physician offices Medicare reimbursement rates are already lower than the actual cost of care for the elderly, thus physicians will have to charge more to other groups of patients to make up for the losses. In the competitive environment, and as medical prices become more and more transparent, cost shifting may be difficult to implement in practice though.

For Medicare patients, it might be more difficult to find a doctor willing to accept Medicare patients, as some physicians will indeed decide to opt out of Medicare. It might also mean longer waiting times.

For the federal government, cutting reimbursement rates might seem like an easy way to decrease huge and unsustainable amounts of healthcare spending on the elderly, but it is not a fix for the bigger problems with Medicare. One of the more efficient solutions may be to restructure Medicare to incorporate cost-controlling mechanisms similar to those used by private managed care plans. Currently, only Medicare Advantage plans (about 22% of the total Medicare enrollment) are engaged in cost-control.

Reference: 5.2 Contracting And Payments/Purchasing Medical Care For Groups

Level: Difficult

 

 

 

28)  Discuss why employer sponsored health insurance contracts rarely include coverage of substance abuse, mental health, HIV/AIDS and similar treatments.

 

Answer:  Offering such generous benefits is likely to disproportionally attract employees with these expensive diseases. Even though treating those diseases would be beneficial from the point of view of the entire society, profit-maximizing employers do not want to bear this extra cost.

Reference:  5.2 Contracting And Payments/ERISA, Taxes, and Mandated Benefits

Level:  Medium

 

 

 

29)  Explain why pharmacy benefits managers might be in favor of re-importation of prescription drugs from Canada to the U.S.

 

Answer:  The role of the pharmacy benefits manager (PBM) is to negotiate lower costs for prescription drugs.  Re-importation of drugs might help achieve that goal if the prices are lower.  Even if the prices are comparable and do not yield great savings, the additional sources of drugs may give PBMs more power in the market place to negotiate lower prices.

Reference:  5.4 Managed Care/Managed Care Contract Provisions

Level:  Medium

 

 

 

30)  Jayda receives a phone call from her doctor’s office reminding her that it is time to bring her twelve year old son in for a wellness checkup.  She is part of an HMO.  How does one reconcile this unsolicited office visit with capitation, which has the goal of minimizing costs to HMOs.

 

Answer:  Along with managing the tendency for overuse of medical services, HMOs must maintain the clients they have and attract new ones.  Wellness visits for children are relatively low cost ways to ensure healthy and happy clients.

Reference:  5.4 Managed Care/Contractual Reforms To Control Costs

Level:  Medium

 

 

 

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