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This week will begin to take on some of the assumptions of the free market and how they are met in the current healthcare system. Looking at the assumptions, you will take on the topics of the demand for health services, health insurance, and health status. First, you will focus on whether consumers have enough information to overcome the tendency toward asynchronous information. Then you will look at the demand for health and subsequently the demand for health insurance. Finally, in this week, we are going to tackle behavioral economics as it applies to healthcare and spend some time looking at the famous RAND Health Insurance Experiment (HIE). It is the Oregon Health Insurance Experiment where these experiences provided great insight into our healthcare system. Along with the behavioral economics, you will begin to look at how to create behavior through programs such as patient cost sharing.

So in this week, you will look at the first five important assumptions in the chapter “Demand for Health, Insurance, and Services.” In a special chapter, “Topics in Demand: Externalities of Consumption and the Formation of Preferences Supply,” you will take on assumptions, which deal with externalities, that is, things that are caused by an activity that are outside of the activity. An example of an externality would be generating electricity by burning coal, which is an efficient activity, but it creates an externality regarding air pollution. This air pollution becomes a problem that must be dealt with and has an added cost on the original activity’s goal of generating electricity.

Your Learning Objectives for the Week:

  • Interpret the factors that affect the supply and demand for health services in order to predict responses, price, quality, and other factors commonly influenced by health policies.
  • Analyze current-day delivery of healthcare policy related to concepts involving efficiency and equality.

MHA5030 Week 2 Discussion Instructions

Discussion Question

Before beginning work on this discussion forum, please review the link Doing Discussion Questions Right, the expanded grading rubric for the forum, and any specific instructions for this topic.

By the due date assigned, respond to the assigned discussion questions and submit your responses to the appropriate topic in this Discussion Area. Respond to the assigned questions using the lessons and vocabulary found in the reading.

The Health Insurance Experiment (HIE) is perhaps the greatest experiment in the history of healthcare finance as it explores the interface of people and insurance and the methods for reducing waste in the consumption of healthcare through moral hazard.

Tasks:

Describe the results of the experiment and analyze how it affects healthcare today.

Your initial posting should be addressed at 300–500 words as noted in the attached PDF. Submit your document to this Discussion Area, by the due date assigned. Be sure to cite your sources using APA format.

Respond to your peers throughout the unit. Justify your answers with examples, research, and reasoning. Follow-up posts need to be submitted by the end of the unit.

Be sure to include textbook reference and scholar references only.

1/19/2021 Rubric Assessment – MHA5030-Current Economics in Healthcare SU01 – South University

https://myclasses.southuniversity.edu/d2l/lms/competencies/rubric/rubrics_assessment_results.d2l?ou=74312&evalObjectId=359328&evalObjectType=5&userId=4901&groupId=0&rubricId=29&d2l_bod… 1/3

Criteria Unacceptable 0 points

Emerging (F through D Range) 27 points

Satisfactory (C Range) 31 points

Above Average (B Range) 35 points

Exemplary (A Range) 40 points

Criterion Score

Quality

of

Initial

Posting

/ 40No initial posting to evaluate

The information

provided is

inaccurate, not

focused on the

assignment’s topic,

and/or does not

answer the

question(s) fully.

Response

demonstrates

incomplete

understanding of the

topic and/or

inadequate

preparation.

The information provided is

accurate, giving a basic

understanding of the

topic(s) covered. A basic

understanding is when you

are able to describe the

terms and concepts

covered. Despite this basic

understanding, initial

posting may not include

complete development of

all aspects of the

assignment.

The information provided is

accurate, displaying a good

understanding of the topic(s)

covered. A good

understanding is when you

are able to explain the terms

and topics covered. Initial

posting demonstrates sincere

reflection and addresses

most aspects of the

assignment, although all

concepts may not be fully

developed.

The information

provided is accurate,

providing an in-depth,

well thought-out

understanding of the

topic(s) covered. An in-

depth understanding

provides an analysis of

the information,

synthesizing what is

learned from the

course/assigned

readings.

Criteria Unacceptable 0 points

Emerging (F through D Range) 13 points

Satisfactory (C Range) 15 points

Satisfactory (C Range) 17 points

Exemplary (A Range) 20 points

Criterion Score

Participation

in

Discussion

/ 20No responses to other classmates in

this discussion forum

May include one or

more of the

following:

*Comments to only

one other student’s

post.

*Comments are not

substantive, such as

Comments to two or

more classmates’ initial

posts but only on one

day of the week.

Comments are

substantive, meaning

they reflect and expand

Comments to two or

more classmates’ initial

posts on more than one

day. Comments are

substantive, meaning

they reflect and expand

on what the other

student wrote.

Comments to two or

more classmates’ initial

posts and to the

instructor’s comment (if

applicable) on two or

more days. Responses

demonstrate an analysis

of peers’ comments,

1/19/2021 Rubric Assessment – MHA5030-Current Economics in Healthcare SU01 – South University

https://myclasses.southuniversity.edu/d2l/lms/competencies/rubric/rubrics_assessment_results.d2l?ou=74312&evalObjectId=359328&evalObjectType=5&userId=4901&groupId=0&rubricId=29&d2l_bod… 2/3

Total / 80

Overall Score

Writing

Mechanics

(Spelling,

Grammar,

APA) and

Information

Literacy

/ 20

just one line or

saying, “Good job” or

“I agree.

*Comments are off

topic.

on what the other

student wrote.

building on previous

posts. Comments extend

and deepen meaningful

conversation and may

include a follow-up

question.

No postings for

which to evaluate

language and

grammar

Numerous issues in

any of the following:

grammar, mechanics,

spelling, use of slang,

and incomplete or

missing APA

citations and

references. If

required for the

assignment, did not

use course, text,

and/or outside

readings (where

relevant) to support

work.

Some spelling,

grammatical, and/or

structural errors. Some

errors in APA

formatting (citations

and references). If

required for the

assignment, utilizes

sources to support

work for initial post but

not comments to other

students. Sources

include course/text

readings but outside

sources (when relevant)

include non-

academic/authoritative,

such as Wikis and .com

resources.

Minor errors in grammar,

mechanics, or spelling in

the initial posting. Minor

errors in APA formatting

(citations and references).

If required for the

assignment, utilizes

sources to support work

for both the initial post

and some of the

comments to other

students. Sources include

course and text readings

as well as outside sources

(when relevant) that are

academic and

authoritative (e.g., journal

articles, other text books,

.gov web sites,

professional organization

web sites).

Minor to no errors in

grammar, mechanics, or

spelling in both the initial

post and comments to

others. APA formatting is

correct. If required for

the assignment, utilizes

sources to support work

for both the initial post

and the comments to

other students. Sources

include course and text

readings as well as

outside sources (when

relevant) that are

academic and

authoritative (e.g.,

journal articles, other

text books, .gov web

sites, professional

organization web sites).

1/19/2021 Rubric Assessment – MHA5030-Current Economics in Healthcare SU01 – South University

https://myclasses.southuniversity.edu/d2l/lms/competencies/rubric/rubrics_assessment_results.d2l?ou=74312&evalObjectId=359328&evalObjectType=5&userId=4901&groupId=0&rubricId=29&d2l_bod… 3/3

Close

Unacceptable 0 points

minimum

Emerging (F through D

Range) 1 point minimum

Satisfactory (C

Range) 54 points minimum

Above Average (B

Range) 62 points minimum

Exemplary (A

Range) 70 points minimum

MHA5030 Week 2 Project Instructions

Introduction

In the traditional market model, there are major assumptions that impact the ability of the model to function efficiently. So far in the course, we have reviewed the first eight of these assumptions. It is important to relate them to the current provision of healthcare to determine the workability of the traditional market model.

Tasks:

· List the first eight assumptions of the free market.

· Discuss how each assumption is important.

· Explain your conclusions for each of the assumptions relating to today’s provision of healthcare.

Submission Details:

· The project should be 500 words or more and contain at least three references from peer-reviewed articles written in a Microsoft Word document. Save it as SU_MHA5030_W2_Project_LastName_FirstName.doc.

· Submit the report to the Submissions Area by the due date assigned.

· Cite any sources you use in APA format on a separate page.

BE SURE TO USE TEXTBOOK REFERENCE AND SCHOLARLY REFERENCES ONLY.

1/19/2021 Rubric Assessment – MHA5030-Current Economics in Healthcare SU01 – South University

https://myclasses.southuniversity.edu/d2l/lms/competencies/rubric/rubrics_assessment_results.d2l?ou=74312&evalObjectId=363099&evalObjectType=1&userId=4901&viewTypeId=3&rubricId=218315&… 1/3

Criteria No Submission 0 points

Emerging (F through D Range) (1-10) 10 points

Satisfactory (C Range) (11-12) 12 points

Proficient (B Range) 13 points

Exemplary (A Range) (14-15) 15 points

Criterion Score

Researched the

changes needed to

the organization

structure i.e.

reporting

structures,

information and

communication

structures, HR

management

policies, locations

and facilities etc.

/ 15Student did not submit

assignment

Work minimally

meets

assignment

expectations. No

purpose

statement is

provided.

Assignment

meets some

expectations

with minimal

depth and

breath. Purpose

statement is

vague.

Assignment

meets most of

expectations

with all

components

being addressed

in good depth

and breadth.

Purpose

statement is

present and

appropriate for

the assignment.

Assignment

meets all

expectations

with exceptional

depth and

breath. A

comprehensive

purpose

statement

delineates all

requirements of

the assignment.

Criteria No Submission 0 points

Emerging (F through D Range) (1-10) 10 points

Satisfactory (C Range) (11-12) 12 points

Proficient (B Range) 13 points

Exemplary (A Range) (14-15) 15 points

Criterion Score

Integrates and

understands

assignments

concepts and

topics.

/ 15Student did not submit

assignment

Shows some

degree of

understanding of

assignment

concepts.

Demonstrates a

clear

understanding of

assignment

concepts.

Demonstrates the

ability to evaluate

and apply key

assignment

concepts.

Demonstrates the

ability to evaluate,

apply and integrate

key assignment

concepts.

Criteria No Submission 0 points

Emerging (F through D

Satisfactory (C Range) (11-12)

Proficient (B Range)

Exemplary (A Range) (14-15)

Criterion Score

1/19/2021 Rubric Assessment – MHA5030-Current Economics in Healthcare SU01 – South University

https://myclasses.southuniversity.edu/d2l/lms/competencies/rubric/rubrics_assessment_results.d2l?ou=74312&evalObjectId=363099&evalObjectType=1&userId=4901&viewTypeId=3&rubricId=218315&… 2/3

Total / 50

Range) (1-10) 10 points

12 points 13 points 15 points

Synthesizes,

analyses,

and

evaluates

resources

to apply

concepts in

the

assignment.

/ 15Student did not submit

assignment

Does not

interpret, apply,

and synthesize

concepts, and/or

strategies.

Summarizes

information

gleaned from

sources to support

major points, but

does not

synthesize.

Provides minimal

justification to

support major

topics. Uses 1

credible resource

in the assignment.

Synthesizes and

justifies (defends,

explains, validates,

confirms)

information

gleaned from

sources to support

major points

presented. Uses a

minimum of 2

credible resources

in the assignment.

Synthesizes and

justifies (defends,

explains, validates,

confirms) information

gleaned from sources

to support major

points presented.

Uses 3 credible

resources for the

assignment, including

at least 1 scholarly

peer-reviewed

resource.

Criteria No Submission 0 points

Emerging (F through D Range) (1-2) 2 points

Satisfactory (C Range) 3 points

Proficient (B Range) 4 points

Exemplary (A Range) 5 points

Criterion Score

Uses correct

spelling, grammar,

and professional

vocabulary.

Provides credible

resources using

correct APA

format.

/ 5Student did not submit

assignment

Contains many (≥

5) grammar,

spelling,

punctuation and

APA errors that

interfere with the

reader’s

understanding.

Contains a few

(3–4) grammar,

spelling,

punctuation and

APA errors.

Uses correct

grammar,

spelling, and

punctuation with

no errors.

Contains a few

(1–2) APA

format errors.

Uses correct

grammar,

spelling, and

punctuation with

no errors. Uses

correct APA

format with no

errors.

1/19/2021 Rubric Assessment – MHA5030-Current Economics in Healthcare SU01 – South University

https://myclasses.southuniversity.edu/d2l/lms/competencies/rubric/rubrics_assessment_results.d2l?ou=74312&evalObjectId=363099&evalObjectType=1&userId=4901&viewTypeId=3&rubricId=218315&… 3/3

Overall Score

Close

No Submission 0 points

minimum

Emerging (F through D

Range) 1 point minimum

Satisfactory (C

Range) 35 points minimum

Proficient (B

Range) 40 points minimum

Exemplary (A

Range) 45 points minimum

MHA5030 WEEK 2 LECTURE NOTES 1

Asynchronous Information in Healthcare

In the free-market system, it is assumed that people maximize their benefits when they are allowed the freedom of making choices on their own. This assumption includes that the government, if allowed to choose for the person, would not make the best choices. For a person to maximize his or her benefits by making intelligent choices, it is clear that good information is necessary. These choices face some restrictions provided by the government, as it is assumed by the government that not all people will make the best choices. Examples are the personal use of drugs or excessive gambling. The government justifies this by showing that it is expensive for the government to take care of the people if they make these choices. In some cases, the government takes a paternalistic view rather than a criminalistic view, like in France. In the case of pharmaceutical drugs, their use is legal, but they are not the best thing to take without a prescription.

In regard to the availability of information, it is important to consider where the information originates from. For example, there are many advertisements on TV and the Internet that describe pharmaceuticals that a person should ask his or her physician to provide. The source of information, of course, being the manufacturers of the pharmaceuticals, leaves us with the question of whether this is unbiased information.

In this unit, you will continue to look at various problems with people making decisions, for example, the status quo bias, present bias, loss aversion, and decision fatigue that make it difficult for people to make completely logical decisions about their health and its maintenance.

Additional Materials

From your course textbook, The Economics of Health Reconsidered, read the following chapter:

· Demand for Health, Insurance, and Services

From the South University Online Library, read the following article:

· Will Quality Report Cards Help Consumers? 

Demand for Healthcare

Few people in this country have unlimited funds to spend on healthcare; so spending money on healthcare is somewhat of a zero-sum game, that is, money spent on healthcare cannot be spent on food or clothing or other activities. To maximize a person’s utility, it is necessary to decide how much healthcare is enough to create good health in that person. This desire to create health is what creates demand in healthcare.

Insurance is one way that people attempt to level out healthcare expenses, which may be large in one month and zero in the next. One of the serious problems with health insurance comes from moral hazard. A hazard is the overuse of, in this case, healthcare, although it could be any other service when that service is free. When something is free, people tend to want as much as they can get. The problem with this, among other things, is that society at large is degraded when one person uses too much and leaves little, if any, for another person. Insurance has this tendency as a problem to solve.

It is important to study the price elasticity of demand for healthcare and know that demand will decrease as price increases, which by itself seems obvious. But it is impossible to calculate how much of a decrease there will be and, therefore, estimate how much service should be provided so that there will be no wastage. The reason this calculation is important is that the public exchanges created by the Affordable Care Act of 2010 would be less than effective if it were not for the subsidies provided to the lower-income population to overcome this price elasticity of demand.

In the next section of this unit, you will spend time discussing the RAND Corporation’s HIE, which was the largest experimental study ever conducted on healthcare in this country. It provides the foundation of cost sharing in healthcare, which is intended to control the overuse of services and moral hazard.

Additional Materials

From your course textbook, The Economics of Health Reconsidered, read the following chapter:

· Demand for Health, Insurance, and Services

From the South University Online Library, read the following articles:

· The Economics of Moral Hazard: Comment 

· A New Estimate of the Welfare Loss of Excess Health Insurance 

Externalities of Consumption

Externalities are created when the actions of one person affect the well-being of another person.

There are two types of externalities, production and consumption. When one organization or person manufactures a product and, as a product of that manufacturing, harms another organization or person, this is called a production externality. Earlier, we discussed the example of generating electricity as a production activity and a product of that being air pollution, which harms others. There are also both positive and negative externalities. For example, the production of apples in a tree farm as a product of reducing carbon dioxide is a positive product. It is common for economists to tax negative externalities and provide incentives for positive ones.

Consumption externalities occur on a more personal level—for example, a positive consumption externality is immunization. When one person consumes an immunization, the product of that is a lowered risk of other people contracting the disease. Society is enhanced through a positive consumption externality quite often. A classic case of a negative consumption externality is smoking. A mention of secondhand smoke provides an image that is not easy to forget.

It can easily be shown that a completely free market would be disrupted by these externalities in many cases. It is, however, difficult for the government to establish taxes, tariffs, and incentives that both maintain a free market and avoid many negative externalities.

Many economists believe that the consumer is the best judge of what will maximize his or her utility, and this is the foundation of a free market. One of the problems with this assumption is that it assumes people will demand things that will make them the best off. However, there are many instances, such as addiction, whether to drugs or cigarettes or obesity, that counter this argument.

So we are left with the question of how many choices are enough, although economic theory suggests that the more the number of choices, the better. One finds that too many choices make them more difficult, or nearly impossible, to manage. It becomes incumbent upon the government then to, at least in some ways, limit the number of choices in order to promote a fair market.

Additional Materials

From your course textbook, The Economics of Health Reconsidered, read the following chapter:

· Special Topics in Demand: Externalities of Consumption and the Formation of Preferences

From the Internet, read the following article:

· Deaton, A. (2003). Health, income, and inequality. NBER Reporter: Research Summary. Retrieved from http://www.nber.org/reporter/spring03/health.html