In this example, imagine 4 consumers who are identical in every way with the exception that they have different insurance plans. Assumption: For this question, ignore the cost of producing a visit. Assume physician is trying to maximize revenue. Furthermore, assume that a visit is indivisible and if a person is indifferent, she chooses to make the visit. Here are each of their prices schedules for physician services: A : flat $80/visit B : flat $70/visit C : flat $70/visit + $10/year membership fee. D : Variable schedule: $140/visit for first 1 visit • $100/visit for next 2 visits $80/visit for next 2 visits

In this example, imagine 4 consumers who are identical in every way with the exception that they have different insurance plans. Assumption: For this question, ignore the cost of producing a visit. Assume physician is trying to maximize revenue. Furthermore, assume that a visit is indivisible and if a person is indifferent, she chooses to make the visit. Here are each of their prices schedules for physician services: A : flat $80/visit B : flat $70/visit C : flat $70/visit + $10/year membership fee. D : Variable schedule: $140/visit for first 1 visit • $100/visit for next 2 visits $80/visit for next 2 visits

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Most systems of medical insurance substantially lower the out-of-pocket costs consumers have to pay for additional units of physician services and hospitalization. Some reduce these costs to zero. How does this method of payment affect the consumption levels of medical services?Might this method of organization result in “too much” consumption of medical services?
Fun with cost-sharing. 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. (a) Draw a set of axes with list price PL on the y-axis and quantity Q on the x-axis (you will want to make your graph nice and big, because we will be adding several demand curves). Suppose a consumer's demand for a particular medical procedure is as follows: Q = 100 - PP. Draw her demand curve in PL - Q space under the assumption of no insurance and label it D1. You will have to think about the relationship between PL and PP to draw it correctly. Now assume the same consumer is fully insured. Think about how this affects the relationship between PL and PP and draw a full-insurance demand curve in…
The difference between retrospective versus prospective reimbursement is that: a. Prospective reimbursement is cost-based and payments are based on each healthcare services/goods done or given; retrospective reimbursements are based on set standards such as DRGs in the case of hospitalizations. b. Retrospective reimbursement is cost-based and payments are based on each healthcare services/goods done or given; prospective reimbursements are based on set standards such as DRGs in the case of hospitalizations. c. Both payment systems practically mean the same thing since it is a way to reimburse providers of health care services on the services they have already given to patients. d. None of the choices are correct
6. The demand for the doctor's visits, Q, is the following: Q= 5 – 0.04P. The market price of a visit, equals the MC of $100. What is the equilibrium number of visits? What if the consumer purchases full-coverage (no coinsurance) health insurance and the demand stays the same. How many doctor visits would the patient consume? Calculate the deadweight loss or moral hazard cost as a result of the insurance coverage. Remember, DWL is there if units for which MB>MC are not produced, or if units for which MC>MB are produced.
Assume throughout that an individual's demand curve for doctors visits is represented by Q = 50 – P. - The market price of a doctor's visit is $30 per visit. Assume the individual has an insurance plan with a deductible of $3,000 and a coinsurance rate of 20%. How many doctor's visits would the individual need have to reach the deductible limit?
1. Fun with cost-sharing. 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. a. Suppose a consumer’s demand for a particular medical procedure is Q = 100 − PP. Draw her demand curve in PL–Q space under the assumption of no insurance and label it D1. You will have to think about the relationship between PL and PP to draw it correctly. b. Now assume the same consumer is fully insured. Think about how this affects the relationship between PL and PP and draw a full-insurance demand curve in PL– Q space. Label this curve D2. c. 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…
1. Utility and Consumer Surplus A. Use the figure below to fill in the total utility and marginal utility of medical care in the table. In this example, is the marginal utility of health care increasing or decreasing? What are some reasons why this might be the case (briefly explain; approximate 3 sentences)? Health (H) Utility 16 15 13 10 3 4 Medical care (q) 1 2 Units of Medical Care 0 1 Total Utility Marginal Utility 2 3 4 Briefly explain: Conceptually, does the marginal utility scheduled above reflect your own demand for going to the dentist to get a check-up?
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1. Consider a model of unilateral care. The injurer can invest $50 in care and reduce the probability of an accident to zero or take no care and face a 10% chance that an accident causing $750 in damages occurs. a. Is it efficient for the injurer to take care in this case? b. Suppose the court could not observe whether or not the injurer took care. Would it be appropriate to for the court to invoke the res ipsa loquitur doctrine in this case?
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