There are two types of people in the economy: low and high risk. Each earns $100. When they are healthy they get to consume the full $100. When they are ill they have to pay $100 of medical costs and have O left for consumption The government is has heard about adverse selection and is considering offering a single insurance plan and making everyone buy it. Using the information in the table below determine what plan the government will offer. The government's insurance plan will require people to pay a premium (tax) of $ when healthy and will give them a benefit of $ when ill. Low Risk High Risk Utility U = Vc U = Vc Percent of Population 70% 30% Risk of illness |10% 50%

There are two types of people in the economy: low and high risk. Each earns $100. When they are healthy they get to consume the full $100. When they are ill they have to pay $100 of medical costs and have O left for consumption The government is has heard about adverse selection and is considering offering a single insurance plan and making everyone buy it. Using the information in the table below determine what plan the government will offer. The government's insurance plan will require people to pay a premium (tax) of $ when healthy and will give them a benefit of $ when ill. Low Risk High Risk Utility U = Vc U = Vc Percent of Population 70% 30% Risk of illness |10% 50%

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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