Efficiency and Equity in Healthcare Practice Questions PDF

Topic 2: Efficiency and Equity in Healthcare Practice Questions Multiple Choice – Please choose the BEST answer (answers provided at the end of this document) 1. “Allocate equal amounts of goods to those who are situated equally with respect to the relevant characteristics” is an example...

Topic 2: Efficiency and Equity in Healthcare Practice Questions Multiple Choice – Please choose the BEST answer (answers provided at the end of this document) 1. “Allocate equal amounts of goods to those who are situated equally with respect to the relevant characteristics” is an example of a) Horizontal equity b) Vertical equity c) Procedural equity d) Inequity 2. People with more income pay more money towards public health care finance than do people with lower income when we believe that individuals’ ability to pay should be used to judge equity of health care finance. This is most likely an example of: a) Horizontal equity b) Vertical equity c) Procedural equity d) Inequity TRUE and FALSE For each of the statements below, indicate whether the statement is true or false and explain why it is true or false. Where helpful, you can use a graph or example to explain your reasoning. 3. Scarcity of resources results from inefficiency. T F Why? False. The fact that resources are scarce is an initial premise or assumption made in economics. It is how these scarce resources are used to produce goods and services that can lead to efficiency or inefficiency. Scarce resources can be used efficiently as long as no resources are wasted in production (technical efficiency), costs are minimized in production (cost-effectiveness efficiency) and the allocation of produce is made in accordance with the value held by consumers (allocative efficiency). 1 4. There is no opportunity cost for applications of resources that are technologically efficient, cost-effective, and allocatively efficient. T F Why? False. Everything has an opportunity cost. The opportunity cost of a resource decision is the value of the next best alternative use of resources. If resources are applied to meet all three types of efficiency then it must be true that the value of the resource allocation must be greater than the next best use of resources and hence greater than the opportunity cost. 5. An equitable distribution of a good often implies an unequal distribution of the good among members of society. T F Why? True. Equitable does not mean equal. Although in certain circumstances the equitable outcome might involve equality, often is does not. Equitable distributions require that the allocation is “just” or “fair”. Often characteristics of a good such as “need”, “cost (affordability)”, “divisibility” and “scarcity (availability)” cause unequal distributions of the good to be deemed equitable. For example, it may be deemed equitable for person with a chronic disease to receive more health care compared to an identical person without a chronic disease. 6. An efficiently cost-effective allocation of productive resources must also be technologically efficient. T F Why? True. A cost-effective allocation is the technically efficient allocation that achieves the lowest-cost with no wasted resources. All cost-effective allocations are required to be technically efficient because if they weren’t, then there would be some wasted inputs and those wasted inputs would not be adding to output but those inputs would cost money so there is no way this could achieve the lowest cost or be cost-efficient. 7. Pareto efficient allocations always maximize welfare in society. T F Why? False. “Pareto efficient” allocations may be deemed allocatively efficient due to some people’s normative views/assumptions. Pareto efficiency is achieved when no one can be made better off without making another person worse off which implies efficiency since nothing is wasted (you can’t take something that is unwanted from 2  someone and give it to another person who values it) but does not imply that overall welfare in society is maximized. However, the “potential Pareto criterion” can be used to identify allocations that maximize welfare in society since it allows for redistributions of resources that make people worse off as long as they make other people better off by a larger amount. Short Answer Questions Please answer each of the following questions. Hours of Hours of Total cost of Nurse Physician program Services Services Nurse hourly wage $20 Physician hourly wage $100 Program A 10000 15000 $1,700,000 Program B 20000 7500 $1,150,000 Program C 15000 7500 $1,050,000 Program D 25000 2500 $750,000 8. Consider the above information on production of health care in a nursing home. Assume that all methods produce the same level of quantity and quality of output (i.e., health among residents of the nursing home). a. Identify the technically efficient production method(s). Programs A, C and D are technically efficient. Program B is technically inefficient because it uses more nurses to achieve the same results as C. b. Identify the cost-effectively efficient production method. Program D is the cost-effectively efficient production method because out of all the technically efficient production methods identified in part a, it has the lowest total cost. 3 9. Based on the information in the chart above relating to rates of surgery in Ontario, Discuss: a. Is there horizontal equity in the utilization of health care in Ontario between Toronto and Owen Sound? Horizontal equity states that equals should be treated equally. The graph shows that regardless of need, people from Toronto receive more surgeries. Assuming that the vertical axis shows the number of surgeries per 10,000 people in each particular need category (and not per 10,000 people in the entire population) this would imply that there is higher utilization in Toronto than Owen Sound for people in the same/equal need category. Since equals are not receiving equal surgeries, there is no horizontal equity in the data. b. Is there vertical equity in the utilization of health care in Ontario between Toronto and Owen Sound? Vertical equity states that unequals should be treated unequally. The graph shows that within each area, vertical equity is met since higher need is always associated with higher utilization. However, across areas vertical equity is not being met. For example people from Toronto in need category 3 are receiving the same amount of surgeries as people from Own sound in need category 4. The need is different so the utilization should be different. 10. An economy contains two people and two goods (apples and oranges). Person 1 likes apples and hates oranges (the more oranges she has, the worse off she is), and person 2 likes oranges and hates apples. There are 10 apples and 10 oranges 4  available. Describe all allocations of the goods to the two people which are allocativelly efficient according to the Pareto criterion (i.e. which allocations are Pareto efficient?). A Pareto efficient allocation means it is an allocation in which no one can be made better off without making someone else worse off. If person 1 has any oranges then we can make person 2 better off without making anyone worse off by giving person 2 all of person 1’s oranges. Likewise if person 2 has any apples then we can make person 1 better off without making anyone worse off by giving person 1 all of person 2’s apples. However once person 1 has all 10 apples and person 2 has all 10 oranges, there is no other way to trade around the apples and oranges to make at least one person better off without hurting someone else. Therefore the only allocation that is allocatively efficient according to the Pareto Criterion is if person 1 has 10 apples and person 2 has 10 oragnes. Multiple Choice Answers: 1(a), 2(b) 5