1. After the Medicare program adopted the Prospective Payment System (PPS), researchers observed that people tended to receive less care for any given diagnosedcondition.

a) One explanation for this finding is that the PPS provides incentives to providelower levels of treatment for any given diagnosis. Explain how PPS provides these incentives.

b) Another explanation for this finding is that PPS offers incentives for physicians to diagnose marginal health conditions as more serious than they are. Explain how PPS provides these incentives.

c) Since this reduction in quantity of care was not accompanied by a reduction in observable health outcomes, what, if anything, can you infer about the efficiency of the Medicare program before the policy change? Explain your answer.

2. These questions refer to the February 23, 2014 WSJ article, "How to Bring the Price of Health Care into the Open".

a) How does shopping for a health care procedure meaningfully differ from shopping for a typical consumer good such as a car with respect to price and quality?

b) Do you think an increase in the number of high deductible plans such as the bronze and silver plans offered under Obamacare will enhance the effect of price transparency?

3. These questions refer to the February 10, 2014 WSJ article "Obamacare is a Job Killer? Not At All"

a) Is Obamacare expected to have a greater effect on the supply of labor or the demand for labor? Why?

b) What will be the effect on wages, unemployment, labor force participation and economic growth?

c) Is there any way in which it might encourage innovation? (Answer not in this article)

4. These questions refer to the February 23, 2014 WSJ article "How the ACA May Affect Health Care Costs"

a) How are Accountable Care Organizations (ACO's) supposed to curb health care costs?

b) How are Accountable Care Organizations (ACO's) supposed to increase quality?