[Related to the Apply the Concept on page 224] A report from the American Council on Competitiveness noted that “there has been some recent progress in the digital health sector, which aims to better integrate information and software technologies into all aspects of healthcare.” The report also concluded that “the U.S. has rather poor health outcomes relative to other developed countries and stands out as having exceptionally low healthcare productivity when measuring outcomes against spending.”

Briefly discuss the evidence for and against U.S. health care performing poorly relative to other countries when comparing outcomes to spending.

The following table lists a portion of Major League Baseball's (MLB's) leading pitchers, each pitcher's salary (In $millions), and earned run average (ERA) for$2008

$$\begin{array}{|l|c|c|} \hline & \text { Salary } & \text { ERA } \\ \hline \text { J. Santana } & 17.0 & 2.53 \\ \hline \text { C. Lee } & 4.0 & 2.54 \\ \hline & \vdots & \vdots \\ \hline \text { C. Hamels } & 0.5 & 3.09 \\ \hline \end{array}$$

$

c. Derive the corresponding residuals and explain why the residuals might be so high.

Seven essential elements of an effective compliance program?

[Related to the Don’t Let This Happen to You on page 230] Briefly explain whether you agree with the following statement: “The reluctance of healthy young adults to buy health insurance creates a moral hazard problem for insurance companies.”

Some economists and policymakers have argued that one way to control federal government spending on Medicare is to have a board of experts decide whether new medical technologies are worth their higher costs. If the board decided that they are not worth the costs, Medicare would not pay for them. Other economists and policymakers argue that the costs to beneficiaries should more closely represent the costs of providing medical services. This result might be attained by raising premiums, deductibles, and copayments or by “means testing,” which would limit the Medicare benefits that high-income individuals receive. Political columnist David Brooks summarized these two ways to restrain the growth of spending on Medicare: “From the top, a body of experts can be empowered to make rationing decisions. . . . Alternatively, at the bottom, costs can be shifted to beneficiaries with premium supports to help them handle the burden.”

Should Congress and the president be concerned about the growth of Medicare spending? If so, which of these approaches should they adopt, or is there a third approach that might be better? (Note: This question is normative and has no definitive answer. It is intended to lead you to consider possible approaches to the Medicare program.)

Some economists and policymakers have argued that one way to control federal government spending on Medicare is to have a board of experts decide whether new medical technologies are worth their higher costs. If the board decided that they are not worth the costs, Medicare would not pay for them. Other economists and policymakers argue that the costs to beneficiaries should more closely represent the costs of providing medical services. This result might be attained by raising premiums, deductibles, and copayments or by “means testing,” which would limit the Medicare benefits that high-income individuals receive. Political columnist David Brooks summarized these two ways to restrain the growth of spending on Medicare: “From the top, a body of experts can be empowered to make rationing decisions. . . . Alternatively, at the bottom, costs can be shifted to beneficiaries with premium supports to help them handle the burden.”

How would shifting the costs of Medicare to beneficiaries restrain the growth of Medicare spending? What does Brooks mean by “premium supports”?

An article in the Wall Street Journal discussed Aspire Health, a startup firm that believes that it can use software to “predict which patients are likely to die in the next year and reduce their medical bills substantially by offering them palliative care at home. Palliative care focuses on easing symptoms such as pain and shortness of breath that are often overlooked amid aggressive efforts to save seriously ill patients.”

Would it be possible to measure how successful the health care systems of different countries are in providing palliative care? If so, how might it be done?

Some economists and policymakers have argued that one way to control federal government spending on Medicare is to have a board of experts decide whether new medical technologies are worth their higher costs. If the board decided that they are not worth the costs, Medicare would not pay for them. Other economists and policymakers argue that the costs to beneficiaries should more closely represent the costs of providing medical services. This result might be attained by raising premiums, deductibles, and copayments or by “means testing,” which would limit the Medicare benefits that high-income individuals receive. Political columnist David Brooks summarized these two ways to restrain the growth of spending on Medicare: “From the top, a body of experts can be empowered to make rationing decisions. . . . Alternatively, at the bottom, costs can be shifted to beneficiaries with premium supports to help them handle the burden.”

What are “rationing decisions”? How would these decisions restrain the growth of Medicare spending?

An article in the Wall Street Journal discussed Aspire Health, a startup firm that believes that it can use software to “predict which patients are likely to die in the next year and reduce their medical bills substantially by offering them palliative care at home. Palliative care focuses on easing symptoms such as pain and shortness of breath that are often overlooked amid aggressive efforts to save seriously ill patients.”

Should providing palliative care to very ill patients, who are typically elderly, be an important goal of a health care system? Are there other goals that should have a higher priority? (Note: This question is basically a normative one without a definitive correct or incorrect answer. You are being asked to consider what the goals of a health care system should be.)

Under the Social Security retirement system, the federal government collects a tax on most people’s wage income and makes payments to retired workers above a certain age who are covered by the system. (The age to receive full Social Security retirement benefits varies based on the year the worker was born.) The Social Security retirement system is sometimes called a program of social insurance. Is Social Security an insurance program in the same sense as a health insurance policy that a company provides to its workers? Briefly explain.

An article in the Economist on evaluating health outcomes is subtitled “To Improve Health Care, Governments Need to Use the Right Data.” Among the data not currently being collected in most countries, the article mentioned “how soon after surgery patients get back to work.” Why don’t governments currently collect such data? Why might such data be important in evaluating the effectiveness of a country’s health care system?

Improvements in technology usually result in lower costs of production or new and improved consumer goods and services. Assume that an improvement in medical technology results in an increase in life expectancy for people 65 years of age and older. How would this technological advance be likely to affect expenditures on health care?

Jan sold her house on December 31 and took a $10,000 mortgage as part of the payment. The 10-year mortgage has a 10% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of interest that was included in the two payments she received during the year. a. What is the dollar amount of each payment Jan receives? b. How much interest was included in the first payment? How much repayment of principal was included? How do these values change for the second payment? c. How much interest must Jan report on Schedule B for the first year? Will her interest income be the same next year? d. If the payments are constant, why does the amount of interest income change over time?

An article in the Economist referred to “the basic logic of the insurance industry—that it is impossible to predict who will be hit by what misfortune when, and that people should therefore pool their risks.” In what sense does insurance involve pooling risks? How does the problem of adverse selection affect the ability of insurance to provide the benefit of pooling risk?