Chapter 12 Quiz Answers PDF

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Chapter 12 Managed Care Key Ideas •

Although current students are likely to have grown up in a managed care environment, it is worthwhile sketching out the general fee-for-service environment that dominated health services delivery in the United States well into the 1990s.

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Managed care represents an integration of health service provision that previously was not available under fee-for-service arrangements.

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Under managed care, households give up some flexibility in choice in order to save money.

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Managed care costs are lower largely because care managers have reduced hospital lengths of stay, the most expensive part of health care.

Teaching Tips •

Talk about health expenditures as a bundle of services, for which one pays a single price. Are people willing to pay more (less) for more (less) complex and complete bundles of service? You may remind them that some people buy expensive cars, and others buy cheaper cars with fewer features.

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This is an opportunity to take advantage of the constant news accounts of managed care. Discussions should focus on the idea that care managers are either providing care more cost-efficiently, or are providing less or lower-quality care.

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Students or their families may have had to choose among the various types of service (HMO, PPO, or POS) indicated in Table 12.1 in the textbook. Their experiences may provide interesting discussions.

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Students may find it useful to put together a spreadsheet to illustrate the cost-saving distinctions between growth rates among various types of managed care and fee-forservice, and shares of the market in the alternatives, following Table 12.4 in the textbook.

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Chapter 12 Multiple-Choice Questions 1. Which of the following statements is false? a. Managed care plans create incentives for patients to seek hospital care, since more volume means more profit.* b. HMO plans, unlike traditional FFS plans, have physician gatekeepers that serve to direct and manage patient care. c. For a fixed monthly fee, managed care plans offer a specific network of physicians, hospitals, and clinics. d. FFS plans give incentives for overconsumption of services, whereas managed care plans may give incentives for underconsumption. 2. Analysts find ___________ to be the most important mechanism by which managed care organizations influence costs: a. b. c. d.

utilization review patient steering selective contracting* admission certification

3. Staff model HMOs: a. b. c. d.

do not use physician gatekeepers. require cost sharing on non-network care. hire and employ their own physicians.* are also known as independent practice associations.

4. POS and IPO plans are sometime known as “managed care light” because: a. b. c. d.

they charge more for services. they impose fewer restrictions than HMOs on consumer choices.* they charge less for services. they provide a greater variety of providers.

5. Which plan offers cost sharing on non-network care and assigns a physician gatekeeper to each patient? a. b. c. d.

FFS. POS.* PPO. HMO.

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6. Which plan offers no provider network and no physician gatekeeper to each patient? a. b. c. d.

FFS.* POS. PPO. HMO.

7. Employer-provided FFS coverage went from ____ percent of the enrollment for covered workers in 1988 to ______ percent of the enrollment for covered workers in 2010. a. b. c. d.

16; 21 38; 30 60; 58 73; 1*

8. Which of the following statements is correct? a. Physicians receiving a fixed fee per member are not subject to utilization review, since they bear the entire financial risk of over-treatment. b. Managed care penetration has been associated with lower hospital costs.* c. Managed care plans prefer to contract with large for-profit hospitals. d. Medicaid coverage is strictly on a FFS basis. 9. Member disenrollment may cause MCOs to: a. b. c. d.

treat less than the optimal number of patients. provide less than the optimal amount of care. cut back on preventive care. Answers (a) and (b) are correct.*

10. Member disenrollment may cause MCOs to: a. b. c. d.

reduce the quality of care, by not offering the latest high-tech treatments.* increase the quality of care, due to the positive externalities. increase price discrimination. decrease price discrimination.

11. Member disenrollment may lead to _________ in MCOs: a. higher quality b. adverse selection, and reduced profits* c. increased price discrimination © 2017 Taylor & Francis

d. decreased price discrimination

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12.Suppose that a physician serves two markets with demand and marginal revenue curves given by P1 = 100 – Q1 P2 = 130 – 2Q2

MR1 = 100 – 2Q1 MR2 = 130 – 4Q2

where Q is quantity demanded of physician services, P is price, and MR is marginal revenue. Assume marginal cost is constant at $10. What price would the physician charge in each market in order to maximize profits? a. b. c. d.

P1 = $45 and P2 = $80. P1 = $55 and P2 = $70.* P1 = $35 and P2 = $50. P1 = $60 and P2 = $60.

13. Suppose that a physician serves two markets with demand and marginal revenue curves given by P1 = 200 – Q1 P2 = 130 – 2Q2

MR1 = 200 – 2Q1 MR2 = 130 – 4Q2

where Q is quantity demanded of physician services, P is price, and MR is marginal revenue. Assume marginal cost is constant at $20. What price would the physician charge in each market in order to maximize profits? a. b. c. d.

P1 = $100 and P2 = $100. P1 = $200 and P2 = $130. P1 = $75 and P2 = $110. P1 = $110 and P2 = $75.*

14. Suppose that Hospital 1 faces demand and marginal revenue curves given by: P1 = 200 – 2Q1

MR1 = 200 – 4Q1

A second hospital enters the market, and the competition changes the demand curve facing Hospital 1 to: Pʹ1 = 100 – Qʹ1

MRʹ1 = 100 – 2Qʹ1

where Q is quantity demanded of hospital services, P is price, and MR is marginal revenue. Assume marginal cost is constant at $20. The competition ____ the quantity produced and ____ the price charged by Hospital 1.

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a. b. c. d.

reduces; reduces* increases; increases increases; decreases decreases; increases

15. HMO enrollments started to accelerate: a. b. c. d.

in the 1930s. after the establishment of Medicare in 1965. with the passage of the HMO Act of 1973. with the incentives to enroll Medicare and Medicaid recipients in the 1980s.*

16. In the externality model of HMOs, the potential loss of consumers leads to: a. b. c. d.

higher enrollments, less care, and lower technology care. smaller enrollments, less care, and lower technology care.* smaller enrollments, more care, and lower technology care. smaller enrollments, more care, and higher technology care.

17. Medicaid Managed Care plans are offered primarily to: a. b. c. d.

the elderly, who are receiving Social Security. the poor, who qualify under state low-income regulations.* urban residents who have been displaced by natural disasters. alcohol and drug abusers.

18. The quality of care provided by managed care organizations is: a. b. c. d.

better than most FFS plans. worse than most FFS plans. no better or worse than most FFS plans.* better than most HMO plans.

19. Managed care _______ hospital utilization; their growth rate in spending is _______ than most FFS plans. a. b. c. d.

reduces; higher. reduces; similar.* increases; lower. increases; higher.

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20. In Cutler and Reber’s model, when FFS plans increase their coinsurance rates relative to MCOs, the ______ leave the FFS plans, and the general health level in the MCOs ________. a. b. c. d.

least healthy members; decreases least healthy members; increases healthiest members; increases healthiest members; decreases*

21. In Cutler and Reber’s model, when FFS plans increase their coinsurance rates relative to MCOs, the ______ leave the FFS plans, and the general health level in the FFS plans________. a. b. c. d.

least healthy members; decreases least healthy members; increases healthiest members; increases healthiest members; decreases*

22. Increased HMO competition in an insurance market: a. will drive down prices due to increased market discipline. b. will drive up prices of non-HMO care due to HMOs skimming the healthiest patients from the other insurers. c. will drive up prices due to reduced market segmentation. d. Answers (a) and (b) are correct.* 23. Increased copayments for FFS, in competition with HMOs are likely to lead to: a. b. c. d.

increased enrollments in HMOs and increased severity of the cases in both.* increased enrollments in HMOs with decreased severity of the cases in both. unchanged enrollment in either the FFS or HMOs. decreased enrollments in HMOs due to higher quality of service in the FFS.

24. It is often difficult to compare treatment costs in managed care and fee-for-service settings because: a. selection bias means that one group may get a disproportionately healthy or unhealthy group of patients.* b. fee-for-service does not charge competitive prices. c. managed care may price monopolistically. d. Answers (b) and (c) are correct.

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25. Compared with non-HMOs, Miller and Luft have found that HMOs had: a. b. c. d.

better care. more prevention activities.* greater hospital use. Answers (a) and (c) are correct.

26. Polsky and Nicholson decompose the differences between HMOs and non-HMOs into differences in risk selection, utilization, and price. They find that the HMOs have ____ expenditures largely due to ____. a. b. c. d.

lower expenditures; lower prices paid for services* lower expenditures; lower utilization higher expenditures; more favorable risk selection higher expenditures; higher utilization

27. If MCO costs are lower than FFS costs, then a once-and-for-all time shift toward MCOs will: a. permanently reduce the growth rate of health expenditures. b. have no impact on the growth rate of health expenditures. c. reduce the growth rate of health expenditures temporarily during the time of the shift.* d. will be important only if MCO costs inflate at lower rates than FFS costs. 28. Suppose that managed care costs $3,000 per enrollee and FFS costs $4,000 per enrollee and each enrolls one-half of the population. Suppose each sees their costs increase by 5 percent over the course of a year. At the end of the year, average patient costs across both groups will have: a. b. c. d.

increased from $3,000 to $3,150. increased from $3,500 to $3,675.* increased from $4,000 to $4,200. stayed constant.

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29. Suppose that managed care costs $3,000 per enrollee and FFS costs $4,000 per enrollee and each enrolls one-half of the population. After a year, one-third of the population is enrolled in FFS and two-thirds in managed care. Suppose each sees their costs increase by 5 percent over the course of a year. At the end of the year, average patient costs across both groups will have: a. b. c. d.

increased from $3,500 to $3,850. increased from $3,000 to $3,300. increased from $4,000 to $4,400. stayed constant.*

30. Melnick and colleagues looked at hospital pricing in the presence of managed care. One tendency they did NOT find was: a. if the PPO had a larger share of the hospital’s business, it was able to negotiate a higher price.* b. controlling for other factors, the PPO paid a higher price to hospitals located in less competitive markets. c. the more dependent the PPO was on a hospital, the higher price the PPO paid. d. hospitals with high occupancy located in markets with high average occupancy charged the PPO higher prices. 31. Pay for Performance (P4P) has had the following impacts on quality and cost containment: a. Quality has improved, but costs have increased. b. Costs have decreased, at the expense of lower quality. c. A wide variety of studies have found mixed results relating both to costs and quality.* d. The impacts depend on the managed care share of the market. 32. In comparing managed care and fee-for-service care in a 2010 article, Fang and Rizzo conclude that: a. b. c. d.

managed care and fee-for-service care are now quite similar.* managed care imposes considerably more utilization review. unlike fee for service, managed care still requires prior authorization. Answers (b) and (c) are correct.

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33. Accountable Care Organizations (ACOs) are primarily accountable for: a. b. c. d.

integrated information technology systems. quality improvement and cost reduction.* reduction of inpatient care. coordination of care.

34. Compared with more traditional managed care organizations (MCOs), Accountable Care Organizations (ACOs) are generally: a. b. c. d.

smaller. more focused on reduction of outpatient care. more focused on patient outcomes. Answers (a) and (c) are correct.*

35. Under the Affordable Care Act, all managed care organizations must: a. b. c. d.

provide the 10 essential benefits categories.* contract with states for Medicaid enrollees. reduce patient costs. increase patient enrollments.

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