Part A (30% of the total marks): Short Question: Economic Environment Study Find an article in a recent newspaper or magazine illustrating a change in price or quantity in some market. Analyse the situation using economic reasoning.
1. Has there been an increase or decrease in demand? Identify the factor(s) that could shift the demand. Explain your answer. (10 marks)
2. Has there been an increase or decrease in supply? Identify the factors that could shift the supply curve. Explain your answer. (10 marks)
3. Draw a supply-and-demand graph to explain each of this change. Be sure to label your graph and clearly indicate which curve shifts. (10 marks)
You are required to turn in a copy of the article along with your explanation.
Part B (30% of the total marks): Case Study: Malaysian Healthcare. Where are we heading?
As part of the privatization policy started in the early 1980s, the government has in 1983 commissioned a study on health service planning with a grant from the Asian Development Bank. The report was completed in 1985, but was not released for public consideration. It was learnt that the report made a few recommendations, among them were the creation of a National Health Security Fund., selective privatization of certain medical services and development of health management organization (HMOs). In the Seventh Malaysia Plan (1996-2000), it was stated that “the Government will gradually reduce its role in the provision of health services and increase its regulatory and enforcement functions. A health financial scheme to meet health care costs will also be implemented. However, for the low income group, access to health services will be assured through assistance from the government”. The government has undertaken several feasibility studies on the establishment of a National Health Financial Scheme. The latest was by a consultant from Australia which was asked to study the details of financial mechanism of the proposed National Health Financing Scheme (NHFS). Very little is known about the proposed scheme. So far little consultation was done with the interest groups such as general public, civil rights groups, consumer groups and medical associations. This perceived lack of transparency has created a lot of unhappiness and uncertainties among interested groups. According to the certain sources, the Ministry of Health’s proposal on NHFS has the following components. These are: i. The National Health Fund There will be an establishment of a new fund known as The National Health Fund. It will pay for the treatment of all the conditions/illnesses that are specified in the “Essential Health Benefit Package”. Payments will be made to both the MOH hospitals and clinics as well as to the private hospitals and GP clinics. But few things are known as the mechanism of how this fund is to be set up and who will contribute to this fund.
ii. Mandatory Monthly Contributions. It is possible that one source for this fund will be a mandatory monthly contribution not unlike EPF contributions by both employers, employees and self-employed. The government will also make payment to this fund for government servants, pensioners the poor as well as the handicapped
iii. Essential Health Benefit Packages The fund will make payments for treatment under the essential Health. Benefits Package. The package has not yet been made known
iv. Restructured MOH Hospitals and Clinics With the establishment of a National Health Financial scheme, the government would restructure government hospitals and clinics. The ultimate plan may be to corporatise these hospitals. An example of this is the National Heart Institute (IJN) which was privatized in 1992.
v. The Private Sector The NHFS will also pay for visits to general practitioners. There are two models of making payments: on a fee-for-service basis or on a capitation basis. The National Health Fund will also cover either fully or a portion of the costs for the treatment of conditions listed under the “Essential Packages” even in private hospitals.
vi. Private Insurance for Extra Coverage Richer families have the option of purchasing additional private insurance packages to top up for the payment of conditions for which the National Health Fund will pay only a portion of the costs that private hospitals charge. The private insurance packages will also cover conditions not specified in the Essential package underwritten by the National Health Financial Scheme.
vii. The National Health Financing Authority A new body will be set up to oversee the overall administration and evaluation of the new health care system. How this would be constituted and run has not been made known.
The setting up of this National Health Financial Scheme will have a very great impact on the lives of everyone. It will undoubtedly shift the burden of healthcare from the government to the ordinary citizens initially. Whether it will be cost effective in the long run, to the government as well as to the people, remains to be seen and will need to be studied very carefully.
Source: Hsu, D. R., 2006. Dr Hsu' Forum. [Online] Available at: http://www.thestar.com.my/News/Nation/2013/08/18/Plans-for-a-healthier-Malaysia/ [Accessed 13 July 2014].
Question: Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of RM1000, yet a person with health insurance pays only RM200 out of pocket. Her insurance company pays the remaining RM800. (The insurance company recoups the RM800 through premiums, through premiums, but the premium a person pays does not depend on how many procedures that person choose to undertake)
1) Draw the demand curve in the market for medical care. Show the quantity of procedures demanded if each procedure has a price of RM1000. (5 marks)
2) On your diagram, show the quantity of procedures demanded if consumers pay only RM200 per procedure. If the cost of each procedure to society is truly RM1000, and if individuals have health insurance as just described, will the number of procedures performed maximize total surplus? Explain. (5 marks)
3) Economist often blame the health insurance system for excessive use of medical care. Given your analysis, why might the use of care be viewed as “excessive”? (10 marks)
4) What sort of policies might prevent this excessive use? Explain. (10 marks)
Part C (40% of the total marks): Project Malaysia is one of the last countries in the world to implement a full fledged value-added tax. The only countries of note that have yet to implement a Good and Service Tax (GST) are the United States, Hong Kong, Brunei, and the countries under the Gulf Cooperation Council (GCC). Unlike the existing sales tax and service tax, (GST) is generally charged on the consumption of goods and services at every stage of the supply chain, with the tax burden ultimately borne by the end consumer. This multiple tax levels feature of GST is the fundamental change from the present single-stage sales tax and service tax levied at only one stage of the supply chain. Analyse how GST on buyers and sellers affect the market outcome? Prepare an essay report that analyses and explains the issue using the economic concepts and theory learned in the class. Use at least one explained graph developed in the class and one example to illustrate and clarify the issue. Support your explanations and discussions using at least five (5) academically accepted articles (journal articles, books, credible website source) that are properly cited and referenced in your report. Your essay report should have at least the following parts: • Cover page • Table of Content (containing the main content and page number) • Introduction (8 marks) • The specific issue/s discussed in your topic. • the purpose of your paper • A general idea of what would be discussed in the body of your essay. • Body of Essay Report (20 marks) • Clear discussion and explanation of the economic concept you are using for the articles you chose with proper literature referencing • A clear discussion and explanation of the specific issue/s in the newspaper articles and how they relate to the economic concept with support from literature • Appropriate example(s) to make your points clear • Appropriate use of graph(s) to explain your points • Logical suggestions and solutions to overcome the issue based on the understanding of the economic concept (if possible or needed) • Conclusion (8 marks) • The conclusion should summarize and highlight your findings in the body of the essay and provide a satisfactory ending to your essay. • References • Appendix Formatting (language/layouts) (4 marks)
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