In an effort to reduce education expenditures, Ohio shuts down two of the five

Healthcare Economics

1. In
an effort to reduce education expenditures, Ohio shuts down two of the five
colleges that train nurses.

a. Using
the traditional supply and demand model, discuss the effects of the budget cut
on three markets: the markets for nurse schooling (tuition and number of
students), nurses (wages and employment), and the health services (prices and
quantity). Use graphs if appropriate.

b. Suppose
that in addition to the above scenario, average household incomes increased due
to a rebound in the automotive industry.
Describe how equilibrium prices and quantities in the health services
market would compare to the situation prior to the combined budget cuts and
increases in the automotive industry.

2. Billy
Sue “produces” health through the consumption of medical care, education, and
food. She has twelve years of schooling
and her level of food consumption is not expected to change this year. The relationship between medical care and
health status is provided in the following table:


M = medical care visits
H = index of health
MP = marginal product of medical care visits
AP = average product of medical care visits

a. Complete
the table.
b. What
is the marginal product if Billy Sue increases her use of medical care from 4
to 5?
c. Graph
the relationship between medical care and health.
d. Graph
the relationship between medical care and both marginal product of medical care
and average product of medical care.
e. Explain
the meaning concept “marginal product of health care.” Why does the marginal product diminish?

3. Ohio
is one of many states that passed Certificate of Need (CON) laws in the
1970s. Many interest groups are in favor
of repealing all CON regulations. Assuming perfect markets, describe in one
page or less, using graphs where appropriate, the effect of a repeal of Ohio’s
CON law on:

a. hospital inpatient market in Ohio

b. long-term care market in Ohio.

Feel free to consult the web for information on CON. Treat part (a) and (b) as separate (no effect
transferring into the other market).

For the following, read the attached article and review the
CDC link provided.

4.a. Assuming that all transplant surgeries are
successful, draw a graph that represents the decision the Arizona legislature
faced. (Hint: Make the X-axis quantity of vaccines, make the Y-axis quantity of
organ transplants)

4.b.On your
graph, indicate the decision the Arizona legislature took.

4.c.What concept
does the graph represent?

4.d. Provide at
least 3 arguments that support/explain your curve.

5. What if the
Centers for Medicare and Medicaid Services decides to require Arizona to
continue providing the same level of vaccination services and cover
organ transplants? Depict this decision on your graph and explain your

6.You are now a
member of the Arizona legislature dealing with a real market (i.e. not
everybody needs vaccines, decision isn’t solely between funding transplants or
vaccines). What would you have decided? Why? Include concepts covered in class
or found in the materials in your explanation.

Arizona Budget Cuts
Put Organ Transplants At Risk
by Ted Robbins

November 17,

In Arizona,
98 low-income patients approved for organ transplants have been told they are
no longer getting them because of state budget cuts.

The patients
receive medical coverage through the Arizona Health Care Cost Containment
System (AHCCCS), the state’s version of Medicaid. While it may be common for
private insurance companies or government agencies to change eligibility
requirements for medical procedures ahead of time, medical ethicists say
authorizing a procedure and then reversing that decision is unheard of.

A Matter Of Heart

Shepherd is 36 and 6-foot-3, but he has to toss baseballs to his 3-year-old
son, Nathan, while sitting in a lawn chair. Shepherd has cardiomyopathy; his
heart muscle is deteriorating. The condition is the result of rheumatic fever
he had as a child. As a teenager, he had his heart valves replaced, but that
was 20 years ago.

muscle’s gotten tired and distended,” Shepherd says. “It’s just worn

You can hear
the weakness in his voice, even though doctors implanted a pacemaker in 2008.
They’ve told Shepherd that he needs a heart transplant to survive.

(pronounced like “access”) was the only health insurance Shepherd
could get because he had a pre-existing condition and, since he was forced to
stop working in his plumbing business, little money. The agency authorized his
transplant more than a year ago.

nurse who’s the transplant coordinator did tell me about two months ago that
I’m the next one of my body size and blood type, so the next [heart] that’s
available is mine,” Shepherd says.

A Question Of Ethics

But as of
Oct. 1, AHCCCS said it is unable to pay for Shepherd’s transplant. In fact,
facing a $1.5 billion budget deficit, Arizona has cut out all state-funded lung
transplants, some bone-marrow transplants and some heart transplants —
including transplants for the condition Shepherd has.

basically renege on what you promised was [going to] be a chance at life is a
very, very bitter indictment of the ethics of the Legislature,” says
Arthur Caplan, head of the Center for Bioethics at the University of

Caplan calls
the reversal “awful” behavior because Arizona is going back on a
covenant it made with its patients, and because these are patients for whom
time is critical — patients who spent months, some years, thinking they were

then stop trying to raise money, stop trying to see what Uncle Fred might be
willing to give them,” Caplan says. “They don’t have the bake sale.
They don’t make the appeal in church.”

Saving Money?

Arizona says
the cuts will save about $4.5 million this year.

No one from
AHCCCS would agree to an interview with NPR. But the state agency provided data
it also gave to legislators to make their decision. It says only 15 percent of
those waiting actually ever find transplant matches. The problem is, however,
that no one knows ahead of time which 15 percent that will be.

The state’s
data also show the procedures have poor outcomes and that most patients die
after the transplants. But critics say the data was cherry-picked, as it
included only patients enrolled in AHCCCS and only for a two-year period.

A coalition
of Arizona transplant centers, including well-known programs at the University
of Arizona and the Mayo Clinic, recently gave the state data for a broader
patient group and a longer time period. It showed much better outcomes.

Waiting Until January

State Rep.
John Kavanagh, a member of the House Appropriations Committee in the Arizona
Legislature, has looked at the new information.

“It’s a
terrible situation,” Kavanagh says, “but we don’t want anybody to die
because of a faulty data set. So if we made a mistake, we’re [going to]
reinstate those that require it.”

Kavanagh is
promising a hearing when the Arizona Legislature convenes in January. He says
the state can cut the money somewhere else.

one patient has found a private bone-marrow donor.

Shepherd says
he and his wife were bitter when they first learned his approval for a new
heart was taken away, but they have learned to appreciate the time and the
medical procedures he has already had.

“If I
were to die because they didn’t give me the transplant, I’ve had the last 18
months with my kids that I wouldn’t have had otherwise because AHCCCS paid for
my pacemaker,” Shepherd says.

Now on
federal disability, he will become eligible for Medicare next year. That gives
him some hope whatever the Arizona Legislature does. Meanwhile, 96 other
patients in Arizona wait.



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