2023 DHS Prelims Paper 1 QP

1 Name: Centre/ Index Number: Class: DUNMAN HIGH SCHOOL Preliminary Examination Year 6 Economics (Higher 2) 9570/1 Paper 1 Case Study Questions 20 September 2023 2 hours 30 minutes No Additional Materials are required READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 9 printed pages including this cover page. [Turn over

2 Question 1: US Healthcare and Pharmaceutical Industries Extract 1: US government's responsibility for public health Public health promotes and protects the health of all people and their communities. While the healthcare industry treats people who are sick, public health aims to prevent people from getting sick or injured in the first place. While healthcare industry fo cuses on individual patients, public health focuses on entire populations. Every day, the public health field is working – often behind the scenes – to prevent hazards and keep people healthy. Examples of public health program mes include tracking disease outbreaks to reduce the spread of infectious disease, setting safety standards to protect workers and developing school nutrition programmes to ensure kids have access to healthy food. Governmental responsibilities for public health extend beyond voluntar y activities and services to include additional authorities such as quarantine, mandatory immunisation laws, and regulatory authorities. The state's partnership functions by encouraging residents to do things that benefit their health (e.g., physical activity) or creating conditions to promote good health, and requiring certain actions (e.g., food safety). Source: Community Health Services Administration Handbook, 3 May 2023 Extract 2: US healthcare industry The healthcare industry is in many ways the most consequential part of the United States economy. It is a fundamental part of people’s lives, supporting their health and well-being. Early prevention, which is relatively inexpensive, can prevent dire and expensive healthcare problems later in life. This can reduce the long-term healthcare costs for both individuals and society. Moreover, improved healthcare can lead to healthier individuals who are less likely to be absent from work due to illness. This enhances overall workforce productivity and economic output. Healthcare is growing as a share of the economy and government budgets in ways that appear unsustainable. As healthcare has become a larger part of the economy, a higher share of healthcare funding has been provided by government. This increase comes from the rising share of the population enrolled in both Medicare and Medicaid. Medicare provides health insurance for older adults and those with disabilities, while Medicaid subsidises healthcare costs for people with low incomes. If health expenditures continue to increase as a share of government spending, the increase will eventually necessitate either tax increases or reduced spending on other important government functions like public safety, infrastructure, research and development, and education. Source: Ryan Nunn, Jana Parsons and Jay Shambaugh, The Brookings Institution, March 10 2020

3 Fig. 1: US Healthcare Spending Compared to Other Countries in 2021 Fig. 2: Annual Growth Rate of US Healthcare Spending Compared to Other Countries Source: healthsystemtracker.org Extract 3: The biggest problems with the U.S. healthcare system High Prices of Medical Services - High price is the primary reason that prevents Americans from accessing healthcare services. Americans with below -average incomes are much more affected, since visiting a doctor when sick, getting a recommended test, or follow-up care has become unaffordable. $12,914 $6,125 9.9% 7.3% 5.5% 5.6% 7.2% 5.3% 4.1% 4.6% 3.3% 4.1% 5.0% 3.5% 2.6% 9.3%

4 Lack of Insurance Coverage - Health insurance coverage is uneven; minorities and deprived families lack insurance coverage. The United States Census Bureau annually reports that around 27.5 million lower-income workers did not have health insurance. Lack of health insurance is associated with increased mortality, ranging from 30 - 90 thousand deaths per year. Difficulty in finding physicians and specialists - With a lack of accessible doctor credentials and accomplishments, health consumers cannot easily find a good doctor. Instead, consumers rely on uninformed online reviews that can help with assessing traits like staff friendliness and wait times. But these platforms do not evaluate a physician’s skill level in helping people with their health disorders. Source: Johonniuss Chemweno, Managed Healthcare Executive, 27 July 2021 Extract 4: Pharmaceutical companies: A conglomerate of monopolies Pharmaceutical companies employ a slew of powerful tactics to gain and keep monopolistic market control and gain profits: from legislative protections such as patents to gaining exclusive rights of production. For instance, this was what Nostrum Laboratories did with nitrofurantoin, first created in 1953 to treat bladder infections. Nirmal Mulye, CEO of Nostrum Laboratories, bought the rights and raised the medication’s price 400% without any additional R&D investments. The rising price of prescription drugs has sparked outrage for more than a decade. That’s largely because medications aren’t like other expensive products. Take a $250,000 sports car or a $20,000 handbag. Both are exorbitantly priced - their retail prices far exceed the cost of production. At the same time, if people are willing to pay—despite a near-endless array of less-expensive options—then these prices are market driven and, therefore, fair. By contrast, monopolistic pricing in healthcare is both excessive and unfair, leaving millions of patients with only one choice: pay up or suffer. Drug companies know that’s not really a choice, and they take full advantage. Last year, Americans paid US$60 billion for prescription drugs, accounting for 16.7% of all healthcare expenditures. But don’t assume that the large (and ever -rising) price tag for U.S. medications reflects massive improvements in drug efficacy. When the Institute for Clinical and Economic Review (ICER) studied price increases for some of the most expensive drugs, it found 70% of t hose increases (accounting for US$805 million) were unsupported by clinical evidence. Yesterday’s model of drug development is a rarity nowadays. Most drug companies’ strategies are aimed at minimising risk. Rather than engaging in grueling, expensive and risky R&D processes for product innovation, today’s biopharma giants focus on monetising easy wins. In fact, a recent report found 9 in 10 major drug companies spend less on R&D than on marketing and sales. Source: Robert Pearl, Forbes, 31 January, 2023

5 Figure 3: World’s Biggest Pharmaceutical Companies Source: statista.com (a) Would public health programmes to track disease outbreaks and set safety standards be considered as public goods? Justify your answer. [4] (b) Using Figures 1 and 2, describe the main features of US healthcare spending per capita, both over time and compared with other countries. [2] (c) Explain two likely sources of market failure in the healthcare industry. [6] (d) A rising share of the US population are enrolled in Medicaid which subsidises healthcare costs for people with low incomes (Extract 2). Discuss whether government subsidy is the best policy to ensure healthcare are allocated desirably in US. [8] (e) Discuss the extent to which