A supply-demand model of health care financing with an by Ricardo A. Bitran

By Ricardo A. Bitran

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Sample text

The output table of the reduced menu provides basic utilization indicators and a condensed health center income statement. The expanded menu contains more detailed input and output information. The examples of this section deal mainly with the reduced menu. The complete menu structures of the health center and hospital components of the model can be found in Appendix C. The full set of tables contained in the health center component can be found in Appendix D, and the hospital components of the model are contained in Appendix E.

Third, in the absence of external subsidies, or in the presence of a small (that is, less than fixed costs) subsidy, a facility with constant marginal cost will be unable to break even if it sets its price equal to marginal cost. As is shown in figure 2-2a, this facility will operate under declining average costs and marginal cost will be less than average cost. The need to break even thus forces the facility to depart from the marginal cost pricing rule, as is discussed below. A popular welfare economics result is that in such a case the facility will charge a price that is proportional to the marginal cost and inversely proportional to the price elasticity of demand.

The input table of the reduced menu contains key exogenous variables that can be modified by the user to analyze a wide range of policy issues. The output table of the reduced menu provides basic utilization indicators and a condensed health center income statement. The expanded menu contains more detailed input and output information. The examples of this section deal mainly with the reduced menu. The complete menu structures of the health center and hospital components of the model can be found in Appendix C.

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