1. How do fee-for-service and capitation payment systems affect the physician’s role as the patient’s agent? What information would you need and how would you use it to determine whether physicians were over- or underutilizing aides in their practice?
2. What is “cost shifting”? Explain why an increase in a hospital’s fixed costs or an increase in the number of uninsured cared for by the hospital will not change the hospital’s profit-maximizing price. Similarly, why would a change in a hospital’s variable costs change the hospital’s profit-maximizing price? How does cost shifting differ from price discrimination?