(Health Economics and Policy, 8e James Henderson)
(Test Bank all Chapters)
Chapter 01: U.S. Medical Care: A System at the Crossroads
1. Charging higher prices for one category of patients in order to provide free or subsidized care to another group is
called:
a. price discrimination.
b. cost shifting.
c. categorical costing.
d. reprehensible and unethical.
e. creative accounting.
ANSWER: b
FEEDBACK: a. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
b. Correct. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
c. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
d. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
e. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-1a - Emergence of the Modern Medical System
DATE CREATED: 1/24/2022 3:04 AM
DATE MODIFIED: 2/9/2022 7:28 AM
2. In the 1960s, individuals paid for the majority of their medical care out of pocket. Increased insurance coverage, both
private and public, displaced out-of-pocket spending as the primary source of payment. By 2020, what was the forecasted
percentage amount of health care spending paid by individuals?
a. 6 percent
b. 10.4 percent
c. 11.6 percent
d. 17.4 percent
e. Whatever amount we are currently spending
ANSWER: b
FEEDBACK: a. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
b. Correct. The amount that individuals paid out of pocket for health care
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, expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
c. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
d. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
e. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-1c - Recent Changes in the Payment Structure
DATE CREATED: 1/24/2022 3:09 AM
DATE MODIFIED: 2/9/2022 7:41 AM
3. When someone mentions the “managed care” approach to health care, what are they referring to? Be sure to include the
term “horizontal integration” in your answer.
ANSWER: Managed care refers to a delivery system that originally integrated the financing and
provision of medical care into one organization. Now the term encompasses different
arrangements designed to coordinate services and control costs, such as an HMO, a PPO,
or a point-of-service plan. Horizontal integration is the process by which this was carried
out, transforming a highly fragmented industry into a single multihospital system.
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
STUDENT ENTRY MODE: Basic
LEARNING OBJECTIVES: 1-1b - Recent Changes in Medical Care Delivery
DATE CREATED: 1/24/2022 3:14 AM
DATE MODIFIED: 2/9/2022 7:41 AM
4. The 1974 federal legislation that exempted employers from certain state laws governing health insurance was:
a. COBRA.
b. ERISA.
c. CON.
d. HIPAA.
e. SCHIP.
ANSWER: b
FEEDBACK: a. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
b. Correct. Passed to regulate the corporate use of pension funds, the Employee
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, Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
c. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
d. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
e. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-1a - Emergence of the Modern Medical System
DATE CREATED: 1/24/2022 3:15 AM
DATE MODIFIED: 2/9/2022 7:42 AM
5. The key elements of the Affordable Care Act (ACA) passed in 2010 included all of the following except:
a. a mandate that required individuals and every employer with over 50 full-time workers to provide a qualified
health plan at an affordable price or face penalties.
b. expanded insurance regulations include guaranteed issue, guaranteed renewability, and no exclusions for
preexisting conditions.
c. the establishment of insurance exchanges where individuals who did not have access to employer-sponsored
insurance could receive subsidies to purchase private coverage.
d. a federal requirement that states extend Medicaid coverage to individuals with family income less than 138
percent of the federal poverty level.
e. price controls on brand name pharmaceuticals.
ANSWER: e
FEEDBACK: a. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
b. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
c. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
d. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
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, and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
e. Correct. Mandates, new insurance regulation, health insurance exchanges, and
a mandatory Medicaid expansion were all part of the original ACA passed in
2010. Two years later, the Supreme Court ruled that states were not required to
expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-2b - The Key Elements of the ACA
DATE CREATED: 1/24/2022 3:18 AM
DATE MODIFIED: 2/9/2022 7:42 AM
6. One of the key elements of ACA was the establishment of health care insurance exchanges. Describe briefly what an
insurance exchange is and cite at least one example of a government-run exchange.
ANSWER: A health care insurance exchange is a digital marketplace available in every state where
individuals can shop for health insurance and receive government subsidies, making it
more affordable. The so-called Obamacare is one plan, but several other states have their
own exchanges, such as the plan in California, which is called “Covered California.”
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
STUDENT ENTRY MODE: Basic
LEARNING OBJECTIVES: 1-2b - The Key Elements of the ACA
DATE CREATED: 1/24/2022 3:21 AM
DATE MODIFIED: 2/9/2022 7:43 AM
7. Since ACA was passed in 2010, there have been many efforts to have the bill thrown out or at least watered down.
Most attempts have been unsuccessful. However, one key elements of ACA was successful, which was to:
a. overturn expanded Medicaid availability.
b. eliminate health care exchanges.
c. eliminate the tax penalty for the individual mandate.
d. reduce Medicare spending to fund coverage for non-Medicare recipients.
e. expand regulation of the private health insurance market.
ANSWER: c
FEEDBACK: a. Incorrect. Four of the five choices were accomplished in some respect, with the
exception of the elimination of the tax penalty, which has been set at $0. The
tax penalty was eliminated after the end of 2018, under the terms of the Tax
Cuts and Jobs Act of 2017.
b. Incorrect. Four of the five choices were accomplished in some respect, with the
exception of the elimination of the tax penalty, which has been set at $0. The
tax penalty was eliminated after the end of 2018, under the terms of the Tax
Cuts and Jobs Act of 2017.
c. Correct. Four of the five choices were accomplished in some respect, with the
exception of the elimination of the tax penalty, which has been set at $0. The
tax penalty was eliminated after the end of 2018, under the terms of the Tax
Cuts and Jobs Act of 2017.
Copyright Cengage Learning. Powered by Cognero. Page 4
(Test Bank all Chapters)
Chapter 01: U.S. Medical Care: A System at the Crossroads
1. Charging higher prices for one category of patients in order to provide free or subsidized care to another group is
called:
a. price discrimination.
b. cost shifting.
c. categorical costing.
d. reprehensible and unethical.
e. creative accounting.
ANSWER: b
FEEDBACK: a. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
b. Correct. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
c. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
d. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
e. Incorrect. Cost shifting is the practice of charging higher prices to one group of
patients, usually those with private health insurance, in order to subsidize the
care of those whose payments do not cover the fully allocated cost of the care
they receive.
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-1a - Emergence of the Modern Medical System
DATE CREATED: 1/24/2022 3:04 AM
DATE MODIFIED: 2/9/2022 7:28 AM
2. In the 1960s, individuals paid for the majority of their medical care out of pocket. Increased insurance coverage, both
private and public, displaced out-of-pocket spending as the primary source of payment. By 2020, what was the forecasted
percentage amount of health care spending paid by individuals?
a. 6 percent
b. 10.4 percent
c. 11.6 percent
d. 17.4 percent
e. Whatever amount we are currently spending
ANSWER: b
FEEDBACK: a. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
b. Correct. The amount that individuals paid out of pocket for health care
Copyright Cengage Learning. Powered by Cognero. Page 1
, expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
c. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
d. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
e. Incorrect. The amount that individuals paid out of pocket for health care
expenditures declined from 17.4 percent in the 1960s to a forecasted 10.4
percent in 2020, according to Centers for Medicare and Medicaid Services
(CMS.gov).
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-1c - Recent Changes in the Payment Structure
DATE CREATED: 1/24/2022 3:09 AM
DATE MODIFIED: 2/9/2022 7:41 AM
3. When someone mentions the “managed care” approach to health care, what are they referring to? Be sure to include the
term “horizontal integration” in your answer.
ANSWER: Managed care refers to a delivery system that originally integrated the financing and
provision of medical care into one organization. Now the term encompasses different
arrangements designed to coordinate services and control costs, such as an HMO, a PPO,
or a point-of-service plan. Horizontal integration is the process by which this was carried
out, transforming a highly fragmented industry into a single multihospital system.
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
STUDENT ENTRY MODE: Basic
LEARNING OBJECTIVES: 1-1b - Recent Changes in Medical Care Delivery
DATE CREATED: 1/24/2022 3:14 AM
DATE MODIFIED: 2/9/2022 7:41 AM
4. The 1974 federal legislation that exempted employers from certain state laws governing health insurance was:
a. COBRA.
b. ERISA.
c. CON.
d. HIPAA.
e. SCHIP.
ANSWER: b
FEEDBACK: a. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
b. Correct. Passed to regulate the corporate use of pension funds, the Employee
Copyright Cengage Learning. Powered by Cognero. Page 2
, Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
c. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
d. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
e. Incorrect. Passed to regulate the corporate use of pension funds, the Employee
Retirement and Income Security Act (ERISA) of 1974 also exempted self-
insured health plans from state-level health insurance regulations. Today, over
two-thirds of all workers with employer-sponsored insurance are covered by
self-insured plans.
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-1a - Emergence of the Modern Medical System
DATE CREATED: 1/24/2022 3:15 AM
DATE MODIFIED: 2/9/2022 7:42 AM
5. The key elements of the Affordable Care Act (ACA) passed in 2010 included all of the following except:
a. a mandate that required individuals and every employer with over 50 full-time workers to provide a qualified
health plan at an affordable price or face penalties.
b. expanded insurance regulations include guaranteed issue, guaranteed renewability, and no exclusions for
preexisting conditions.
c. the establishment of insurance exchanges where individuals who did not have access to employer-sponsored
insurance could receive subsidies to purchase private coverage.
d. a federal requirement that states extend Medicaid coverage to individuals with family income less than 138
percent of the federal poverty level.
e. price controls on brand name pharmaceuticals.
ANSWER: e
FEEDBACK: a. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
b. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
c. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
d. Incorrect. Mandates, new insurance regulation, health insurance exchanges,
Copyright Cengage Learning. Powered by Cognero. Page 3
, and a mandatory Medicaid expansion were all part of the original ACA passed
in 2010. Two years later, the Supreme Court ruled that states were not required
to expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
e. Correct. Mandates, new insurance regulation, health insurance exchanges, and
a mandatory Medicaid expansion were all part of the original ACA passed in
2010. Two years later, the Supreme Court ruled that states were not required to
expand Medicaid coverage, but could do so voluntarily. Pharmaceutical price
controls were not a part of the legislation.
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: 1-2b - The Key Elements of the ACA
DATE CREATED: 1/24/2022 3:18 AM
DATE MODIFIED: 2/9/2022 7:42 AM
6. One of the key elements of ACA was the establishment of health care insurance exchanges. Describe briefly what an
insurance exchange is and cite at least one example of a government-run exchange.
ANSWER: A health care insurance exchange is a digital marketplace available in every state where
individuals can shop for health insurance and receive government subsidies, making it
more affordable. The so-called Obamacare is one plan, but several other states have their
own exchanges, such as the plan in California, which is called “Covered California.”
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
STUDENT ENTRY MODE: Basic
LEARNING OBJECTIVES: 1-2b - The Key Elements of the ACA
DATE CREATED: 1/24/2022 3:21 AM
DATE MODIFIED: 2/9/2022 7:43 AM
7. Since ACA was passed in 2010, there have been many efforts to have the bill thrown out or at least watered down.
Most attempts have been unsuccessful. However, one key elements of ACA was successful, which was to:
a. overturn expanded Medicaid availability.
b. eliminate health care exchanges.
c. eliminate the tax penalty for the individual mandate.
d. reduce Medicare spending to fund coverage for non-Medicare recipients.
e. expand regulation of the private health insurance market.
ANSWER: c
FEEDBACK: a. Incorrect. Four of the five choices were accomplished in some respect, with the
exception of the elimination of the tax penalty, which has been set at $0. The
tax penalty was eliminated after the end of 2018, under the terms of the Tax
Cuts and Jobs Act of 2017.
b. Incorrect. Four of the five choices were accomplished in some respect, with the
exception of the elimination of the tax penalty, which has been set at $0. The
tax penalty was eliminated after the end of 2018, under the terms of the Tax
Cuts and Jobs Act of 2017.
c. Correct. Four of the five choices were accomplished in some respect, with the
exception of the elimination of the tax penalty, which has been set at $0. The
tax penalty was eliminated after the end of 2018, under the terms of the Tax
Cuts and Jobs Act of 2017.
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