Health Economics

Analytical problems

Chapter 2

11 Suppose you are collecting data from a country like Japan where the government sets the price of health care. Each prefecture in Japan has a different set of prices (for example, Tokyo has higher prices than rural Hokkaido). Data for 1999 is displayed in Table 2.12. a What is the arc price elasticity of demand for health care consumers in Japan (using only this data)? b Suppose that incomes are generally much higher in Tokyo than Hokkaido. Is your answer to the last question an overestimate or underestimate of price elasticity? Justify your answer. [Hint: It may be helpful to plot the data points from Table 2.12 and consider likely demand curves for Tokyo and Hokkaido.]

c Using your estimated elasticity, what would the demand for health care be if the price in Tokyo were raised to 30 per visit? What would the demand in Hokkaido be if the price were lowered to 5 per visit? You continue your observations of the Japanese health care system into the year 2000. For inscrutable reasons having to do with internal Japanese politics, the government changed the price in both Tokyo and Hokkaido that year, and you observe the demand recorded in Table 2.13.

d Calculate the price elasticity of demand for health care in Japan using only data from the year 2000. e Use data from both years to calculate the elasticity of demand for health care for Tokyo and Hokkaido separately. f Using your estimated elasticities, what would the demand for health care in each prefecture be if the price were raised to 60 per visit next year (for both prefectures)? g Combine the Tokyo and Hokkaido estimates from Exercise 11(e) to get a single estimate of the price elasticity of health care demand for all of Japan. Assume that Tokyo is five times as populous as all of Hokkaido.

12 Preventative care refers to care taken to prevent future diseases rather than to treat current ones. Compared with ER care, preventative care is rarely urgent, and benefits can be difficult to measure: if you had the flu vaccine this year but did not catch the flu, it is impossible to tell if it was the shot or assiduous hand-washing that preserved you.

a Given this description of preventative care, would you expect preventative care to be more or less price-sensitive compared with inpatient care? Why? b Table 2.14 shows evidence on preventative care from the RAND HIE. Summa-rize the data in the table and note any interesting patterns. Was your prediction correct?

13 In this exercise, assume that the term “admission” in Table 2.15 refers to inpatient care, while “any use” refers to inpatient and outpatient care.

Table 2.15 contains a lot of information. Without looking at any specific values, summarize what type of data the table contains. Give an example of a broad question about income levels and demand for health care that the table might have the potential to answer.

Chapter 3

Analytical problems 11 The Grossman model envisions consumers deciding between investments in healthH and investments in home goods Z. Figure 3.15 depicts a typical consumer’s production possibility frontier for health and home goods.

Chapter 4

13 Table 4.5 shows data from Rich-Edwards et al. (2005) on the prevalence of various afflictions among female nurses who were born at different weights.