According to Chase (1993), TPA, a heart drug produced by Genentech Inc., costs ten times more at $2,200 a dose than streptokinase, an alternative heart drug sold by Astra AB and Kabi Farmacia AB of Sweden and by Hoechst AG of Germany. A trial of 41,000 heart attack patients found that the TPA treatment saves 1 more life out of 100 than streptokinase does. Assume that a person pays full cost for either drug and chooses TPA over streptokinase. Another otherwise identical person makes the opposite choice. Use the willingness-to-pay approach to calculate the difference in the value of their lives (assume that dosage requirements are the same).

Problem

Victor Fuchs (1996) lists the following questions in an article in The Wall Street Journal. Identify whether the following questions involve positive or normative analysis. All the questions deal with a Republican plan to reform Medicare, the public health insurance program for the elderly.

A. How many Medicare beneficiaries will switch to managed care?

B. How much should the younger generation be taxed to pay for the elderly?

C. Should seniors who use less care benefit financially, or should they subsidize those who use more care?

D. How many Medicare beneficiaries will switch to medical saving accounts?