1. The U.S. government currently spend $475, 909, 674, 990.00 a year on the Medicaid program. Suppose there are 82 Million households that receive Medicaid. Providing low income Americans with free health insurance is intended to improve their economic well-being. We can understand this better by showing improvements in a typical low-income family's budget possibilities. Please illustrate with a well-labeled budget constraint graph how the consumption possibilities of health insurance (HI) and all else (Y) expand for a family when Medicaid is introduced, through parts a) - d) below. As we have done in class, Assume that P(Y) = $1; P(HI) = $1 and family income is $20,000 a year. a) Based on the information above, what is the average government Medicaid spending per household?[1 pt] Hint--you are given the total national spending and the total number of households, so you have the information to calculate this. You will use this number in the rest of question 1 below as well. b) Using the amount from a), show how the budget constraint of a family (showing Y and HI) changes when they are given Medicaid. [4 pts] c) Show what the new budget constraint would be if that amount of cash were given to a family (i. e. in cash) instead of Medicaid. [1 pt] d) Suppose there are two uninsured families: one currently spends $2,000 on medical care a year and the other spends $6,000 on medical care a year. The government now starts to provide them with Medicaid (as is described above). Which of these families would prefer the cash option vs Medicaid, and why? [2 pts]

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1. The U.S. government currently spend $475, 909, 674, 990.00 a year on the Medicaid program. Suppose there are 82
Million households that receive Medicaid. Providing low income Americans with free health insurance is intended to
improve their economic well-being. We can understand this better by showing improvements in a typical low-income
family's budget possibilities. Please illustrate with a well-labeled budget constraint graph how the consumption
possibilities of health insurance (HI) and all else (Y) expand for a family when Medicaid is introduced, through parts a) -
d) below. As we have done in class, Assume that P(Y) = $1; P(HI) = $1 and family income is $20,000 a year. a) Based on
the information above, what is the average government Medicaid spending per household?[1 pt] Hint--you are given
the total national spending and the total number of households, so you have the information to calculate this. You will
use this number in the rest of question 1 below as well. b) Using the amount from a), show how the budget constraint of
a family (showing Y and HI) changes when they are given Medicaid. [4 pts] c) Show what the new budget constraint
would be if that amount of cash were given to a family (i. e. in cash) instead of Medicaid. [1 pt] d) Suppose there are
two uninsured families: one currently spends $2,000 on medical care a year and the other spends $6,000 on medical
care a year. The government now starts to provide them with Medicaid (as is described above). Which of these families
would prefer the cash option vs Medicaid, and why? [2 pts]
Transcribed Image Text:1. The U.S. government currently spend $475, 909, 674, 990.00 a year on the Medicaid program. Suppose there are 82 Million households that receive Medicaid. Providing low income Americans with free health insurance is intended to improve their economic well-being. We can understand this better by showing improvements in a typical low-income family's budget possibilities. Please illustrate with a well-labeled budget constraint graph how the consumption possibilities of health insurance (HI) and all else (Y) expand for a family when Medicaid is introduced, through parts a) - d) below. As we have done in class, Assume that P(Y) = $1; P(HI) = $1 and family income is $20,000 a year. a) Based on the information above, what is the average government Medicaid spending per household?[1 pt] Hint--you are given the total national spending and the total number of households, so you have the information to calculate this. You will use this number in the rest of question 1 below as well. b) Using the amount from a), show how the budget constraint of a family (showing Y and HI) changes when they are given Medicaid. [4 pts] c) Show what the new budget constraint would be if that amount of cash were given to a family (i. e. in cash) instead of Medicaid. [1 pt] d) Suppose there are two uninsured families: one currently spends $2,000 on medical care a year and the other spends $6,000 on medical care a year. The government now starts to provide them with Medicaid (as is described above). Which of these families would prefer the cash option vs Medicaid, and why? [2 pts]
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