Imagine a community with only one insurance company that provides coverage to ev
ID: 237566 • Letter: I
Question
Imagine a community with only one insurance company that provides coverage to everyone in that community (a universal insurer, or payer). Currently, the payer does not pay anything for physician office visits, so patients pay 100%. However, bowing to intense lobbying pressure, the payer will pay 80% of the cost of these visits effective January 1 - and patients will pay the remaining 20%. Describe the likely effect on demand curves for office visits to a physician as a result. What do you suppose will be the intended and unintended consequences?
Explanation / Answer
The likely effect on demand curves to increase for office visits to a physician as they patients will consult the physicians more now. The intended consequences are enhanced and better care of the patients due to increased consultation with the physicians and unintended consequences are an increased economic burden on the insurance company.