### What would be the equilibrium level and price of health care

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1. Describe the health care industry. What are the two major problems facing the health care system?

2. What are the two major parts of the Medicare program? What is Medicaid?

3. What are the economic implications of rising health care costs? What are three effects on labor markets of rising health care costs?

4. Below is a table with data on the supply and demand of health care. Use this information to answer the following questions.

 Price Qd Qs \$10,000 400 1200 9,000 500 1100 8,000 600 1000 7,000 700 900 6,000 800 800 5,000 900 700 4,000 1000 600 3,000 1100

(a) Assume initially there is no health insurance. What would be the equilibrium level and price of health care?

(b) Suppose the introduction of health insurance decreased medical costs by one half. What would be the new price and quantity of health care? What would be the marginal cost and marginal benefit at this output?

(c)Suppose that the government decided to subsidize the cost of medical school. How would this change the supply and demand situation of the health care market?

(d) Suppose the government subsidy causes the supply of health care to shift by 200 at every price? What would be the new equilibrium price and quantity in the absence of insurance? What would be the marginal benefit and marginal cost if insurance coverage of 50% were in place?

(e) Suppose that doctors shift away from a fee-per-visit system and are instead paid set annual salaries. What effect will this have on the supply and demand situation for the health care market?

(f) Given the supply condition in (d), suppose the shift in policy causes health care demand to shift down by 200 at every price. What is the new equilibrium price and quantity? What is the marginal benefit and cost if 50% insurance coverage were in place?

(g) How have the previous policies influenced the impact of the 50% insurance policy?

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