Consider a population of 1,000,000 people that consists of two groups with varyi
ID: 2452782 • Letter: C
Question
Consider a population of 1,000,000 people that consists of two groups with varying need for mental health coverage:
(1) Ten percent of the population are individuals who have a mental health disorder that needs immediate treatment. Treatment costs $18,000, and thus these people are willing to pay up to $18,000 for insurance that covers the treatment.
(2) The other 90 percent of the population are people who understand that they are at risk of needing mental health treatment that will cost $18,000. These people understand that there is a 1 in 9 chance that they will require mental health treatment. They are each willing to pay up to $3500 for insurance to cover the treatment.
(a) Assume that individuals know what group they are in,but insurance companies cannot tell this. Assume that the market structure in the insurance industry is competitive. Even if the cost of selling insurance policies in negligible, will the insurance industry provide coverage for mental health? Give a careful proof for your answer, and explain the economic logic.
(b) Now suppose that insurance companies can screen for mental health status at the cost of $1000 per patient. Describe the competitive equilibrium. Is this outcome better or worse for the population than the one you describe in (a)? Support your answer with specific economic logic.
(c) Continue to assume (as in (b)) that companies can screen for mental health status at a cost of $1000. A proposal has been made for the government to provide universal coverage for mental health treatment (i.e., treatment for everyone who needs it), financed by charging each individual a fee just sufficient to fund the program. Write a short (one paragraph) statement that either favors or opposes the program. Provide economic arguments, e.g., dollar figures for the costs and benefits of your favored solution, compared to the alternative.
Explanation / Answer
The purpose of universal health care is to provide all citizens with an opportunity to obtain the health care that they may need without having to worry about financial hardship. Currently, the costs associated with privatized health care are really expensive. Private companies are able to set their own costs for insurance premiums, medical tests, and other services in order to make a profit.
A universal health care system would be run by the government. The assumption here is that the government would not be interested in making profits; however, the government would be interested in promoting the best interests of its citizens. Therefore a universal health care system would likely result in decreased costs for medical care and improved monitoring for health care costs, which would result in more affordable health care.
AMT in $ Required mental health trement cost ($) Total cost ($) Willing to Pay for insurance amt in $ Profit or loss to insurance company amt in $ (a) Total Population 1,000,000.00 Mental Health disorder 100,000.00 18,000.00 1,800,000,000.00 1,800,000,000.00 - Needed mental health tretment 900,000.00 18,000.00 1,800,000,000.00 3,150,000,000.00 1,350,000,000.00 1,350,000,000.00 It is economical for insurance company to provide coverage for mental health. (b) AMT in $ Required mental health trement cost per Patient ($) Total cost ($) Willing to Pay for insurance amt in $ Profit or loss to insurance company amt in $ Total Population 1,000,000.00 Mental Health disorder 100,000.00 1,000.00 100,000,000.00 1,800,000,000.00 1,700,000,000.00 Needed mental health tretment 100,000.00 1,000.00 100,000,000.00 350,000,000.00 250,000,000.00 1,950,000,000.00 This outcome is much better than the a above © Universal coverage of mental health tretment refers to health care system which provide health care and financial Protection to all the citizens of a particular country. Universal coverage with needed health services maintains and improves health. Good health allows children to learn and adults to earn. It helps people escape from poverty and provides the basis for long term economic development.The purpose of universal health care is to provide all citizens with an opportunity to obtain the health care that they may need without having to worry about financial hardship. Currently, the costs associated with privatized health care are really expensive. Private companies are able to set their own costs for insurance premiums, medical tests, and other services in order to make a profit.
A universal health care system would be run by the government. The assumption here is that the government would not be interested in making profits; however, the government would be interested in promoting the best interests of its citizens. Therefore a universal health care system would likely result in decreased costs for medical care and improved monitoring for health care costs, which would result in more affordable health care.
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