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METHODICAL INRUCTION

June 13, 2024

METHODICAL INSTRUCTION FOR STUDENTS OF THE

INSTITUTE OF NURSING

LESSON № _9_ (PRACTICAL – 6 HOURS)

Theme: 1. The Role of Government in Health Care. Methods Used by Government to Redistribute Income in Society. – 6 hours.

Aim: 1. To understand the impact of public sector policies on the allocation of medical resources and the distribution of medical output.

Professional orientation of students: The government plays an important role in the various medical markets and either directly or indirectly influences the health of the population in a number of ways. For example, regulatory and taxing policies affect the production or consumption of certain products (such as prescription drugs, narcotics, alcohol, and tobacco) and thereby beneficially or adversely affect the population’s health. Regulations also have the potential to alter the price, quantity, or quality of medical services and can thereby inhibit or promote efficiency in the allocation of resources. The degree of government intervention varies considerably across the country. Some state governments choose to actively regulate the production and reimbursement of nursing home, hospital, and psychotherapy services. Other state governments take more of a laissez-faire attitude toward the health care industry.

Two general alternative economic views or models describe why government intervenes in a market-based health care system. These are the public interest and special interest group theories of government behavior. According to the public interest theory, government promotes the general interests of society as a whole and chooses policies that enhance efficiency and equity. An efficient allocation of resources is achieved when, for a given distribution of income, each good and service is produced at the point where marginal social benefit equals marginal social cost. In the presence of market imperfections, such as imperfect consumer information or monopoly, markets fail to allocate resources efficiently. Market failure also occurs when public goods such as national defense or externalities such as air pollution are involved, or when distributive justice is a concern.

1. Individual Students Program.

Theme № 1 for the Practical Class on “The Role of Government in Health Care. Methods Used by Government to Redistribute Income in Society”

1. Economic Reasons for Government Intervention.

2. Types of Government Intervention.

3. Taxes and Subsidies as Corrective Instruments.

4. The Effects of a Price Ceiling in a Competitive Market.

5. The Effect of a Price Ceiling in a Monopoly Market.

6. The Efficiency Implication of a Price Ceiling.

7. The Effects of Quality Regulations.

8. Antitrust Laws.

9. Price Fixing, Boycotting, and Market Allocation.

10. Public Enterprise.

11. The Redistribution Function of Government.

2. Test evaluation and situational tasks:

a) For the Practical Class on “The Role of Government in Health Care. Methods Used by Government to Redistribute Income in Society”

1. A situation in which a single company or group owns all or nearly all of the market for a given type of product or service is:

A. Oligopoly

B. Price fixing

C. Tying contracts

D. Market allocations

E. Monopoly

2. Establishing the price of a product or service, rather than allowing it to be determined naturally through free-market forces is:

A. Price Fixing

B. Price Discrimination

C. Price Rigging

D. Price Skimming

E. Price Leadership

3. Situations where competitors agree to not compete with each other in specific markets, by dividing up geographic areas, types of products, or types of customers are:

A. Tying contracts

B. Monopolies

C. Market allocations

D. Boycotts

E. Exclusive dealing contracts

4. What model treats insurance coverage as offering people an income transfer from those who remain healthy to themselves in the event they become ill?

A. Nyman’s access theory and conventional theory

B. Only Nyman’s access theory

C. Miller’s access theory

D. Only Conventional theory

E. The answer is no

5. A value that will purchase a definite quantity, weight, or other measure of a good or service is a:

A. Money

B. Taxation

C. Subsidies

D. Price

E. Cost

3. Correct answers of test evaluations and situational tasks for Practical Class on “The Role of Government in Health Care. Methods Used by Government to Redistribute Income in Society”:

1. B. 2. A. 3. C. 4. B. 5. D.

4. References:

А – Basic:

1. Rexford E. Santerre, Stephen P. Neun. Health Economics: Theory, Insights, and Industry Studies, 5 editions. – S-th-W-rn C-ge P-b, 2009. – ISBN: 0324789076. – 624 p.

2. Philip A. Musgrove. Health Economics in Development. –W..d B-k P—ns, 2003. – ISBN: 0821355708. – 455 p.

3. A.J. Culyer, J.P. Newhouse. Handbook of Health Economics, Volume 1A. –Publisher: Nor the Holland, 2000. – ISBN: 0444504702. – 1000 p.

4. Rice, Jones. Applied Health Economics. – Routledge, 2007. – ISBN: 0415397715. – 335 p.

5. Jordan Braverma. Health Economics. – Pharmaceutical Press, 2009. – ISBN: 0853698678. – 359 p.

6. Peter Zweifel, Friedrich Breyer, Mathias Kifmann. Health Economics. –Springer, 2009. – ISBN: 3540278044. – 529 p.

7. Ceri J. Phillips. Health Economics: An Introduction for Health Professionals. – Wiley-Blackwell, 2005-11-04. – ISBN:0727918494. – 160 p.

В – Additional:

1. Anthony J. Culyer. The Dictionary of Health Economics Publisher. – Edwаrd Elgаr Pub., 2005-09-05. – ISBN: 1843762080. – 390 p.

2. Stefan Felder, Thomas Mayrhofer. Medical Decision Making: A Health Economic Primer. – Springer, 2011-07-25. – ISBN: 3642183298. – 217 p.

3. David Hyman. Improving Healthcare: A Dose of Competition (Developments in Health Economics and Public Policy). – Publisher: Springer, 2006. – ISBN: 0387257519. – 436 p.

4. Francesco Paolucci. Health Care Financing and Insurance: Options for Design (Developments in Health Economics and Public Policy). – Publisher: Springer, 2010. – ISBN: 3642107931. – 115 p.

5. Barbara Mcpake. Health Economics: An International Perspective. – Routledge, 2002. – ISBN: 0415277361, 0415277353. – 344 p.

6. Anthony Scott, Alan Maynard, Robert Elliott. Advances in Health Economics. – Wiley, 2003-01-17. – ISBN: 0470848839. – 274 p.

7. Dr. Ross M. Mullner. Encyclopedia of Health Services Research. – English, 2009. – ISBN: 1412951798. – 1409 p.

5. Methodology of Practical Class. (9⁰⁰-11¹⁵)

Theme № 1 for Practical Class on “The Role of Government in Health Care. Methods Used by Government to Redistribute Income in Society”

Work 1.

1. Discuss the two views of government intervention in a market-based health care system. What role does the politician play in both of these views?

2. Health officials have suggested that the spread of AIDS can be partly contained if more males use condoms while engaging in sexual intercourse. Use the concept of a demand-side externality to explain why the number of condoms sold in the United States is likely to be lower than the optimal number. Explain some ways the government might promote a more optimal use of condoms.

3. The discussion on price ceilings supposed that the medical industry faces increasing marginal costs of production. Suppose a for-profit, monopolistic hospital is experiencing economies of scale (that is, downward-sloping average and marginal cost curves) in the relevant range. Show graphically and discuss in writing the problems associated with a price ceiling set where the demand curve intersects the marginal cost curve and a price ceiling set where the demand curve intersects the average cost curve. Think in terms of allocative efficiency and financial solvency.

Work 2.

1. Allied health professionals (for example, social workers) are required by law to possess a professional certificate in some states; in others, they are not. Assuming sufficient data exist, discuss how you might test empirically whether this law exists to protect the public interest or to provide benefits to special interests.

2. Minnesota and Tennessee, among other states, have recently begun to tax the sales of health care providers, such as hospitals and physicians. Analyze the incidence of this sales tax for three different scenarios: (a) The demand for medical services is completely inelastic, while the supply curve is positively sloped to the right; (b) the demand curve is downward sloping and supply is completely inelastic (for this case, it is best to shift the demand curve downward by the amount of the per-unit tax); and (c) the demand curve is downward sloping and the supply curve is positively sloped. When does the consumer or the health care provider pay a larger portion of the tax? Why?

3. Do you think subsidies should be provided to lower the cost of a medical education? Why or why not? Use a graphical model in your explanation, if possible.

Work 3.

Answer the following questions regarding redistribution.

1. Why must the government perform the redistribution function?

2. What are horizontal and vertical equity?

3. What are the differences among proportional, progressive, and regressive taxation?

4. What are the three ways subsidies can be provided in practice?

5. Comment on the relative efficiency and equity of these three methods.

Work 4.

1. Define price fixing, boycotting, exclusive dealing contracts, tying contracts, and market allocations. How have these business practices been viewed by the courts? Explain.

2. Discuss why the courts use a rule of reason when determining whether to allow a horizontal merger.

3. According to Lindsay (1976), why are the average costs of production likely to be lower for a public hospital than for an otherwise identical private hospital?

Work 5.

1. Suppose that the supply of labor is perfectly inelastic with respect to the wage rate in some labor market. Show graphically that no excess burden results from a tax on labor income. What does a perfectly inelastic supply of labor suggest about the opportunity cost of leisure time?

2. Suppose the laborers in a particular market are currently working 200 hours per week at a wage of $40 per hour. Further suppose that the government implements a 25 percent tax on labor income and that these same laborers are willing to work 180 hours at $30 per hour. Calculate the size of the excess burden resulting from this tax (you must know how to calculate the area of a triangle). Using this information, also calculate the elasticity of labor supply with respect to the wage rate. Average the two observations for hours worked and the wage rate when determining the base to calculate each percentage change. Now suppose that the laborers are willing to work 100 hours at $30 per hour. Recalculate the excess burden from a 25 percent tax on labor income and the wage elasticity of labor supply. What does this exercise suggest about the relation between excess burden and the supply of labor?

Work 6.

Explain the logic behind the welfare-reducing tendency of a price ceiling in cell 4 of Table.