When baseball player Mr. X was able to renegotiate his contract, he was able to
ID: 1206455 • Letter: W
Question
When baseball player Mr. X was able to renegotiate his contract, he was able to double his previous salary. This allowed him to get a very good policy - one with a 1% copay and deductible of $100, no cap and very good benefits. After this, his manager noticed that he was becoming more aggressive on the field - running after fly balls with the danger of hitting the outfield walls, going after balls even after the other fielder shouts that it is not his ball to catch and during his at bata he crowds the plate which increases the possibility of him getting hit by the pitch. How do we explain this from the health economics point of view?
a.
physician induced demand has occurred due to the more beneficial policy
b.
the better insurance has created adverse selection on the part of Mr. X
c.
risk selection on the part of Mr. X has occurred due to the more beneficial health insurance policy
d.
moral hazard on the part of Mr. X has occurred due to the more beneficial health insurance policy
Year 1 Quantity Price
Burdick Vision 5 Holter Analysis System 50 $6,000
foldable wheelchair 300 $116
Year 2 Quantity Price
Burdick Vision 5 Holter Analysis Sytem 49 $5,600
foldable wheelchair 288 $190
If Year 2 is the base year, what is the year 1 index?
a.
99.5
b.
100
c.
100.5
d.
105.5
From the previous question assuming the 2 goods given are the only 2 goods comprising medical CPI, The growth rate of medical CPI is
a.
+ 0.5%
b.
- 0.5%
c.
zero
d.
10%
Explanation / Answer
d.moral hazard on the part of Mr. X has occurred due to the more beneficial health insurance policy
Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost.
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