Discuss the idea of medical care as derived demand.

1. Why is it easier to measure the effects of smoking on individual’s health than it is to measure the effects of anti-smoking campaigns on health? Be sure to discuss the idea of medical care as derived demand.

2. Discuss your opinion about the efficiency (or lack of thereof) of the Medicaid reimbursement mechanism for nursing home care. Do you expect the Medicaid reimbursement mechanism for nursing home care to change in the future, or to remain as is? Why?

3. Give some reasons for and against the idea that paying emergency room physicians a salary might provide an incentive for lower productivity than if they are paid by volume of services performed.


4. Explain why patients in hospitals are generally insensitive to price, but buyers of health insurance are sensitive to price differences in health insurance policies. Be sure to include an explanation of why insurance companies are very price competitive.

5. The number of large US employers offering wellness programs to their employees has been steadily increasing over the years. Weight management, nutrition, fitness, and/or other wellness initiatives are now being offered by more than half of such employers. Use the concept of determinants of health to discuss the reasoning behind this trend. What do the employers expect to gain from this additional expense? Compare short-run versus long-run gains, private versus societal gains.


These questions are designed to elicit broad integrative critical thinking and the application of policy and economics course concepts, principles and material. Thus, be sure to use policy and economics concepts, principles, and material from course in answering the following essay questions. For each essay, there is not one single ‘correct answer’; instead, various answers are possible depending on how well they are argued and supported. So have fun expressing your own points of view, but support your views with course material. Take some time to think first, organize your thoughts second, and write third.

Essay 1 (15 points)

The U.S. government subsidizes the private provision of health insurance through employers. Benefits paid to employees are deductible as expenses by firms. Why then do most small employers in the US not offer health insurance benefits to their employees? Why private insurers, often not willing to sell insurance contracts to small employer groups before the enactment of PPACA, may be more inclined to offer an “essential benefits package” at affordable rates through such exchanges in the near future?

Essay 2 (15 points)

Why does the ACA allow for a significant variety in the types of “qualified” plans that can be offered by health insurance exchanges? Wouldn’t it be less expensive for the states (in terms of administrative costs) to offer just one standard plan of essential benefits to everyone?




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