2011-2 1. (8) The PPACA requires that employer health insurance costs above $27,500 annually for family coverage and $10,200 for individual coverage be subject to a tax of 4%0 percent. This is the “Cadillac Tax.” Some have argued that this is one of the few elements of the legislation that has the potential to “bend the cost curve.” Explain the argument that leads from taxes on employer sponsored health insurance to lower health care costs. What evidence is there to support this? 2. (6) A. Describe how the “backlash against managed care” may have resulted in higher health insurance premiums. B. Describe how “provider consolidation” may have resulted in higher health insurance premiums. 3. (8) Dr. Bentley, Alabama’s new governor, is a proponent of Consumer Directed Health Plans (CDHP) and has as yet undisclosed plans to encourage their use in the state. In anticipation of these plans, please do the following: A. Briefly summarize how a CDHP operates. B. Describe how such plans are supposed to achieve health care cost savings. C. Summarize the extent of the evidence on how effective these plans have been in reducing health care spending. D. Discuss the nature of the adverse or favorable selection that may arise in these types of plans. 4. (8) It has been argued that larger out-of-pocket employee premium contributions are the result of more two-earner households in the labor market. Sketch out the economics argument that leads to this result. 2011-3 1. (8) Answer all of the following: A. How is the Medicare Hospital Insurance (HI) Trust Fund financed? B. How is the Supplemental Medical Insurance (SMI) Trust Fund financed? C. The Medicare program is often said to be in crisis by the year 2020 or so. How do the HI and SMI Trust Funds affect this crisis? How do they affect the broader issue of government spending on entitlements? 2. (7) Your widowed grandmother is 70 years old and is currently covered by Medicare. Her health has been good but she worries about ending up in a nursing home. She asks you if she should buy long term care insurance. What do you advise her? (Be sure to explain your advice.) 3. (8) Your aunt will become eligible for Medicare later this year. She is reasonably healthy. She understands Medicare Part A and knows she will have to pay a premium for Part B coverage. However, she is a bit unclear about Part D, Medicare Advantage and Medigap coverage. In a brief note to her, summarize these programs and offer her some advice on whether she should take any or all of these. She is a smart lady and will expect you to justify your recommendations. 4. (7) Suppose the opticians in Alabama want the state to enact legislation requiring that all private health insurance plans in the state include coverage for eye exams, eyeglasses and contact lenses. You are the health policy analyst for the governor. Prepare a short memo discussing the extent to which such legislation will actually expand insura ...

1. 2011-2
1.
(8) The PPACA requires that employer health insurance costs
above $27,500 annually for family coverage and $10,200 for
individual coverage be subject to a tax of 4%0 percent. This is
the “Cadillac Tax.” Some have argued that this is one of the
few elements of the legislation that has the potential to “bend
the cost curve.” Explain the argument that leads from taxes on
employer sponsored health insurance to lower health care costs.
What evidence is there to support this?
2.
(6) A. Describe how the “backlash against managed care” may
have resulted in higher health insurance premiums. B. Describe
how “provider consolidation” may have resulted in higher
health insurance premiums.
3.
(8) Dr. Bentley, Alabama’s new governor, is a proponent of
Consumer Directed Health Plans (CDHP) and has as yet
undisclosed plans to encourage their use in the state. In
anticipation of these plans, please do the following:
A.
Briefly summarize how a CDHP operates.
B.
Describe how such plans are supposed to achieve health care
cost savings.
C.
Summarize the extent of the evidence on how effective these
plans have been in reducing

2. health care spending.
D.
Discuss the nature of the adverse or favorable selection that
may arise in these types of plans.
4.
(8) It has been argued that larger out-of-pocket employee
premium contributions are the result of more two-earner
households in the labor market. Sketch out the economics
argument that leads to this result.
2011-3
1.
(8) Answer all of the following:
A.
How is the Medicare Hospital Insurance (HI) Trust Fund
financed?
B.
How is the Supplemental Medical Insurance (SMI) Trust Fund
financed?
C.
The Medicare program is often said to be in crisis by the year
2020 or so. How do the HI
and SMI Trust Funds affect this crisis? How do they affect the
broader issue of
government spending on entitlements?
2.
(7) Your widowed grandmother is 70 years old and is currently

3. covered by Medicare. Her health has been good but she worries
about ending up in a nursing home. She asks you if she should
buy long term care insurance. What do you advise her? (Be
sure to explain your advice.)
3.
(8) Your aunt will become eligible for Medicare later this year.
She is reasonably healthy. She understands Medicare Part A
and knows she will have to pay a premium for Part B coverage.
However, she is a bit unclear about Part D, Medicare Advantage
and Medigap coverage. In a brief note to her, summarize these
programs and offer her some advice on whether she should take
any or all of these. She is a smart lady and will expect you to
justify your recommendations.
4.
(7) Suppose the opticians in Alabama want the state to enact
legislation requiring that all private health insurance plans in
the state include coverage for eye exams, eyeglasses and contact
lenses. You are the health policy analyst for the governor.
Prepare a short memo discussing the extent to which such
legislation will actually expand insurance coverage for these
services and why.
2012-2
Answer all questions in the space provided. Point values are in
parentheses.
1.
(6) Information on the quality of health plans is valuable in its
own right. However, knowledge of health plan quality is argued
to increase employee price sensitivity with respect to health
plans as well. How is this so? What evidence do you have for
this effect?

4. 2.
(6) Some have argued that larger out-of-pocket employee
premium contributions are the result of more two-earner
households in the labor market. Sketch out the economic
argument for this result.
3.
(6) A number of managed care plans have identified “centers of
excellence” for the provision of high cost surgical procedures.
In some cases the managed care plans agree to pay travel costs
for the patient and a caregiver to go several hundred miles to
undergo the treatment. Discuss these practices in the context of
the principles of selective contracting.
4.
(6) Many health policy analysts have argued that the tax
treatment of employer sponsored health insurance is one of the
fundamental reasons for high health care costs in the U.S.
Trace the economic logic that leads from taxing employer-
sponsored health insurance as income to reducing health care
costs. What evidence can you bring to bear on this issue?
5.
(6) The advocates of consumer directed health plans (CDHPs)
argue that they will reduce health care spending and make
people more effective consumers of care. Describe the key
elements of a CDHP and sketch the argument for how it results
in lower spending. Summarize the evidence to date on the
effectiveness of these plans.
2012-3
Answer all questions in the space provided. (Point values in
parentheses.)
1.

5. (6) Many states are concerned about the pension and retiree
health benefits obligations that arise from the promises that the
states have made to state employees. Suppose the governor
asked you to summarize the options for reducing the state’s
obligations for retiree health insurance.
A. Describe the nature of retiree health benefits typically
provided to retirees by large public and private employers.
B. Suggest two proposals to reduce these costs to government.
Briefly indicate why/how each proposal would save money.
C. What are the labor market consequences, if any, of your
proposals in B?
2.
(8) Earlier this month the trustees of the Medicare Trust Fund
presented their annual report and indicated that the Trust Fund
will be exhausted by 2024, the same date as last year.
A. What does it mean to say that the “Trust Fund will be
exhausted”?
B. Over the years, people on each side of the political aisle have
proposed a “premium subsidy” plan to try to control Medicare’s
spending. What are the key features of a premium subsidy
plan? How is it supposed to reduce Medicare spending?
3.
(6) Your aunt is 60 and thinking about her retirement. Her
health is good, but she is on her own and wonders if she should
buy a long term care policy. What do you advise her? (Be sure
to explain your advice.)
4.
(10) The Patient Protection and Affordable Care Act (PPACA)

6. gives states the opportunity to establish health insurance
exchanges.
A. Describe three key decisions (of many) that the states have
to make. Which option do you tentatively recommend for each
decision? Why?
B. Discuss three options the states have for paying for the costs
of running their exchange.
2013-2
Answer all questions in the space provided. (Point values are
given in parentheses.)
1.
(6) In recent weeks there have been press reports that health
care plans offered in the exchanges are likely to be dominated
by managed care plans with narrow panels of providers. What
advantage would a narrow panel managed care plan have in the
health insurance market? Why? What disadvantages? Why?
2.
(8) Some have argued that concentration in the health insurance
industry has led to lower provider prices. Others have argued
that hospital and physician consolidation in the last decade has
led to higher insurance premiums. Discuss the economic
rationale underlying each view point. Briefly summarize the
empirical evidence supporting or refuting each perspective.
3.
(6) You are a small employer with 120 full time employees.
You currently offer health insurance to your employees. Under
the Patient Protection and Affordable Care Act (PPACA) you,
of course, are required to continue to offer coverage or pay a
penalty of $2,000 per worker (after the first 30). Some have

7. argued that a small employer like you will simply stop
providing health insurance and pay the penalty. Does this make
good economic sense? Provide an analysis.
4.
(6) Former head of the Council of Economic Advisors, Martin
Feldstein, has proposed that the federal tax code be revised to
cap the total amount of deductions and exemptions at, say, 2
percent of adjusted gross income. Employer-sponsored health
insurance is included among the exemptions. If this proposal
were to be implemented, what effect would it have on: (A) the
amount of health insurance obtained through employers? (B)
health care spending? (C) on money wages provided as
compensation? In each instance indicate why such an outcome
is expected.
5.
(4) Consumer directed health plans, i.e., high deductible health
plans with a health savings accounts (HSAs), are supposed to
reduce health care spending. What are the mechanisms whereby
this occurs? How big are the estimates of savings?
2013-3
Answer all questions in the space provided. Point values in
parentheses.
1.
(6) Earlier this month the Birmingham Business Journal
reported that many small businesses in Alabama were
converting to self-insurance in anticipation of the
implementation of the Patient Protection and Affordable Care
Act (PPACA). If a small employer wanted to continue to offer
health insurance to his/her employees, what advantages does
self insurance give them? Would such a shift be of concern to a
small business (SHOP) exchange? Why? Aren’t small
employers too small to be self-insured?

8. 2.
(6) Most states have chosen (or defaulted) into the “market
facilitator” model of the individual health insurance exchange.
What are the key functions of this model? What is the
mechanism that is supposed to allow them to control the rate of
increase in health insurance premiums?
3.
(8) In a report released this spring, the Society of Actuaries
estimated that the implementation of the exchanges, as required
by the PPACA, would lead to very different levels of premium
increases in different states. Ohio and Wisconsin, for example,
were predicted to have average premium increases in the
neighborhood of 80 percent. In contrast, New York and
Vermont were predicted to have average premium decreases of
about 12 percent. Discuss two reasons why these states may see
such wide differences in the average premiums in their non-
group (i.e., individual) insurance markets.
4.
(6) Your aunt will become eligible for Medicare later this year.
She is reasonably healthy. She understands Medicare Part A
and knows she will have to pay a premium for Part B coverage.
However, she is a bit unclear about Part D, Medicare Advantage
and Medigap coverage. In a brief note to her, summarize these
programs and offer her some advice on whether she should take
any or all of these. She is a smart lady and will expect you to
justify your recommendations.
5.
(4) Suppose the implementation of the exchanges in the PPACA
had to be delayed for a year or two due to the complexity of
establishing the exchanges. Instead, the Congress decided to
continue the high risk pools that were intended to be a
transition to the full PPACA. Summarize what we know about

9. high risk pools. Who would be eligible for coverage? What
sort of coverage would be available? What sort of premiums
would be established? Would the premiums likely cover plan
costs?
2014-2
Answer all questions in the space provided. (Point values in
parentheses.)
1. (9) Discuss the four factors under which managed care firms
were found to be able to negotiate lower prices with hospitals.
Explain the concept of “reference pricing.” Discuss how it can
be thought of as a form of selective contracting. Finally,
explain how selective contracting could be employed in
contracting for “centers of excellence.”
2. (8) Many economists have argued that a key element in
“bending the cost curve” in health care is to change the tax
treatment of employer sponsored health insurance. Discuss how
changes in this tax treatment are supposed to lead to lower
health care costs. Some have argued that the “Cadillac Tax” on
generous employer sponsored health insurance plans is one of
the few cost control devices in the Affordable Care Act.
Describe this tax and how it’s supposed to control costs.
3. (6) The advocates of consumer directed health plans
(CDHPs) argue that they will reduce health care spending and
make people more effective consumers of care. Describe the
key elements of a CDHP and sketch the argument for how it
results in lower spending. Summarize the evidence to date on
the effectiveness of these plans.
4. (7) You are a small employer with 120 full time employees.
You currently offer health insurance to your employees. Under
the Patient Protection and Affordable Care Act (ACA) you, of

10. course, are required to continue to offer coverage or pay a
penalty of $2,000 per worker (after the first 30). Some have
argued that a small employer like you will simply stop
providing health insurance and pay the penalty. Does this make
good economic sense? Provide an analysis.
2014-3
Answer all questions in the space provided. Point values are in
parentheses.
1. (9) A key function of the health insurance exchanges is to
provide risk mitigation across the plans in the exchange. Even
though the premiums are not allowed to reflect health status, the
payments that the plans get will take risk into consideration.
Please describe each of the mechanisms that the ACA requires
to be used: transitional reinsurance, the risk-corridor program,
and the formal risk adjustment process.
2. (8) In a report released this spring, the Society of Actuaries
estimated that the implementation of the exchanges, as required
by the ACA, would lead to very different levels of premium
increases in different states. Ohio and Wisconsin, for example,
were predicted to have average premium increases in the
neighborhood of 80 percent. In contrast, New York and
Vermont were predicted to have average premium decreases of
about 12 percent. Discuss why these states may see such wide
differences in the average premiums in their non-group (i.e.,
individual) insurance markets.
3. (6) Your widowed grandmother is 65 years old and is now
covered by Medicare. Her health has been good but she worries
about ending up in a nursing home. She asks you if she should
buy long term care insurance. What do you advise her? (Be
sure to explain your advice.)
4. (7) There is good empirical evidence of “crowd-out” as it

11. affects Medicaid and CHIP [Children’s Health Insurance Plans].
Define crowd-out and discuss how it applies in states that have
expanded their Medicaid programs as a result of the ACA. Do
you think the ACA motivated effects for adults will be larger or
smaller in magnitude than those seen for the earlier Medicaid
and CHIP expansions for children? Why?
2015-2
Answer all questions in the space provided. Point values are in
parentheses.
1.
(6) A. Describe how the “backlash against managed care” may
have resulted in higher health insurance premiums. B. Describe
how “provider consolidation” may have resulted in higher
health insurance premiums.
2.
(6) Information on the quality of health plans is valuable in its
own right. However, knowledge of health plan quality is argued
to increase employee price sensitivity with respect to health
plans as well. How is this so? What evidence do you have for
this effect?
3.
(6) Many health policy analysts have argued that the tax
treatment of employer sponsored health insurance is one of the
fundamental reasons for high health care costs in the U.S.
Trace the economic logic that leads from taxing employer-
sponsored health insurance as income to reducing health care
costs. What evidence can you bring to bear on this issue?
4.
(6) Consumer directed health plans, i.e., high deductible health
plans with a health savings accounts (HSAs), are supposed to

12. reduce health care spending. What are the mechanisms whereby
this occurs? How big are the estimates of savings?
5.
(6) The typical single-worker health insurance plan offered by
employers costs about $6,000 per year. The Affordable Care
Act (ACA) requires larger employers to provide health
insurance to their workers or pay a $2,000 penalty per full-time
employee. Some have argued that larger employers, currently
providing coverage, will drop health insurance and simply pay
the $2,000 penalty, saving approximately $4,000 per worker per
year. Evaluate the economic soundness of this analysis.
2015-3
Answer all questions in the space provided. Point values are in
parentheses.
1.
(8) What are the key provisions of the Affordable Care Act that
apply to the small group market? What sort of changes do you
expect to see in that insurance market as a result of the
legislation? Why? These changes may relate to employers
offering coverage, premiums, sources of coverage, the effects of
the subsidies, etc.
2.
(8) Last fall the trustees of the Medicare Trust Fund presented
their annual report and indicated that the Trust Fund will be
exhausted by 2030.
A. What does it mean to say that the “Trust Fund will be
exhausted”?
B. Over the years, people on each side of the political aisle have
proposed a “premium subsidy” plan to try to control Medicare’s
spending. What are the key features of a premium subsidy
plan? How is it supposed to reduce Medicare spending?

13. 3.
(6) There is good empirical evidence of “crowd-out” as it
affects Medicaid and CHIP [Children’s Health Insurance
Programs]. Define crowd-out and discuss how it applies in
states that have expanded their Medicaid programs as a result of
the ACA. Do you think the ACA motivated effects for adults
will be larger or smaller in magnitude than those seen for the
earlier Medicaid and CHIP expansions for children? Why?
4.
(8) A key function of the health insurance exchanges is to
provide risk mitigation across the plans in the exchange. Even
though the premiums are not allowed to reflect health status, the
payments that the plans get will take risk into consideration.
Please describe each of the mechanisms that the ACA requires
to be used: transitional reinsurance, the risk-corridor program,
and the formal risk adjustment process.
PAGE
2