Assume a consumer's demand for a medical service is as follows: Q = 100 - Pp where Pp is the out-of-pocket price she actually faces. She is considering four different insurance options: uninsurance, full insurance, a 50% coinsurance plan, and a copayment plan with a $25 copay. Assume this service has a list price of PL= $70. Calculate Q under each insurance plan. Please fill in the final answer without showing the middle steps (a number only, without any extra space, symbol, word, etc.) • If the customer is uninsured, Q=

Assume a consumer's demand for a medical service is as follows: Q = 100 - Pp where Pp is the out-of-pocket price she actually faces. She is considering four different insurance options: uninsurance, full insurance, a 50% coinsurance plan, and a copayment plan with a $25 copay. Assume this service has a list price of PL= $70. Calculate Q under each insurance plan. Please fill in the final answer without showing the middle steps (a number only, without any extra space, symbol, word, etc.) • If the customer is uninsured, Q=

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter7: The Market For Health Insurance

Section: Chapter Questions

Problem 11QAP

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Suppose, if ill, that Fred’s demand for health services is summarized by the demand curve Q = 50 − 2P , where P is the price of services. How many services does he buy at a price of $20? Suppose that Fred’s probability of illness is 0.25. What is the actuarially fair price of health insurance for Fred with a zero coinsurance rate? If the insurance company pays Fred’s entire loss, will the insurance company offer him insurance at the actuarially fair rate? Why? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Explain how each of these situations will affect the quantity demanded of health insurance: d) New technologies that enable medical illness to be predicted more accurately. e) A tendency among buyers to become less risk, on average.
Insurance coverage has been shown to diminish the importance of time in the decision about how much medical care to seek and which providers to use. True OR False
Suppose that Elaine’s demand for doctor visits per year is given by the equation: P = 250 – 20Q, where Q is the number of doctor visits and P is the price. The marginal cost of providing this service is fixed at $130 per patient. What is the efficient level of visits per year? What would be the total cost to provide the efficient level of visits? On a supply/demand graph, illustrate this situation; label the efficient levels from part (a). If Elaine obtains insurance with no deductible and a copayment of $10 per visit, how many times would she visit the doctor per year? In total, how much does Elaine pay out of pocket for her visits and how much does the insurer have to pay? Calculate the deadweight loss resulting from the insurance policy and show this region on your graph. What happens to the size of the deadweight loss as the copayment increases? Briefly explain why the insurance policy can induce moral hazard.
Suppose consumers consume and gain utility from two types of goods and services – (1) health care and (2) all other goods & services. Using this information, derive the demand curve for health care.
1. More fun with cost-sharing. (You may want to review Exercise 15 before proceeding, although it is not necessary.) A consumer’s demand for a medical service is Q = 100 − PP where PP is the out-of-pocket price she actually faces. She is considering four different insurance options: uninsurance, full insurance, a 50% coinsurance plan, and a copayment plan with a $25 copay. a. Assume this service has a list price of PL = $70. Calculate Q under each insurance plan. b. Calculate the amount of social loss under a copayment plan with a $25 copay.
Suppose that your utility function over health care (h) and other goods (c) is given by U(h, c) and that you have a fixed income of $100. (Assume that the indifference curves of your utility function bear the usual convex shape.) Each year, you choose h and c to maximize your utility subject to a budget constraint: phh+pcc=Ywhere ph is the price of health care, pc is the price of other goods, and Y is your income. In year 1, the price of health care is $1, while the price of other goods is $2. At these prices, you demand 30 units of health care and 35 units of other goods. In year 2, your utility function and your income do not change, but prices do. Health care becomes more expensive at $1.50, while other goods become cheaper at $1.50. At these prices, you demand 20 units of health care. a. Assuming you spend all your income in year 2, how many units of other goods do you buy?b. Draw a graph with your demand for health care on the horizontal axis and your demand for other goods on the…
An important distinction in health insurance is between the list price (PL) and out-of-pocket price (PP) of a medical good or service. The list price is the official price that the provider charges the insurance company, while the out-of-pocket price is the price that the insurance customer faces. Sometimes, the out-of-pocket price depends on the list price. d. Now assume the consumer is part of a partial insurance plan with a coinsurance provision. Her insurance pays 50% of all medical expenses. Consider again the relationship between PL and PP and plot a coinsurance plan demand curve in PL - Q space. Label this curve D3. e. Finally, assume the consumer is part of a partial insurance plan with a copayment provision. Her insurance pays all expenses above and beyond her copayment of $25 for each unit of Q. Consider again the relationship between PL and PP and plot a copayment-plan demand curve in PL - Q space. Label this curve D4.
A noted insurance authority has said, “Because the financing of long-term care is inconsistent with insurance principles, it is a problem that does not lend itself to solution through insurance.” In what ways is the financing of long-term care inconsistent with insurance principles? What, in your opinion, is the solution to the problem of financing long-term care?
Suppose you have two persons, one with more elastic demand for medical care than the other. If they both obtain identical health insurance coverage (or both have their % of costs paid by insurance increased), whose demand will be affected most? Given what you know about relative demand for MC for well vs. ill individuals, more educated vs. less educated persons, and wealthy vs. less wealthy individuals, which of each pair will have the greatest increase in demand under health insurance?
Indicate whether the statement is true or false, and justify your answer.Under partial insurance, income in the sick state with insurance is higher than income in the healthy state.
Demand studies in health care have provided estimates of both income and price elasticity. Estimates of income elasticity are usually above +1.0. Estimates of price elasticity typically range between -0.1 and -.75 (with hospital services at the lower end and elective services at the upper end). What information do these estimates convey? What does the price elasticity of demand estimates imply for government policymakers, insurance companies, and medical providers' decisions? What does the income elasticity of demand estimates imply for government policymakers, insurance companies, and medical providers' decisions?