Given the Current Structure of Health-Care Finance, Which of the Following

question 59

Multiple Choice

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

• A) The demand for health-care services will decrease.
• B) The prices of health-care services will grow less rapidly than has been the case during the last three decades.
• C) The real (adjusted for inflation) expenditures on Medicare and the taxes to finance the program will tend to decline.
• D) The health-care inflation and spending growth of recent decades will continue or even accelerate.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to assign manufacturing overhead costs to individual units of production, based on a chosen activity base.

Denominator Level

In cost accounting, it refers to the standard quantity or activity used in calculating the predetermined overhead rate.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to products, changing with the level of production.

Efficiency Variance

A measure in cost accounting that calculates the difference between the actual quantity of input used and the standard amount expected to be used, multiplied by the standard price.