by: Christopher Weaver and Coulter Jones
Aug 10, 2016
Click here to view the full article on WSJ.com
Aug 10, 2016
Click here to view the full article on WSJ.com
TOPICS: Health Economics, Moral Hazard
SUMMARY: New medical devices allow doctors to test patients themselves, leading to fast-growing Medicare payouts, according to the latest data.
CLASSROOM APPLICATION: Instructors can use the article as a case of moral hazard with hidden information. One issue to analyze is whether the financial incentives offered by Medicare cause excessive use in the sense of economic efficiency of medical treatments.
QUESTIONS:
1. (Advanced) Define moral hazard. What is moral hazard with hidden information? Would a physician profiting from ordering medical tests for patients create an environment of moral hazard with hidden information?
2. (Introductory) Does the article offer anecdotal evidence that changes in Medicare sets up payments for new services causes inefficiently excessive use of the services?
3. (Advanced) Does a physician's exceptional use of a medical test or treatment in which the physician owns the necessary equipment indicate that the physician is responding to financial incentives? What other factors could explain the physician's exceptional use? How could economists determine whether the financial incentives motivate the physician?
1. (Advanced) Define moral hazard. What is moral hazard with hidden information? Would a physician profiting from ordering medical tests for patients create an environment of moral hazard with hidden information?
2. (Introductory) Does the article offer anecdotal evidence that changes in Medicare sets up payments for new services causes inefficiently excessive use of the services?
3. (Advanced) Does a physician's exceptional use of a medical test or treatment in which the physician owns the necessary equipment indicate that the physician is responding to financial incentives? What other factors could explain the physician's exceptional use? How could economists determine whether the financial incentives motivate the physician?
Reviewed By: James Dearden, Lehigh University
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