What does adverse selection refer to
When the seller gets buyers most adverse to their intentions
In a patient-physician relationship, who is the principal and who is the agent
The patient is the principal (owner) and the physician is the agent (manager)
What does roemer’s law state
a bed built is a bed filled
What does Say’s law state
Supply generates its own demand
What is the utility fuction in a utility maximising/target income model
u = ((pi)I)
In the utility maximising model, what are the IE and SE
IE: I decreases
SE: I increases
In the profit maximising model, what are the IE and SE
IE: no change
SE: I increases
What does small area variation refer to
Differences in care given to patients presenting the same symptoms
What is the economic cost of misinformation
MB* = True MB of intervention
What are 4 components of the managed care structure
- Network of organisations producing coordinated care (physicians, hospitals)
-Patients encouraged/required to seek care from this network
-Critical & fiscal accountability and GP gatekeeper often relied on
-Direct coordination between medical providers and insurance companies
What are the 3 main types of managed care
Healthcare maintenance organisation (HMO)
Preferred provider organisation (PPO)
Point of service plans (POS)
What are 3 challenges of managed care
dumping
creaming
skimping
What is dumping
refusing to treat less healthy patients
What is creaming
Seeking to attract healthier patients
What is skimping
Providing less than optimal quality of care
What is the cost of FFS to patient
FFScost = D + r x s
What is the cost of HMO to patient
HMOcost = pHMO
What is the extra cost of care under FFS (E)
E = [o] + r x s
Using E, how to patients choose between FFS and HMO
IF E > max WTP, choose HMO
If E < max WTP, choose FFS
What is the impact on FFS from HMO entry
More competition
-D shifts left
-D becomes more elastic
What is FFS structure stand for
Fee for service structure
What features does HMO reduce to decrease expenditures compared to FFS
-Eliminates excessive care
-Skimping
-Lower Prices
-Dumping, creaming
How is nonprofit organisation defined
Difference between revenue and costs cannot be distributed amongst shareholders
What are 3 reasons of rationale for nonprofits
Provision of public goods (non rival/excludable)
Contract faliure
Interest groups
