1) Identify at least four things that will likely affect an individual’s demand for medical care. Which will likely be the best predictor of spending for a single individual? Which group of people (assuming that you do not know anything about individual health events)?
Different factors may influence an individual’s demand for medical care. Four of these factors include income levels, health status, age, and availability of health insurance coverage.
Levels of Income: Individuals with higher levels of income are capable of paying for various healthcare services without any demur or difficulties. Thus, they are more likely to seek medical care. They are never worried about the affordability of healthcare.
Health Status: People suffering from chronic and acute health conditions require adequate medical care compared to healthy individuals. This is because the sick require immediate solutions offered by medical care to alleviate their problems.
Age: Due to age-related problems, elderly individuals normally require more medical care than youthful people. Adults are equally more likely to develop chronic illnesses than young people.
Health Insurance Coverage: The availability of health insurance coverage can greatly influence the dynamics of medical care needs among individuals. Those with elaborate insurance coverage are likely to seek healthcare services more than those lacking coverage.
An individual’s Health status, including current illnesses and chronic diseases, forms the best-predicting parameter for healthcare spending. Factors like income and age levels may be utilized in a group when a single person’s health activities are unknown.
2) Identify at least four things that will likely affect an individual’s demand for health insurance. Discuss how and why this list differs from that answer to question 1.
Individuals’ demands for health insurance coverage can be affected by various factors. Some of the factors include levels of income, perceived health risks, employment status, and government policies. Individuals with higher incomes, employment, and elevated perceived health risks are likely to acquire health insurance coverage easily.
This list is distinct from the factors affecting demand for medical care discussed in question 1. It focuses mainly on the decision-making processes regarding acquiring health insurance rather than utilizing healthcare services.
3) U.S. national health expenditure was $7,026 per person in 2006 and $4,790 in 2000. The Consumer Price Index had a value of 201.6 in 2006 and a value of 172.2 in 2000. Adjusted for inflation, how much was spending in 2000?
The following formula can be applied in adjusting spending in 2000 for inflation:
Therefore, the spending in 2000 would be approximately $5,618.33 when adjusted for inflation.
4) Why has the share of healthcare output produced by hospitals fallen? Will this trend continue? What implications does this have for the careers of healthcare managers?
Different factors have led to the fall of the hospital-produced portion of healthcare output. These factors include the contemporary rise in medical technologies, which see most procedures undertaken in outpatient departments. This leads to limited admission and hospitalization, thus limiting care services within the inpatient settings. Moreover, there has been a robust shift from hospital-centric care frameworks to embracing preventive care services to manage population health.
While keenly examining, this pattern is likely to continue since contemporary health developments evolve toward decentralizing services and utilizing community-based strategies to improve the health of the populations. The advancements in the current technology, including Telemedicine, may further limit the requirement for inpatient hospital services for some diseases.
5) Explain how adverse selection and moral hazard are different and give an example of each.
Adverse selection occurs when higher-risk people have an increased chance of buying insurance coverage, causing an imbalance within the risk pool. For instance, if only people with pre-existing illnesses acquire health insurance, there can be an elevated number of premium coverage for everybody in the insurance pool.
In contrast, moral hazard occurs when people like engaging in risky activities when insured because they know they will be protected from financial impacts. For instance, an individual with health insurance coverage may participate in dangerous activities since their medical care costs will be covered.