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.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.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.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An important distinction in health insurance is between the list price (P_L) and out-of-pocket price (P_P) 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.

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 P_L and P_P and plot a coinsurance plan demand curve in P_L - Q space. Label this curve D₃.
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 P_L and P_P and plot a copayment-plan demand curve in P_L - Q space. Label this curve D₄.

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