Assume that health insurance is private in a country, and the market for insurance is competitive. The figure below shows the marginal benefit and willingness and ability to pay curve.

BN7.1 Explain the First Welfare Theorem & why it does not apply to Health Care Markets?

Suppose that Hubert, an economist from an AM talk radio program, and Kate, an economist from a school of industrial relations, are arguing over health insurance. The following dialogue shows an excerpt from their debate: Kate: A popular topic for debate among politicians as well as economists is the idea of providing government assistance for health benefits. Hubert: I think it is oppressive for the government to tax people who take care of themselves in order to pay for health insurance for those who are obese. Kate: I disagree. I think government funding of health insurance is useful to ensure basic fairness.   The disagreement between these economists is most likely due to (DIFFERENCE IN SCIENTIFIC JUDGEMENT, DIFFERENCE IN VALUES, DIFFERENCE BETWEEN PERCEPTION VERSUS REALITY)   .   Despite their differences, with which proposition are two economists chosen at random most likely to agree? A. Employers should not be restricted from outsourcing work to foreign nations.…

Demand for medical services is price inelastic (Absolute value of price elasticity of demand is less than 1 and greater than zero). Medical services are different from most other goods and services in that the person who determines the demand (the patient) is not the person who makes the payment (payment is made by the insurance company). How does this affect the price elasticity of demand for medical services (increase it or decrease it)? You may assume that this question only refers to people who have health insurance. Ignore co-payments and deductibles and any other out-of-pocket expenses. Please give an explanation.

Ronald Coase in his classic October 1960 article “The Problem of Social Cost” (Journal of Law and Economics 3[1], pp.1-4) discussed collective ownership of resources.  Collective ownership often means that no one takes care of resources, or at minimum that resources are not cared for as well as if they were privately owned.  What are some of problems with collective ownership in the health care industry? Can you think of some examples in which collective ownership works?  In what situations does it not work?

How would functionalists, conflict theorists and symbolic interactionists suggest that health care delivery might be improved in the USA?

If the demand curve is steeper for particular health services the moral hazard is less ? True or false  Explain briefly.

Explain how each of these situations will affect the quantity demanded of health insurance:   a) A reduction in the tax-exempt fraction of health insurance premiums.   b) An increase in buyer income.   c) An increase in per capita medical expenses.

Suppose you have an insurance plan in which you pay the market price for medical care until you meet a deductible of $1,000, after which you have a coinsurance rate of .20. Answer parts a and b assuming your inverse demand curve for medical care is P = 400 – 10Q and the market price for medical care is $200 per unit.a) Graph the price line and your demand curve. On the graph, label the values of the x and y intercepts of the demand curve, the quantity where you meet the deductible, the horizontal sections of the price line, and the point(s) where the demand curve intersects the price line.b) Find the number of units of medical care that you will demand. Show all calculations that youperformed in your analysis.