MI_H2_ECONS_(9757_01)_Answers

2018 PU3 H2 Economics EYE Answers CSQ1: Healthcare and Health Insurance (a) Using the information from Extract 1, compare the change in share of health expenditure as a percentage of GDP between Singapore and Ireland from 2011 to 2015. [2] While Singapore’s healthcare expenditure as a percentage of GDP increased, that of Ireland decreased. [1m] In terms of magnitude, the extent of the decrease for Ireland was larger than the increase for Singapore. [1m] (b) Explain how each of the following led to the trend in healthcare expenditure in Singapore. (i) ‘the development and adoption of new and expensive health technologies’ and ‘rising wages’ [4] Both increase COP  fall in supply [1] Fall in supply  increase P and decrease Q [1] Since healthcare is a necessity, demand is price inelastic [1] So, fall in Q is less than prop to increase in P, causing TE to increase [1] (ii) ‘population ageing’ and ‘lifestyle risk factors’ [2] Both lead to an increase in D for healthcare [1] Increase in D  increase in P, Q, and hence TE [1] (c) Explain how the statement “retrenched PMETs from other fields cannot easily enter the healthcare sector due to a mismatch of skills” illustrates a form of inefficiency in the healthcare market. [2] The statement shows inefficiency due to factor immobility [1] This is because the occupational immob ility caused by the lack of skills means that these retrenched PMETs remain unemployed, which causes productive inefficiency (not producing on the PPC) as labour resources are not utilised. [1] Also accept structural unemployment but must be linked to some form of inefficiency for full credit. (d) (i) Explain the source of market failure caused by ‘(h)aving an insurer pay 100 per cent of a patient's bill’ (Extract 2). [2] The action of undergoing medical procedure undertaken by consumer but cost of going for healthcare procedures borne by insurer [1] This creates moral hazard where the c onsumers will overconsume even if the procedures are not necessary / consumers will not be careful about health [1] (ii) With reference to the case material, assess the use of deductibles and co-insurance (Extract 3) to address the market failure in (d)(i). [8] Question analysis: Command word = “assess”  Need 2 sides and an evaluative conclusion Content = “the use of deductibles and co-insurance to address the market failure”  Need to explain how deductibles and co-insurance correct the market failure due to moral hazard and the limitations Context = insurance industry Introduction

2018 PU3 H2 Economics EYE Answers Deductibles and co-insurance are supposed to correct the market failure due to moral hazard in the insurance market. Thesis: Use of the 2 measures solves moral hazard Both the deductible and co-insurance require consumers to co-pay for the healthcare they consume, even though they have insurance. This solves the overconsumption due to