Healthcare analyst: Consumers should avoid purchasing

Question

Healthcare analyst: Consumers should avoid purchasing low-cost insurance plans from a certain health insurance company that has been touted as a resource for those who need to reduce the cost of their monthly premiums. Although the low-cost insurance plan, which costs up to fifty percent less than other insurance plans, has short-term financial benefits, it does have a serious 
drawback: it does not cover brand-name drugs, thereby costing consumers as much as several hundred dollars per month.

In evaluating the columnist's position, it would be most useful for a consumer to determine which of the following?

(A) Whether the reduction in the cost of monthly premiums is likely to be greater than the monthly cost of brand-name drugs
(B) Whether the low-cost insurance plan covers medical procedures that require supplemental use of brand-name drugs
(C) Whether low-cost insurance plans offer consumers the same choice of physicians that higher-cost plans offer
(D) Whether the low-cost insurance plan covers the cost of generic alternatives to brand-name drugs 
(E) Whether surveys indicate that consumers value drug coverage more than other aspects of a health insurance plan

Source:  GMAT Hacks - 080613

avohden · Answer

Official Explanation

Answer: A   The argument gives us a positive and negative aspect to the low-cost insurance plan: The positive is that it costs less; the negative is that it does not cover something that can end up costing a lot of money itself. The scope of the argument is the cost of medical care under certain plans, so look for a choice that focuses on the financial aspect directly.  Choice (A) does this.  To determine whether it's wise to "avoid" purchasing these plans, it's important to know whether the drawback is really worse than the benefits gained by opting for the low-price plan. If the additional cost is less than the amount saved by going with such a plan, the argument is not very strong. Choice (B) may be tempting, but it strays from the narrow scope of the argument by ignoring the specific costs of certain types of treatment. (C) is off topic, as is (E). (D) may be tempting as well, but the argument tells us that brand-name drugs cost consumers a certain amount of money; it shuts out the possibility that generics are available by the terms of the argument.   Choice (A) is correct.

unceldolan · Answer

Why is it not D? If the savings for the premiums are lower than the cost of the drugs, I could - if covered - still take other drugs. Hence I chose D, can someone explain why A is the better answer?

SyedHazari · Answer

(A) Whether the reduction in the cost of monthly premiums is likely to be greater than the monthly
cost of brand-name drugs.

VS

(D) Whether the low-cost insurance plan covers the cost of generic alternatives to brand-name drugs

It is already assumed in the question that the given argument is for people that take brand-name drugs. This is evidenced by the line - it does have a serious 
drawback: it does not cover brand-name drugs, thereby costing consumers as much as several hundred dollars per month.

Option D is also wrong because the question nowhere speaks about generic alternatives and hence is out of the scope of the question.

Hope the explanation helped!

gmatprav · Answer

IMHO, we are asked to evaluate conclusion that

"it does have a serious drawback: it does not cover brand-name drugs, thereby costing consumers as much as several hundred dollars per month."

So, we need to understand whether the cost of brand-name drugs has any impact on the consumer or not.

A. says evaluate if cost of brand-name drugs exceeds the savings due to the plan... this is good enough, but what about D?

D clearly indicates there are generic alternatives to brand-name drugs. Then evaluating if their cost is covered will ALSO allow us to know whether the we can avoid brand-name drugs or not. So D is equally good.

So, I think both answers are valid. any other comments please?

riskietech · Answer

Yes the option D is tempting but is certainly not a right choice.

Premise - Low cost insurance plan - costing 50% less, but has serious flaw - doesn't cover branded - can cost 100 d per month.
Conclusion - Consumers should avoid purchasing low-cost insurance plans from a certain health insurance company that has been touted as a resource for those who need to reduce the cost of their monthly premiums

While evaluating, consumer need to focus at reducing monthly premium and finally the overall monthly cost (notice the sentence in argument"...who need to reduce the cost of their monthly premiums"). What if the generic alternate is costing more than a branded one? Nothing has been mentioned about the cost of generic alternative, so this option, even if seems closer, is not a right choice.

A is better choice which throws a light on the net cost incurred to consumer.

Hope this makes sense.

gmatprav · Answer

Okay. Let me re-phrase you

Let's say we evaluated D and we found generic is low cost then we can go with the plan, but if the generic cost is high, then we have to fall back on option A to decide on the plan.

Thus A is choice. Good explanation. Thanks & Kudos.

riskietech · Answer

well said and thanks a lot for kudos.. You are the first to give this to me..

thanhphong01 · Answer

It's not the conclusion of the stimulus

A_Nishith · Answer

ACCURATE EXPLANATION 
To evaluate the healthcare analyst's position on low-cost insurance plans, it's important to consider the implications of the lack of coverage for brand-name drugs and how it affects the overall cost and value of the plan for consumers. Let's go through each option to determine its relevance:

(A) Whether the reduction in the cost of monthly premiums is likely to be greater than the monthly cost of brand-name drugs
 This is the most relevant factor. The core of the analyst's argument is that the savings from lower premiums may be outweighed by the high costs of brand-name drugs. Determining whether the savings on premiums compensate for the potential out-of-pocket expenses for brand-name drugs would directly address the analyst's concern.

(B) Whether the low-cost insurance plan covers medical procedures that require supplemental use of brand-name drugs
While important, this point is more specific and situational. It does not address the general cost-benefit analysis of the insurance plan but rather focuses on particular medical needs, which might not be applicable to all consumers.

(C) Whether low-cost insurance plans offer consumers the same choice of physicians that higher-cost plans offer
This aspect is relevant to the overall quality of the insurance plan but does not directly pertain to the analyst's primary concern about the financial impact of not covering brand-name drugs. It could be a secondary consideration for consumers evaluating the plan.

(D) Whether the low-cost insurance plan covers the cost of generic alternatives to brand-name drugs
This is also very relevant. If the plan covers generic alternatives, the impact of not covering brand-name drugs might be mitigated, making the plan more attractive. Consumers need to know if they have cost-effective alternatives to brand-name drugs under the plan.

(E) Whether surveys indicate that consumers value drug coverage more than other aspects of a health insurance plan
This information provides context on consumer preferences but does not directly help an individual consumer evaluate the cost-effectiveness of the insurance plan for their specific situation. It's useful for understanding general market trends but less so for making a personal decision.

In conclusion:

(A) Whether the reduction in the cost of monthly premiums is likely to be greater than the monthly cost of brand-name drugs

and

(D) Whether the low-cost insurance plan covers the cost of generic alternatives to brand-name drugs

are the most useful factors for a consumer to determine in order to evaluate the analyst's position. These factors directly address the financial trade-off between lower premiums and the potential high costs of brand-name drugs.

Comparing the two:

Option (A) focuses on the overall financial balance between the savings from lower premiums and the extra costs of brand-name drugs.
Option (D) offers a potential mitigation to the issue raised by the analyst by providing an alternative that could be cheaper than brand-name drugs.

While both are important, option (A) is more directly aligned with the core of the analyst's argument about the overall financial impact of the insurance plan. 
 
 Therefore, it would be the most useful for a consumer to determine:(A)

VerbalBot · Answer

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Healthcare analyst: Consumers should avoid purchasing

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