1. A mandatory health insurance plan costs $4,000. There are three workers. One gets $24,500 in employment income and $500 in investment income. One gets $48,000 in employment income and $2,000 in investment income. The third gets $68,000 in employment income and $7,000 in investment income. A premium-based system would cost each worker $4,000. A wage-tax based system would cost each worker 8.5 percent of wages. An income-tax based system would cost each worker 8 percent of income. For each worker, calculate the cost of the insurance as a share of total income.
E= Employment income $24,500 $48,000 $68,000
I = Investment income $ 500 $ 2,000 $ 7,000
P= Premium cost of insurance $ 4,000 $ 4,000 $ 4,000
Premium as a percentage of income = P/(E + I)
W = Wage tax cost of insurance = 0.085 × E
Wage tax as a percentage of income = W/(E + I)
T = Income tax cost of insurance = 0.080 × (E + I)
Income tax cost as a percentage of income = T/(E + I)
2. Below are data for Australia, Canada, and the United States.
a. How did female life expectancy at birth change between 1995 and 2005?
b. How did expenditure per person change between 1995 and 2005?
c. What conclusions do you draw from these data?
d. If you were the "manager" of the healthcare system in the United States, what would be a sensible response to data like these?
Life Expenditure Expectancy per Person
1995 2005 Change 1995 2005 Change
Australia 80.8 83.3 $2,056 $3,080
Canada 81.1 82.7 $2543 $3,496
United States 78.9 80.4 $4,593 $6,498
3. What's wrong with spending 16 percent of GDP on healthcare?
4. A new treatment of cystic fibrosis costs $2 million. The life expectancy of 1,000 patients who were randomly assigned to the new treatment increased by 3.2 years. What is the cost per life year of the new treatment?
5. Setting up nurse practitioner clinics to serve 20,000 newborns in Georgia would cost $6 million. This would increase life expectancy at birth from 75.1 to 75.3. How many life years would be gained? What is the cost per life year? Should this program be started?