Economics Homework Help

1)

A person has end stage renal disease and has life of 3 years left with utility of 0.8. Therapy A cost $100,000 during the first year but extends the life expectancy by 2 years with utility of 0.7 for the first year, but 0.9 for the other 4 years. Another therapy B costs $300,000 during the first year, but extends the life expectancy by 4 years with utility of 0.6 in the first year, but 0.9 in other 6 years. Don’t consider discounting.

1. Find incremental cost-effectiveness ratio $/QALY of Therapy A vs baseline ? 2. Find incremental cost-effectiveness ratio of Therapy A vs Therapy B vs baseline. 3. If you are a doctor which treatment would you recommend ? Suppose you’re an executive of HMO , what will you recommend ? Why ?

2)

• Some years ago a second children’s hospital opened in Virginia despite market analysts suggesting that the population of state only needs one children’s hospital .
  • If you were the Mayor (or Governor or Health Commissioner) trying to decide whether to support the opening of a second children’s hospital, what tools might you use to determine whether it was a good idea?
  • If you were going to conduct a cost-effectiveness or cost-benefit analysis of this decision, describe how you might attempt to do this. What costs would you include? What outcomes would you include?
  • Why would the health care system that opened the second children’s hospital choose to do so? Try to use predominantly economic arguments.
  • From the perspective of a purchaser of children’s hospital services (please consider both a patient’s perspective and an insurance company’s perspective), is it a good or bad thing to have a second children’s hospital? Please argue both sides and consider issues such as prices and quality.