LECTURE+5a+-+Cost-sharing,+elast,+_+MH

LECTURE+5a+-+Cost-sharing,+elast,+_+MH - Lecture 5-a...

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Lecture 5-a: Cost-Sharing, Demand Elasticity, and Moral Hazard Health Economics 01:220:316 Prof. Derek DeLia, Ph.D.
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Example Demand curve: P = 1000 – 20Q MC of care constant at 300 Assume providers charge price = MC. 1. How much medical care is consumed without insurance? 2. Show this on a graph. 3. Is there any deadweight loss? If so, how much?
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The role of insurance How would the answers change if the consumer had health insurance under the following alternative contractual arrangements? Coinsurance of 30% Fixed copayment of $100 per unit of medical care Fixed copayment of $400 per unit of medical care A $6,000 deductible A $12,000 deductible A $13,000 deductible all market participants are risk neutral
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Demand curve: P = 5000 – 10Q MC of care is MC = 1000 + 30Q Assume providers charge price = MC. 1. What is the price and quantity of medical care consumed without health insurance? 2. Is there any DW loss? How much? 3. How do the answers change under the following alternative insurance arrangements? Coinsurance of 20%
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LECTURE+5a+-+Cost-sharing,+elast,+_+MH - Lecture 5-a...

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