Consider how medical insurance affects the quality of medical services

Consider how medical insurance affects the quality of medical services. Suppose the typical medical procedure costs $ 100, but the person with health insurance pays only $ 20 out of pocket. Your insurance pays the remaining $ 80. (The health insurance company recovers the $ 80 for the premiums, but the premiums paid by a person do not depend on the procedures that are done.)

a. Draw a market demand curve for medical procedures. (In your diagram, the horizontal axis should represent the number of medical procedures.) Show the claimed quantity of medical procedures if each procedure is priced at $ 100.

b. In your diagram, show the quantity demanded of procedures if consumers only pay $ 20 per procedure. If the cost of each procedure is really $ 100, will this amount maximize the total benefit?

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c. Economists often blame insurance for the excessive use of medical care. Given your analysis, could this use be excessive?

d. What policies could prevent this excessive use?