How many Medicare beneficiaries will switch to managed care?

Please show the derivation process and limit your answers within5 pages. Highlight the answer for each question in MS Wordformat.
Q1: Problem 2Suppose a health expenditure function is specified inthe following manner:
E = 500 +0.2Y,
where E represents annual health careexpenditures per capita and Y stands for income percapita.
A. Using the slope of the health expenditure function,predict the change in per capita health care expenditures thatwould result from a $1,000 increase in per capitaincome.
B. Compute the level of per capita health care spendingwhen per capita income takes on the following dollar values: 0;1,000; 2,000; 4,000; and 6,000.
C. Using the resulting values for per capita health carespending in part B, graph the associated health care expenditurefunction.
D. Assume the fixed amount of health care spendingdecreases to $250. Graph the new and original health functions onthe same graph. What is the relation between the original and newhealth care expenditure functions?
E. Now assume that the fixed amount of health carespending remains at $500 but the slope parameter on incomedecreases to 0.1. Graph both the original and new health careexpenditure functions. Explain the relation the twolines.
Q2: Problem 3Victor Fuchs (1996) lists the following questions in anarticle in The Wall Street Journal. Identify whether thefollowing questions involve positive or normative analysis. All thequestions deal with a Republican plan to reform Medicare, thepublic health insurance program for the elderly.
A. How many Medicare beneficiaries will switch to managedcare?
B. How much should the younger generation be taxed to payfor the elderly?
C. Should seniors who use less care benefit financially,or should they subsidize those who use more care?
D. How many Medicare beneficiaries will switch tomedical saving accounts?
E. What effect will these changes have onutilization?F. How much should society devote to medicalinterventions that would add one year of life expectancy for menand women who have already passed the biblical “three score andten”?
G. Will senior citizens’ choices about types of coveragedepend on their health status?
H. If the rate of spending growth is reduced to 6percent from 10 percent a year, what will happen to the growth ofmedical services?
Q3: Problem 9Explain how a change in each of the following factorswould alter the shape of the total product curve for medicalcare.A. An increase in education.B. An improvement in lifestyle.
C. An improvement in the environment.
Q4: Problem 10Some people believe cigarette and alcohol advertisementsshould be banned completely in the United States. If this were thecase, what would likely happen to the shapes of the total andmarginal product for medical care?
Q5: Problem 9According to Chase (1993), TPA, a heart drugproduced by Genentech Inc., costs ten times more at $2,200 a dosethan streptokinase, an alternative heart drug sold by Astra AB andKabi Farmacia AB of Sweden and by Hoechst AG of Germany. A trial of41,000 heart attack patients found that the TPA treatment saves 1more life out of 100 than streptokinase does. Assume that a personpays full cost for either drug and chooses TPA over streptokinase.Another otherwise identical person makes the opposite choice. Usethe willingness-to-pay approach to calculate the difference in thevalue of their lives (assume that dosage requirements are thesame).
Q6: Problem 12Given this information, answer the followingquestions.
CostEffectivenessCurrentTreatment$100,0004 life-years gainedNewTreatment$250,00010 life-years gained
A. Calculate the ICER for the new treatment, assumingthat the new treatment would replace the old one.
B. In what quadrant is the ICER located in Figure 3-4?Is cost effectiveness analysis relevant?
C. How does the answer change if the cost of the newtreatment equals $75,000?
Q7: Problem 3Describe the demand curve shift (rightward or leftward)about how the following changes would affect the demand forinpatient services at a hospital in a large city.
A. Average real income in the communityincreases.
B. In an attempt to cut costs, the largest employer inthe area increases the coinsurance rate for employee healthcoverage from 10 percent to 20 percent.
C. The hospital relocates from the center of the city,where a majority of the people live, to a suburb.
D. A number of physicians in the area join together andopen up a discount-price walk-in clinic; the cross-price elasticityof demand between physician services and inpatient hospitalservices is –0.50.
Q8: Problem 7In reaction to higher input costs, a physician decidesto increase the average price of a visit by 5 percent. Will totalrevenues increase or decrease as a result of this action? Use theconcept of price elasticity to substantiate youranswer.
Q9: Problem 10You are employed as an economic consultant to theregional planning office of a large metropolitan area, and yourtask is to estimate the demand for hospital services in the area.Your estimates indicate that the own-price elasticity of demandequals –0.25, the income elasticity of demand equals 0.45, thecross-price elasticity demand for hospital services with respect tothe price of nursing home services equals –0.1, and the elasticityof travel time equals –0.37. Use this information to project theimpact of the following changes on the demand for hospitalservices.
A. Average travel time to the hospital diminishes by 5percent due to overall improvement in the public transportationsystem.
B. The price of nursing home care decreases by 10percent.
C. Average real income decrease by 10percent.
D. The hospital is forced to increase its price forservice by 2 percent.