Assignment

1. Cost shifting occurs when a provider responds to low reimbursement rates by public payers (e.g., Medicare or Medicaid) or uncompensated care provided to the uninsured by charging private payers-insurers, managed care companies, or private individuals-more. Essentially, hospitals and physicians try to compensate for providing care below costs to some patients by raising their charges to others. To be able to do so, they would have had to not be fully exploiting their market power in the first place. What is a classic example of this in the healthcare marketplace and how would you go about developing a remedy to reduce the unfair burden cost shifting places on certain payers?

2. In the face of the market power of insurance and managed care, hospital concentration (mergers & acquisitions) may be a survival mechanism that maintains prices at a financially viable level and increases efficiency. Because the overall impact of hospital concentration is not clear, the best policy may be to monitor the market, collect more data, and regulate the industry in a way that discourages predatory practices and high prices. This regulation would include antitrust discipline where needed.

3. In economics, it is generally agreed that monopolies are bad. However, the book argues that the healthcare system could be improved by purchasers of care having their own monopoly power-called a monopsony when in the hands of the buyer. What are the advantages and disadvantages of such monopsony power in healthcare?

4. Read the Heritage Foundation article entitled The Impact of the Affordable Care Act on the Health Care Workforce Healthcare Workforce. Develop a response addressing these questions:

a. Is the current healthcare workforce adequate?
b. What about in the future?
c. If there are imbalances, why hasn't the market equilibrated supply and demand?

5. Discuss why economic evaluation is important in healthcare.

6. The United States spends far more than other countries on healthcare. Interestingly, when queried in opinion polls, the American public believes that we should actually spend more, not less, on healthcare. How would one evaluate whether this spending is worthwhile? What reasons might there be for being concerned about the validity of such assessments?