1.2 Assume that a patient has 80% coverage for medical services but no coverage for prescription drugs. An 80% drug benefit is added. Show graphically what will happen to the relative utilization of Μ and D, and total spending on health care, to attain a given health status.

What happens to the amount spent on drugs (insurance plus patient amounts)? Why will total spending on health care diminish when the 80% drug benefit is added?