Question

The U.S. government currently spend $576,638,219,100.00 a year on the Medicaid program. There are 82 Million households that receive Medicaid. Providing low income Americans with free health insurance is intended to improve their economic well-being. We can understand this better by showing improvements in a typical low-income family’s budget possibilities. Please illustrate with a well-labeled budget constraint graph how the consumption possibilities of health insurance (HI) and all else (Y) expand for a family when Medicaid is introduced, through parts a) –d) below. As we have done in class, Assume that P(Y)=$1; P(HI)=$1 and family income is $20,000 a year.

D.) Suppose there are two uninsured families: one spends $3,000 on medical care a year and the other spends $8,000 on medical care a year. The government now starts to provide them with Medicaid (as in described in this problem). Which of these families would prefer the cash option vs Medicaid, and why?

Answer 1

The average medical spending on each household is $7210 (approximately). In the given problem one family is getting $3000 income and the other is getting $8000 income.

The family which is having income $8000 they opt for medicaid options, because they are getting higher income.

The family which is getting $3000 income they opt for cash option, because they do not have income to take a mediclaim policy. so, this family uses cash option to their medical needs