Reference no: EM131755557

Public Health and Nutrition Prescription medication can be very expensive, in part because of the high cost of research and development. The most expensive drug in the world is Soliris, which is used to treat a rare blood disorder. Many insurance companies have adopted a tiered plan that allows the user to select a generic or preferred drug at a reduced cost or copay instead of the named or specialty drug at a higher copay. Medicare Blue RX has four tiers for prescription medication, each with different copays. Past records indicate that the proportions of users who select each tier are as follows: Tier 1, 0.35; Tier 2, 0.28; Tier 3, 0.12; Tier 4, 0.25. Suppose a random sample of policyholders who purchased medication was obtained and the frequency associated with each tier is given in the following table.

a. Use a goodness-of-fit test to show that there is a shift in the proportion of users by tiers. Use a = 0.05.

b. Use your results in part (a) to explain the shift in the proportions, that is, which tiers are more/less utilized.