Question

The demand function is: Qp = 1,000 - (0.5 x P), where P is the price paid by consumers for a healthcare diagnostic product is initially not covered by Medicaid insurance. The state then mandates that the product is covered by Medicaid insurance, but that there is a 20% co-insurance for the product. This changes the demand function to: Qp = 1,000 - (0.5 x 0.2 x P). The supply function for the product is: Qs = 160 + (0.9 x P), where P is the price received by the seller. Complete this table for demand without insurance (Demandu), the net price to the patient after mandated coverage (Pnet), the demand with insurance (Demndl), and the amount Supplied and answer the following questions: Demand Pet Demand, Supply Price $1,000 $960) $920 560 $176 912 952 $880 $840 $800 $760 $720) $680 $640 $600 $560) 1. What is the equilibrium price before coverage? 2. What is the equilibrium price after coverage? 3. Without insurance coverage: How much in total did patients pay for the product? 4. With insurance coverage: a. How much in total will patients pay for the product? b. How much in total will Medicaid pay for the product? 5. What do these answers suggest regarding the coverage of preventive care services under the ACA in terms of demand, supply, & costs?

Answer 1

Price($)	Demand​ u	P net($)	Demand i	Supply
1000	500	200	900	1160
960	520	192	904	1024
920	540	184	908	988
880	560	176	912	952
840	580	168	916	916
800	600	160	920	880
760	620	152	924	844
720	640	144	928	808
680	660	136	932	772
640	680	128	936	736
600	700	120	940	700
560	720	112	944	664

1. The equilibrium price before coverage will be there where we will have demand = supply. It means it will take place where Demand _u = Supply. This happens at price level $600. At this price level uncovered demand is equal to supply = 700.

2. Equilibrium price after coverage is $840. At this price covered demand (916) is equal to supply (916). At this price demand with insurance is equal to supply.

3. Without insurance coverage the patients were paying $600 total. Because that is the equilibrium price. There was no coverage.

4. After insurance equilibrium price is $840. Among this $840

a. Patient will pay $840 - $168 = $672.

b. Medicaid will pay $168 in total.

5. These coverage of preventive care service suggesting that the patients are loosing in terms price pay but they are getting more services i e 916 and for this service they are better off. They are giving some extra price but receiving more services. This is the beneficiary side.