Assignment: Medical interventions were not important in the historical declines in mortality rates

Assignment: Medical interventions were not important in the historical declines in mortality rates ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Assignment: Medical interventions were not important in the historical declines in mortality rates 1. “Medical interventions were not important in the historical declines in mortality rates, but that does not imply that medical research was unimportant.” Explain this viewpoint. Assignment: Medical interventions were not important in the historical declines in mortality rates 2. Chapter 5 Exercise 1. In addition to showing how the curve changes when E is increased to 15 discuss this in words. 3. Chapter 6 Exercise 4 4. Given the nature of the cost function and possible economies of scale and scope, does a policy encouraging large, centralized hospitals seem wise? Will market forces tend to reward centralization of hospital services? 5. Chapter 7 Exercise 3 6. Chapter 7 Exercises 4 and 5 (Chapter 5 exercise 1 is on page 104. Chapter 6 exercise 4 is on page 128. Chapter 7 exercise 3,4,5 is on page 146, 147 in the attached textbook.) the_economics_of_health_and_health_care_seventh_edition___sh.pdf Seventh Edition The Economics of Health and Health Care Sherman Folland Professor of Economics, Oakland University Allen C. Goodman Professor of Economics, Wayne State University Miron Stano Professor of Economics and Management, Oakland University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Executive Editor: David Alexander Editorial Director: Sally Yagan Editor in Chief: Donna Battista Assistant Editor: Lindsey Sloan Editorial Assistant: Emily Brodeur Director of Marketing: Patrice Jones Senior Managing Editor: Nancy Fenton Production Project Manager: Nancy Freihofer Permissions Specialist: Estelle Simpson Senior Manufacturing Buyer: Carol Melville Cover Photo: Yang MingQi/Fotolia Cover Design: Jayne Conte Full-Service Project Management and Composition: Integra Printer/Binder: Edwards Brothers Cover Printer: Lehigh Phoenix Text Font: 10/12 Times Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text. Copyright © 2013, 2010, 2007, 2004, 2001 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, Upper Saddle River, New Jersey 07458. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458. Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps. Library of Congress Cataloging-in-Publication Data Folland, Sherman. The economics of health and health care/Sherman Folland, Allen C. Goodman, Miron Stano.—7th ed. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-13-277369-0 ISBN-10: 0-13-277369-4 I. Assignment: Medical interventions were not important in the historical declines in mortality rates Goodman, Allen C. II. Stano, Miron. III. Title. [DNLM: 1. Economics, Medical. 2. Government Regulation. 3. Health Care Reform—economics. 4. Health Policy—economics. 5. Insurance, Health—economics. W 74.1] LC Classification not assigned 338.4’73621—dc23 2011053121 10 9 8 7 6 5 4 3 2 1 ISBN 13: 978-0-13-277369-0 ISBN 10: 0-13-277369-4 BRIEF CONTENTS PART I PART II PART III Basic Economics Tools Chapter 1 Chapter 2 Chapter 3 Introduction 1 Microeconomic Tools for Health Economics Statistical Tools for Health Economics 48 Chapter 4 Economic Efficiency and Cost-Benefit Analysis 20 63 Supply and Demand Chapter 5 Chapter 6 Production of Health 85 The Production, Cost, and Technology of Health Care Chapter 7 Chapter 8 Chapter 9 Demand for Health Capital 129 Demand and Supply of Health Insurance Consumer Choice and Demand 173 105 148 Information and Insurance Markets Chapter 10 Asymmetric Information and Agency 195 Chapter 11 The Organization of Health Insurance Markets 210 Chapter 12 Managed Care 236 Chapter 13 Nonprofit Firms 265 PART IV Key Players in the Health Care Sector Chapter 14 Hospitals and Long-Term Care Chapter 15 The Physician’s Practice 302 283 Chapter 16 Health Care Labor Markets and Professional Training Chapter 17 The Pharmaceutical Industry 344 PART V 319 Social Insurance Chapter 18 Chapter 19 Chapter 20 Chapter 21 Chapter 22 Chapter 23 Equity, Efficiency, and Need 367 Government Intervention in Health Care Markets 390 Government Regulation: Principal Regulatory Mechanisms Social Insurance 435 Comparative Health Care Systems 466 Health System Reform 492 407 PART VI Special Topics Chapter 24 The Health Economics of Bads 513 Chapter 25 Epidemiology and Economics: HIV/AIDS in Africa 531 iii CONTENTS Preface xix Part I Basic Economics Tools Chapter 1 Introduction 1 What Is Health Economics? 2 The Relevance of Health Economics 3 The Size and Scope of the Health Economy 3 Health Care’s Share of GDP in the United States 3 Health Care Spending in Other Countries 4 Importance of the Health Economy in Personal Spending 5 Importance of Labor and Capital in the Health Economy 6 Time—The Ultimate Resource 7 The Importance Attached to Economic Problems of Health Care Delivery Inflation 9 Access 9 Quality 9 The Economic Side to Other Health Issues 9 Economic Methods and Examples of Analysis 10 Features of Economic Analysis 10 Examples of Health Economics Analysis 11 Does Economics Apply to Health and Health Care? 12 An Example: Does Price Matter? 12 Is Health Care Different? 13 Presence and Extent of Uncertainty 13 Prominence of Insurance 13 Problems of Information 14 Large Role of Nonprofit Firms 15 Restrictions on Competition 15 Role of Equity and Need 16 Government Subsidies and Public Provision 16 Conclusions 16 Summary 17 • Discussion Questions 18 • Exercises Chapter 2 Microeconomic Tools for Health Economics Scarcity and the Production Possibilities Frontier 21 Practice with Supply and Demand 23 The Demand Curve and Demand Shifters 23 The Supply Curve and Supply Shifters 24 Equilibrium 25 Comparative Statics 25 iv 20 18 8 Contents Functions and Curves 26 Linear Functions 27 Demand Functions 27Assignment: Medical interventions were not important in the historical declines in mortality rates Derived Demand 28 Consumer Theory: Ideas Behind the Demand Curve 28 Utility 29 Indifference Curves 30 Budget Constraints 31 Consumer Equilibrium 32 Individual and Market Demands 33 Elasticities 33 Production and Market Supply 35 The Production Function 35 Production Functions 36 Isocost Curves 38 Cost Minimization or Output Maximization 39 Marginal and Average Cost Curves 40 The Firm Supply Curve Under Perfect Competition 41 Monopoly and Other Market Structures 43 Conclusions 45 Summary 45 • Discussion Questions Chapter 3 Statistical Tools for Health Economics Hypothesis Testing 49 Difference of Means 49 The Variance of a Distribution 50 Standard Error of the Mean 51 Hypotheses and Inferences 53 Regression Analysis 54 Ordinary Least Squares (OLS) Regressions A Demand Regression 56 Estimating Elasticities 57 Multiple Regression Analysis 58 Interpreting Regression Coefficients 58 Dummy Variables 59 Statistical Inference in the Sciences and Social Sciences 60 Conclusions 61 Summary 61 • Discussion Questions 46 • Exercises 47 • Exercises 62 48 55 61 Chapter 4 Economic Efficiency and Cost-Benefit Analysis Economic Efficiency 63 Cost-Benefit Analysis: Background 66 Cost-Benefit Analysis: Basic Principles 66 Measuring Costs 67 63 v vi Contents Risk Equity Versus Equality of Marginal Costs per Life Saved 67 Marginal Analysis in CBA 68 Discounting 70 Risk Adjustment and CBA 71 Distributional Adjustments 72 Inflation 72 Valuing Human Life 72 Willingness to Pay and Willingness to Accept 73 Contingent Valuation 73 How Valuable Is the Last Year of Life? 73 Cost-Benefit Analyses of Heart Care Treatment 75 Cost-Effectiveness Analysis 76 Advantages of CEA 77 Cost-Utility Analysis, QALYs, and DALYs 77 An ACE Inhibitor Application of Cost-Effectiveness Analysis 78 QALYs Revisited: Praise and Criticism 78 Are QALYs Consistent with Standard Welfare Economics? 78 Extra-Welfarism 79 Sen’s Capability Approach and QALYs 79 Linearity Versus What People Think 79 The Ageism Critique of QALYs 80 Conclusions 80 Summary Part II 81 • Discussion Questions 81 • Exercises 82 Supply and Demand Chapter 5 Production of Health 85 The Production Function of Health 85 The Historical Role of Medicine and Health Care 88 The Rising Population and the Role of Medicine 88 What Caused the Mortality Rate Declines? Was It Medicine? 89 What Lessons Are Learned from the Medical Historian? 93 The Production of Health in the Modern Day 93 Preliminary Issues 93 The Contribution of Health Care to Population Health: The Modern Era 94 Is Health Care Worth It? 95 Prenatal Care 96 The World’s Pharmacies 97 How Does Health Care Affect Other Measures of Health? 97 On the Importance of Lifestyle and Environment 98 Cigarettes, Exercise, and a Good Night’s Sleep 99 The Family as Producer of Health 100 Social Capital and Health 100 Environmental Pollution 101 Income and Health 101 Contents The Role of Schooling 101 Two Theories About the Role of Schooling 102 Empirical Studies on the Role of Schooling in Health Conclusions 102 Summary 103 Assignment: Medical interventions were not important in the historical declines in mortality rates • Discussion Questions 103 vii 102 • Exercises Chapter 6 The Production, Cost, and Technology of Health Care 104 105 Production and the Possibilities for Substitution 106 Substitution 106 What Degree of Substitution Is Possible? 107 Elasticity of Substitution 107 Estimates for Hospital Care 109 Costs in Theory and Practice 109 Deriving the Cost Function 110 Cost Minimization 111 Economies of Scale and Scope 112 Why Would Economies of Scale and Scope Be Important? 113 Empirical Cost-Function Studies 114 Difficulties Faced by All Hospital Cost Studies 114 Modern Results 116 Summary: Empirical Cost Studies and Economies of Scale 116 Technical and Allocative Inefficiency 116 Technical Inefficiency 116 Allocative Inefficiency 117 Frontier Analysis 118 The Uses of Hospital Efficiency Studies 119 For-Profit Versus Nonprofit Hospitals 120 Efficiency and Hospital Quality 120 Are Hospital Frontier Efficiency Studies Reliable? 120 Performance-Based Budgeting 121 Technological Changes and Costs 121 Technological Change: Cost Increasing or Decreasing? 121 Health Care Price Increases When Technological Change Occurs 122 Diffusion of New Health Care Technologies 124 Who Adopts and Why? 124 Other Factors That May Affect Adoption Rates 125 Diffusion of Technology and Managed Care 126 Conclusions 126 Summary 126 • Discussion Questions Chapter 7 Demand for Health Capital 127 129 The Demand for Health 129 The Consumer as Health Producer 129 Time Spent Producing Health 130 Labor–Leisure Trade-Offs 131 Trading Leisure for Wages 132 Preferences Between Leisure and Income 132 • Exercises 127 viii Contents The Investment/Consumption Aspects of Health 133 Production of Healthy Days 133 Production of Health and Home Goods 134 Investment over Time 135 The Cost of Capital 135 The Demand for Health Capital 136 Marginal Efficiency of Investment and Rate of Return 136 The Decreasing MEI 136 Changes in Equilibrium: Age, Wage, and Education 137 Age 137 Wage Rate 138 Education 139 Empirical Analyses Using Grossman’s Model 139 Obesity—The Deterioration of Health Capital 141 An Economic Treatment of Obesity 142 Economic Effects 143 Why Has Obesity Increased? 144 Conclusions 145 Summary 146 • Discussion Questions Chapter 8 Demand and Supply of Health Insurance 146 • Exercises 148 What Is Insurance? 148 Insurance Versus Social Insurance 149 Insurance Terminology 149 Risk and Insurance 150 Expected Value 150 Marginal Utility of Wealth and Risk Aversion 151 Purchasing Insurance 152 The Demand for Insurance 153 How Much Insurance? 153 Changes in Premiums 155 Changes in Expected Loss 155 Changes in Wealth 156 The Supply of Insurance 157 Competition and Normal Profits 157 The Case of Moral Hazard 159 Demand for Care and Moral Hazard 159 Effects of Coinsurance and Deductibles 162 Health Insurance and the Efficient Allocation of Resources The Impact of Coinsurance 162Assignment: Medical interventions were not important in the historical declines in mortality rates The Demand for Insurance and the Price of Care 166 The Welfare Loss of Excess Health Insurance 167 The Income Transfer Effects of Insurance 168 Conclusions 170 Summary 170 • Discussion Questions 146 171 162 • Exercises 171 Contents Chapter 9 Consumer Choice and Demand 173 Applying the Standard Budget Constraint Model 174 The Consumer’s Equilibrium 175 Demand Shifters 176 Health Status and Demand 178 Two Additional Demand Shifters—Time and Coinsurance The Role of Time 178 The Role of Coinsurance 180 Issues in Measuring Health Care Demand 182 Individual and Market Demand Functions 182 Measurement and Definitions 183 Differences in the Study Populations 183 Data Sources 183 Experimental and Nonexperimental Data 184 Empirical Measurements of Demand Elasticities 184 Price Elasticities 184 Individual Income Elasticities 185 Income Elasticities Across Countries 186 Insurance Elasticities 187 Impacts of Insurance on Aggregate Expenditures 189 Other Variables Affecting Demand 189 Ethnicity and Gender 189 Urban Versus Rural 190 Education 190 Age, Health Status, and Uncertainty 191 Conclusions 191 Summary Part III 192 • Discussion Questions 193 178 • Exercises Information and Insurance Markets Chapter 10 Asymmetric Information and Agency 195 Overview of Information Issues 196 Asymmetric Information 196 On the Extent of Information Problems in the Health Sector 196 Asymmetric Information in the Used-Car Market: The Lemons Principle 198 Application of the Lemons Principle: Health Insurance 199 Inefficiencies of Adverse Selection 200 Experience Rating and Adverse Selection 201 The Agency Relationship 202 Agency and Health Care 202 Consumer Information, Prices, and Quality 203 Consumer Information and Prices 203 193 ix x Contents Consumer Information and Quality Other Quality Indicators 206 Conclusions 207 Summary 208 204 • Discussion Questions 208 • Exercises Chapter 11 The Organization of Health Insurance Markets 209 210 Loading Costs and the Behavior of Insurance Firms 210 Impacts of Loading Costs 211 Insurance for Heart Attacks and Hangnails 212 Loading Costs and the Uninsured 212 Employer Provision of Health Insurance: Who Pays? 212 Spousal Coverage: Who Pays? 215 How the Tax System Influences Health Insurance Demand 215 Who Pays the Compensating Differentials?—Empirical Tests 217 Other Impacts of Employer Provision of Health Insurance 218 Employer-Based Health Insurance and Labor Supply 219 Health Insurance and Retirement 219 Health Insurance and Mobility 219 The Market for Insurance 221 The Market for Private Insurance 221 Insurance Practices 222 The Past 30 Years 223 The Uninsured: An Analytical Framework 224 The Working Uninsured Assignment: Medical interventions were not important in the historical declines in mortality rates 227 The Impacts of Mandated Coverage 229 Technological Change, Higher Costs, and Inflation 230 The Cost-Increasing Bias Hypothesis 231 Goddeeris’s Model—Innovative Change over Time 231 Evidence on Technological Change and Inflation 233 Conclusions 233 Summary 234 Chapter 12 Managed Care • Discussion Questions 234 • Exercises 236 What Is the Organizational Structure? 237 What Are the Economic Characteristics? 238 The Emergence of Managed Care Plans 239 Employer-Sponsored Managed Care 240 Medicaid and Medicare Managed Care Plans 242 Managed Care Contracts with Physicians 242 Managed Care Contracts with Hospitals 243 Development and Growth of Managed Care—Why Did It Take So Long? 244 Federal Policy and the Growth of Managed Care 244 The Economics of Managed Care 245 235 Contents Modeling Managed Care 246 Modeling Individual HMOs 246 How Much Care? 247 What Types of Care? 247 Framework for Prediction 248 Where Managed Care Differs from FFS—Dumping, Creaming, and Skimping 248 Equilibrium and Adverse Selection in a Market with HMOs 249 How Does Managed Care Differ?—Empirical Results 251 Methodological Issues—Selection Bias and Quality of Care 251 Comparative Utilization and Costs 252 The RAND Study—A Randomized Experiment 252 Recent Evidence 252 Growth in Spending 255 Competitive Effects 256 Theoretical Issues 256 Managed Care Competition in Hospital Markets 257 Managed Care Competition in Insurance Markets 258 Managed Care and Technological Change 259 The Managed Care Backlash 259 Conclusions 262 Summary 262 Chapter 13 Nonprofit Firms • Discussion Questions 263 • Exercises 264 265 An Introduction to Nonprofits 265 Why Nonprofits Exist and Why They Are Prevalent in Health Care 266 Nonprofits as Providers of Unmet Demands for Public Goods 266 The Public Good–Private Good Aspect of Donations 267 Relevance to Health Care Markets 268 Nonprofits as a Response to Contract Failure 269 Applications of Contract Failure to Health Care 269 Financial Matters and the Nonprofit 270 Summary of the Reasons for the Prevalence of Nonprofits 270 Models of Nonprofit Hospital Behavior 270 The Quality–Quantity Nonprofit Theory 271 The Profit-Deviating Nonprofit Hospital 272 The Hospital as a Physicians’ Cooperative 274 Maximizing Net Revenue per Physician 274 A Comparison of the Quantity–Quality and the Physicians’ Cooperative Theories 275 The Evidence: Do Nonprofit Hospitals Differ from For-Profit Hospitals? 276 xi xii Contents Summary of Models of Hospital Behavior 279 What Causes Conversion of Nonprofits into For-Profits? 279 The Relative Efficiency of Nonprofits Versus For-Profits 280 Are Nonprofit Health Care Firms Less Technically or Allocatively Efficient?—Hospital and Nursing Home Studies 280 Conclusions 281 Summary Part IV 281 • Discussion Questions 282 • Exercises 282 Assignment: Medical interventions were not important in the historical declines in mortality rates • Exercises 301 Key Players in the Health Care Sector Chapter 14 Hospitals and Long-Term Care 283 Background and Overview of Hospitals 283 History 284 Organization 285 Regulation and Accreditation 286 Hospital Utilization and Costs 286 Competition and Costs 287 Closures, Mergers, and Restructuring 291 Quality of Care 293 Nursing Homes 294 Background and Costs 294 Quality of Care 295 Excess Demand 296 Financing Long-Term Care 297 Hospice, Home Health, and Informal Care 298 Conclusions 299 Summary 299 • Discussion Questions Chapter 15 The Physician’s Practice 300 302 A Benchmark Model of the Physician’s Practice 303 Do Physicians Respond to Financial Incentives? 305 Physician Agency and Supplier-Induced Demand 305 Modeling Supplier-Induced Demand 306 The Target Income Hypothesis 306 The Benchmark Model as a Synthesis 308 The Parallel Between Inducement and Marketing 309 What Do the Data Say About Supplier-Induced Demand? 309 Physician Fees, Fee Tests, and Fee Controls 309 Diffusion of Information and Small Area Variations 311 Contributions to These Variations 311 The Physician Practice Style Hypothesis 312 Multiple Regression Approaches 313 SAV and the Social Cost of Inappropriate Utilization 313 Other SAV Applications 315 Contents xiii Other Physician Issues and Policy Puzzles 315 Malpractice 315 Direct-to-Consumer Advertising of Drugs 316 Paying for Outcomes 316 Conclusions 317 Summary 317 • Discussion Questions 318 • Exercises 318 Chapter 16 Health Care Labor Markets and Professional Training 319 The Demand for and Supply of Health Care Labor 319 Production Functions and Isoquants 320 Marginal Productivity of Labor 321 Factor Substitution and Labor Demand 322 The Supply of Labor 322 Factor Productivity and Substitution Among Factors 324 Measurement of Physician Productivity 324 The Efficient Utilization of Physician Assistants: Substitution Among Inputs 324 Health Manpower Availability and the Meaning of Shortages 325 Availability of Physicians 326 Economic Definitions of Shortages of Health Professionals 327 The Role of Monopsony Power: Shortages of Registered Nurses 330 Medical Education Issues and the Question of Control 332 Sources of Medical School Revenues 332 Capital Market Imperfections Justify Subsidies 332 Teaching Hospitals, Medical Schools, and Joint Production 333 Foreign Medical School Graduates 334 The Control of Medical Education 335 Control over Entry 335 Licensure and Monopoly Rents 336 Licensure and Quality 338 Other Physician Labor Issues 339 Specialization 339 Physician Income by Gender 340 Conclusions 341 Summary 341 • Discussion Questions Chapter 17 The Pharmaceutical Industry 342 344 Structure and Regulation 346 Competition 346 Barri … Get a 10 % discount on an order above $ 100 Use the following coupon code : NURSING10

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