1. Medical bills may be paid by any of the following methods except

a) shifting consumption from one period to another.

b) reducing your welfare loss.

c) charity.

d) family or friends.

e) third party insurance companies.

2. Social insurance

a) is not found in the U.S.

b) would most likely provide more extensive coverage for dementia treatments than family or private savings.

c) is based on actuarially fair premiums.

d) is funded by voluntary contributions from large corporations.

e) does nothing for people who cannot afford to buy insurance or for people excluded from purchasing insurance (e.g., people with disabilities).

3. A sudden escalation in the utilization rates and, correspondingly, medical expenditures for treatment of ischemic heart disease (a procedure usually covered by insurance) would immediately

a) benefit providers.

b) result in Ex Ante moral hazard.

c) reduce welfare loss.

d) benefit insurance companies.

e) increase insurance company profits in the short term.

4. Insurance coverage of which treatment would likely cause the most problems with moral hazard?

a) emergency room services for fractured ankles.

b) hip replacement surgeries.

c) colon cancer screening tests.

d) allergy medicine.

e) services of Neonatal Intensive Care Units (newborn intensive care).

5. Offering insurance coverage through an optional rider would likely cause the most problems with adverse selection for which condition?

a) concussion treatment.

b) stress reduction counseling for employees.

c) HIV/AIDs treatment.

d) preventive dental examinations.

e) policy covering accidents for children in daycare.

6. Patient cost sharing is now a permanent feature in almost all health insurance contracts. The insurers introduce patient cost sharing with the goal to

a) reduce adverse selection.

b) reduce risk aversion.

c) reduce consumer demand.

d) increase consumers’ medication compliance.

e) use those funds to guarantee full coverage of catastrophic events.