Health Economics Test 1 PDF - York University 2017

Student Number: YORK UNIVERSITY DEPARTMENT OF ECONOMICS AP/ECON 3510 3.0 SECTION A HEALTH ECONOMICS TE...

Student Number: YORK UNIVERSITY DEPARTMENT OF ECONOMICS AP/ECON 3510 3.0 SECTION A HEALTH ECONOMICS TEST #1 INSTRUCTOR: Mon. Oct 23rd 2017 Professor N. Buckley 50 Minutes(11:30pm-12:20pm) LOCATION: ACE 001 NAME: ___________________________ ________________________________ LAST NAME FIRST NAME STUDENT NUMBER: _____________________________________________ SIGNATURE: _____________________________________________ INSTRUCTIONS: Make sure to print your NAME, STUDENT NUMBER and SIGN the sheet above to acknowledge you had read these instructions. Write your student number at the top right of each page. You can use pen or pencil (random tests will be photocopied before handed back to prevent answers from being changed after they are handed back). No calculators and no other electronic devices are allowed. Make sure these (cell phones etc.) are all turned off and safely stored away, otherwise you will be in breach of the academic honesty code. You have 50 minutes to answer all 13 questions. Questions will be either multiple choice, true/false/why or short answer format. For multiple choice answers, no work needs to be shown. The full marks will be granted if the best answer is circled and zero otherwise. For true/false/why and short answer questions, grading will be based on the quality of your explanation. Make sure to show all your work, part marks will be granted. It is a good idea to state the meaning of any relevant technical terms. Be concise and clear, the allotted space is adequate to provide a good answer. In all cases your answers should emphasize and discuss the questions from an economic perspective using concepts discussed in the lectures and notes. Your answers should reflect what a thoughtful health economist would say about these issues. Although not required, feel free to draw diagrams to help answer questions. 1  Student Number: 1. [2 marks] The supply side of the health care sector, encompassing individuals and organizations that provide health care services or produce health care goods, is referred to as: a) Health care financing b) Health care funding c) Health care efficiency d) Health care delivery 2. [2 marks] The criteria required under the Canada Health Act that all residents must be provided with health insurance coverage on uniform terms and conditions is known as: a) Universality b) Public Administration c) Comprehensiveness d) Portability 3. [2 marks] The principle that uses the idea of “if no person can be made better off without making another person worse off” is known as: a) Technical efficiency b) Vertical equity c) The Pareto criterion d) Market failure 4. [2 marks] A tax on cigarettes will reduce the number of smokers but society should not impose it because it will impose more burden on lower income individuals than higher income ones. a) This is a positive economic statement b) This is a normative economic statement c) This is neither a positive nor a normative economic statement d) This is both a positive and normative economic statement 5. [2 marks] Which of the following is NOT a reason for market failure: a) Monopoly b) Too many producers c) Producers have more information about product than consumers d) Externalities in production 2  Student Number: 6. [2 marks] What is the name for goods that are commonly consumed together (e.g., doctor visits and prescription drugs)? a) Substitute goods b) Complementary goods c) Public goods d) Health care goods 7. [2 marks] Which of the following statements is correct? a) The social gradient in health means that having more friends leads to better health b) The marginal product of health care on health increases the more health care you consume c) Genetic, environmental and lifestyle factors do no contribute to a person’s health status d) Modern medicine (surgeries etc.) has been found to be relatively poor at preventative health care 8. [2 marks] According to the Grossman model of demand for health capital that uses the concept of the marginal efficiency of investment (MEI), when a person becomes older they are predicted to choose a lower health stock. If the person has a relatively elastic MEI curve then the decrease in the chosen health stock… a) Will be relatively larger b) Will be relatively smaller c) Will not be affected d) The question is incorrect, the person will choose a higher health stock in this case 9. [6 marks] What is the basic difference between Health Care Financing and Health Care Funding? Health care financing is about the activity of raising or collecting revenues (using taxes, insurance premiums etc.) to pay for the provision of health care goods and services. Health care funding regards how health care organizations and individuals are paid or provided with the financial resources required to carry out health care related activities (after the revenues have already been collected). 3  Student Number: 10. [6 marks] One patient receives more health care than another patient even though they both had the same health care need. This is an example where the vertical equity component of procedural equity is not met. True or False and Why? False. Vertical equity says that we should treat unequals unequally. Horizontal equity says that we should treat equals equally. When one patient receives more health care than another even though they have equal need then it is Horizontal Equity that is not met, not Vertical Equity (otherwise the people with equal need would have received equal health care). Also Vertical Equity is not a component of procedural equity it is a component of distributional equity (aside: instead of this last sentence you could have said that procedural equity is the ideal that if fair processes are followed then the resulting outcome will turn out to be fair). 11. [6 marks] Suppose two research studies investigate the correlation (not causation) between Education (E=years of schooling) and Health Care Need (HCN). Study 1 uses a linear regression to study how education is related to a person’s need rated between 0=lowest need to 100=highest need (HCN is between 0 and 100), while Study 2 uses a logistic regression to study how education is related to whether a person’s need is high (HCN=1) or low (HCN=0). Study 1 finds that the regression coefficient on E is equal to -4.8 with a p-value of 0.04 while study 2 finds that the odds ratio on E is equal to 0.81 with a p-value of 0.95. According to these statistics, is the effect of Education on Health Care Need similar for the two studies? Why or why not? Make sure to reference the direction of the relationship found between E and HCN in each study. Assuming that both studies were conducted equally well and in a similar fashion then Study 1 finds that Education and Health Care Need are negatively related. This is because the coefficient is negative (less than zero) and the p-value is below 0.05 so it is accurate (or significantly different from no effect). However, Study 2 finds that there is no meaningful or significant relationship between Education and Health Care Need. This is because the odds ratio is below 1.0, suggesting a negative relationship, but the p-value is above 0.05 so this means the odds ratio is not accurate and is not significantly different from no effect (or not different from an odds ratio of 1.0). Therefore the effect of Education on Health Care Need is different for the two studies. 4  Student Number: 12. [4 marks] Even though it is commonly found that people with higher education tend to have better health (and those with lower education have poorer health), the heath economist Fuchs (1982) argued the idea that a significant portion of this positive relationship was due to “spurious correlation”. Does “spurious correlation” mean that education causes people to be in better health? If so, how? And if not, then what is causing the better health? No spurious education does not mean that education causes people to be in better health in this case. Rather, spurious correlation means that education and health are positively “correlated” but the relationship is not a causal one so “spurious” correlation means “non-causal” correlation. With spurious correlation some third factor other than education and health may be causing both. In this case Fuchs theorized that since both health and education require a long term investment that this third factor causing better health (and causing higher education level) is that people are putting importance or emphasis on the future rather than the present (this is sometimes called people having “long time horizons or people having “low discount rates” for the future). Therefore it is people’s preferences for long time horizons and low discount rates that is causing better health (and higher education levels). 13. [5 marks] What did McKeown argue were the 2 most important sources or reasons of mortality rate decline in Europe and North America from 1750 until now? How did he know this? McKeown argued that it was 1) Better living standards (e.g., nutrition and housing) and 2) Intervention of public health authorities to improve sanitary conditions (e.g., water and sewage purification) that were the two most important historical sources of mortality rate decline. He knew this because most of the world’s mortality rate decline occurred before the invention of modern medicine (and happened before medicine science discovered “cures” for most diseases) and occurred when the world was experiencing the two factors above. 5