3. An important distinction in health insurance is between the list price (PL) and out-ofpocket price (PP) of a medical good or service. The list
3. An important distinction in health insurance is between the list price (PL) and out-ofpocket price (PP) of a medical good or service. The list price is the ofcial price that the provider charges the insurance company, while the out-ofpocket price is the price that the insurance customer faces. Sometimes, the out-of-pocket price depends on the list price. Natalia has demand for medical services as follows: Q = 100 2Pp, where Pp is the out-of- pocket 111194: she actually faces. She is considering four different insurance options: No insurance, full insurance, a coinsurance plan, and a copayment plan. The medical services each have a list price of PL = $40. Assume a perfectly competitive market, such that the list price represents the marginal cost of producing each unit of the medical services. (17 points total) a. Graph Natalia's demand curve under the assumption of no insurance. (3 points) b. Graph Natalia's demand curve under the assumption of full insurance. Calculate the quantity demanded and the social loss. (3 points) 0. Graph Natalia's demand curve for a 50% coinsurance plan. Calculate the quantity demanded and the social/welfare/deadweight loss. (4 points) d. Graph Natalia's demand curve for a $30 copayment plan. Calculate the quantity demanded and the social/welfare/deadweight loss. (4 points) e. Would the coinsurance plan or the copayment plan be better at mitigating moral hazard for these medical services? Why? (3 points)
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