Suppose the U.S. government’s tax policies on employer health coverage were to be changed. In particular, suppose health premiums paid through the employer were no longer tax exempt. In its place, the government provides a 25% subsidy for all employer health expenditures. That is, the government gives a tax credit to the employer worth 25% of expenditures. How might this new policy impact who gets insurance? Will there still be a tendency for plans that have relatively high premiums and low OOP costs? In a paragraph or two, concisely answer these questions and clearly explain your reasoning.
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Suppose the U.S. government’s tax policies on employer health coverage were to be changed….
- (10 points) Individuals without health insurance impose substantial negative externalities on those who do. In a paragraph, list some of these externalities and briefly describe their signficance.
- (30 points) Comparative Health Care Systems.
- In a paragraph (or two), summarize the major features of the health care systems for one of the following nations: Britain, Germany, Switzerland, Taiwan, or Japan.
- In a second paragraph (or two), speculate on which specific elements of the health care system for the country you’ve chosen would be good for the U.S. to emulate, and which would not. There is no right or wrong answer for this part, scoring is based on thoughtfulness, clarity of your answer, and using economic ideas correctly.
- (20 points) Let’s divide medical care into two groups: Routine and Catastrophic. We’ll define Routine care as being essentially predictable and relatively cheap. Catastrophic care strikes individuals more or less randomly and is rare. Some have catasrophes, most don’t, but when it does strike it is devastating and extremely costly. In the end, suppose 25% of health expenditures are for Routine care and the remainder is for Catastrophic care. In a paragraph (or two), compare the following two insurance policies: a) 25% coinsurance for all medical care (the individual is responsible for 25% of the bill); b) 100% coinsurance for Routine care, 0% coinsurance for Catastrophic care. In particular, comment on consumption smoothing, and the effect on overall expenditures from both policies.
- (15 points) In a paragraph (or two), describe the “three-legged-stool” of the Affordable Care Act. How do the legs work together? Why is the stool likely to fall if one of the legs is removed?
- (10 points) What is meant by “retrospective” billing of health care expenses. How can a system of retrospective billing impact health care expenditures?