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 whetherphysicians 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 ofuninsured 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?
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