Assignment:
QUESTION 1
Consider the following case:
Bob has a pre-existing condition that costs $10,000 per year. Calculate the fair and full insurance premium for Bob. Bob's utility function is U equals square root of I . Is he better off buying the insurance or not?
What happens to insurance firms if they are forced to offer insurance policies that cover pre-existing conditions?
QUESTION 2
Why is the following statement considered a myth by health economists? Use reasoning and evidence from the course.
Covering the uninsured pays for itself by reducing expensive and inefficient emergency room care.
QUESTION 3
Politicians are considering a policy that would fully privatize Medicare. From an economics perspective, what would be the likely effect? (Think of moral hazard, adverse selection, prices, and number of people who have insurance)
QUESTION 4
What is adverse selection? What are three different policies that reduce or eliminate adverse selection?
QUESTION 5
What is moral hazard? What are three different policies that reduce or eliminate moral hazard?