You are the administrator for a medical practice. Assume all of your practice’s patients are covered by insurance. Insurance pays, on average, 80% of your fee for a physician visit for which your practice charge is $100. The patient is responsible for the $100 fee but receives 80% back from the insurer. Currently, your practice’s volume for this service is 1,500 per year. Answer the following question in regard to this assumption:
For your calculations, use the following as the price elasticities for physician visits:
After a quick survey, you decide that 65% of the practice’s patients are in at least good health and account for 1,000 of the 1,500 visits. The remaining patients are in fair or poor health. In light of this survey, write out all the steps of the calculation.
Write answers separately for patients in each category of health status—excellent, good, fair, and poor—for all patients. Share your answers with your classmates. Comment on the responses posted by your classmates.
Reference:
Wedig, G. J. (1988). Health status and the demand for health: Results on price
elasticities. Journal of Health Economics, 7(2), 151–163. Retrieved from
http://ideas.repec.org/a/eee/jhecon/v7y1988i2p151-163.html
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