Strategy Healthcare

1. Indicate the best answer to the question among theoptions provided 

Inthe U.S. people who are 65 or older (senior citizens) are eligible forMedicare, which is a health insurance program funded by the U.S. government.Several years ago, Medicare began to cover prescription drugs under a programcalled Medicare Part D. Under Part D, private insurance companies can sellinsurance plans that will pay for the prescription drug expenses of seniorcitizens.


Consider the competition amongprivate insurance companies that offer Medicare Part D insurance plans tosenior citizens in the U.S. Which of the following would be expected to DECREASE the aggressiveness of pricerivalry in the Medicare Part D insurance market? 


a)     Underthe law, insurers have little flexibility in terms of what drugs are covered bytheir insurance plans.

b)     Eachof the insurers is required to provide information on their plans to Medicarein a standardized format; Medicare publishes this standardized informationonline and in publications mailed to every Medicare-eligible citizen. 

c)     Overthe last two decades, there has been significant entry by new insurers into theprescription drug insurance industry.

d)     Someinsurers have obtained exclusive endorsements from third parties such as theAmerican Association of Retired Persons (AARP, the largest advocacy group inthe U.S. representing senior citizens) and Prevention magazine (a well-knownmagazine focusing on health issues relevant to seniors). 

2. Consideryour answer to question 3 above. Do you believe that the source of thereduction in price rivalry that you identified should increase the profits ofthe Part D insurer? If so, why?  If not,why not?

Provide a simple one-page answer to the question. You will be graded on the quality (correctness and effectiveness) of your answer. 


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