Keep the Highest: . The impact of health insurance The following oraph shows the

Question

Keep the Highest: . The impact of health insurance The following oraph shows the market for doctor's office vists. In this market, the central government provides health inaurance to government pays the remainder The a copayment of $40 per doctior's office visit. That is, consumers pay $40 for each doctor's appointment, and the Market for Doctor's Office Visits Demand Supply Area Calcul QUANTITY OF VISITS (Mitions per month) In the absence of the copayment plan, the equiabrium price would be S per doctor's office visit, and the equilibrium quantity would be milion visits per month. Under the copayment plan, the quantity of visits demanded by consumers is million visits per month. Doctors are willing to supply this at a price of? per visit. Therefore, the government wil Day per visit under the copayment scheme. In the absence of the copayment plan, total payments for visits to the doctor amount to green rectangle (triangle symbols) to calculate areas in the graph. You will not be graded on where you place the green rectangle. million per month. Hint: You can use the Under the copayment plan, total payments for visits to the doctor amount to is paid by consumers and S million per month, S milion off which million of which is paid by the government. The government copayment plan might lead to an efficient outcome if visits to the doctor's office generate external Grade It Now Continue wilhout saving

Explanation / Answer

The given figure shows that demand and supply curves are intersecting each other corresponding to the price of $100 per unit and the quantity of 4 million visits per month.

So,

In the absence of the copayment plan, the equilibrium price would be $100 per doctor's office visit, and the equilibrium quantity would be 4 million visits per month.

Co-payment is $40 per visit. This means consumers pay only $40 per visit.

So, for consumers, the price is $40 per visit.

At price of $40 per visit, consumers demand 6 million per month. This much visits can be supplied by doctors if the price is $140 per unit.

Thus,

Under the copayment plan, the quantity of visits demanded by consumers is 6 million visits per month. Doctors are willing to supply this number of office visits at a price of $140 per visit. Therefore, the government will pay $100 per visit under copayment scheme.

In the absence of copayment plan, total payment for visits to the doctor amount to ($100 * 4 million) $400 million per month.

Under the copayment plan, total payment for visit to the doctor amounts to ($140 * 6 million) $840 million per month, ($40 * 6 million) $240 million of which is paid by consumers and ($100 * 6 million) $600 million of which is paid by the government.

The government copayment plan might lead to an efficient outcome if visits to the doctor's office generate external benefit.

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