Careforall, The mayor of sickcity, claimed that his residents are very elastic and highly sensitive when the price of preventative care changes but not so sensitive when the price of inpatient care changes. To prove her point she referred back to the RAND studies. She claimed that the results of a replicated study in her town are shown below Plan Average # of preventative care visits Average # of inpatient visits Free 3.2 0.126 25% 2.54 0.122 50% 2.10 0.118 Careforall claimed that the best solution for her city is to provide free health care for all. The insurance companies replied that they will not be able to provide such a service. As a health adviser, you need to draft a proposal where you can design a health coverage that will be optimum for the citizen and provide insurance companies with a profitable market. Assume that the average cost of a preventative visit is $75 and the average cost of inpatient care is $2700 and that the current plan asks patients to contribute 25% of the cost as a copay. (Hint: Do not calculate lots of value. Based on the elasticities, suggest a plan to minimize the change in revenue for insurers and increase benefit to citizens)
Careforall, The mayor of sickcity, claimed that his residents are very elastic and highly sensitive when the price of preventative care changes but not so sensitive when the price of inpatient care changes. To prove her point she referred back to the RAND studies. She claimed that the results of a replicated study in her town are shown below
Plan Average # of preventative care visits Average # of inpatient visits
Free 3.2 0.126
25% 2.54 0.122
50% 2.10 0.118
Careforall claimed that the best solution for her city is to provide free health care for all. The insurance companies replied that they will not be able to provide such a service. As a health adviser, you need to draft a proposal where you can design a health coverage that will be optimum for the citizen and provide insurance companies with a profitable market. Assume that the average cost of a preventative visit is $75 and the average cost of inpatient care is $2700 and that the current plan asks patients to contribute 25% of the cost as a copay. (Hint: Do not calculate lots of value. Based on the elasticities, suggest a plan to minimize the change in revenue for insurers and increase benefit to citizens)
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