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Appendix to Chapter 4 Applying Supply and Demand Analysis to Health Care

Appendix to Chapter 4 Applying Supply and Demand Analysis to Health Care. Lecture Slides. Survey of Economics Irvin B. Tucker. What will I learn in this appendix?. To bring textbook theory to life and use it to provide you with a deeper understanding of health service markets.

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Appendix to Chapter 4 Applying Supply and Demand Analysis to Health Care

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  1. Appendix to Chapter 4Applying Supply and Demand Analysis to Health Care Lecture Slides Survey of Economics Irvin B. Tucker

  2. What will I learn in this appendix? • To bring textbook theory to life and use it to provide you with a deeper understanding of health service markets

  3. Exhibit 4A.1 The Impact of Insurance on the Health Care Market S P3 C Health Care Providers Receive P3 A Price per Unit (dollars) Insurers Pay Difference (P3-P2) P1 B P2 Patients Pay P2 D Q1 0 Q2 Quantity of Health Care (units per time period)

  4. Without health insurance, how do consumers behave? • At point A, consumers buy Q1 units of health care services per year at a price of P1 per unit

  5. How is health care actually paid for? • About 80 percent of all health care is paid for by third parties, including private insurance companies and government programs

  6. What is the copayment rate? • The percentage of the cost of services consumers pay out-of-pocket

  7. What is the impact of health insurance for consumers? • Because patients pay only 20 percent of the bill, the quantity of health care demanded increases at point B to Q2 at a lower price of P2

  8. What is the impact of health insurance for providers? • Health care providers respond by increasing the quantity supplied to point C where the quantity supplied equals the quantity demanded of Q2

  9. What is the conclusion? • Compared to a health care market without insurance, the quantity demanded, the quantity supplied, and the total cost of health care are increased by copayment health care insurance

  10. What can cause shifts in the demand for health care? • Number of buyers • Tastes and preferences • Income • Prices of substitutes

  11. What can cause shifts in the supply of health care? • Number of sellers • Resource prices

  12. END

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