Economics For Healthcare Managers
4th Edition
ISBN: 9781640550483
Author: Robert H. Lee
Publisher: Health Administration Pr
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Chapter 1, Problem 3E
To determine
Insurance plans and tax burden.
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What makes the Earned Income Tax Credit (EITC) different from other poverty-fighting programs?
The amount of the credit is doubled if the head of household is attending college.
The tax credit is phased out gradually, rather than at a specific income cutoff point.
The amount of the credit is not determined by the number of dependent children in the household.
The EITC doesn't require the recipient to pay a minimum amount of income tax in order to receive the credit.
It creates less of an incentive to work than other programs.
Mark earns $18,000 a month as a physician. He becomes disabled under an own occupation definition policy with a 50% prior wages clause because he lost his hearing in a hunting accident. He returns to work as a researcher making $3,000 per month, a reduction of 83.33%. He has a residual benefit provision in his disability policy that calls for monthly benefits of $12,000. What will be his total income per month including any residual benefits?
$3,000 (one time payment)
$12,000 (the greater of his salary or the disability benefits)
$13,000 (the $3,000 plus $10,000 from the residual)
$15,000 (the $12,000 plus the $3,000)
1.3 A mandatory health insurance plan costs $4,000. One worker earns $24,500 in employment income and $500 in investment income. Another worker earns $48,000 in employment income and $2,000 in investment income. A third worker earns $68,000 in employment income and $7,000 in investment income. A premium-based system would cost each worker $4,000. A wage tax–based system would cost each worker 8.5 percent of wages. An income tax–based system would cost each worker 8 percent of income. For each worker, calculate the cost of the insurance as a share of total income.
E = Employment income
I = Investment income
P = Premium cost of insurance
Premium as a percentage of income = P/(E + I)
W = Wage tax cost of insurance = 0.085 × E
Wage tax cost as a percentage of income = W/(E + I)
T = Income tax cost of insurance = 0.080 × (E + I)
Income tax cost as a percentage of income = T/(E + I)
1.4 Which of the plans in exercise 1.3 would impose the larger burden on those with incomes under $25,000: a…
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