Figure 21-6 traces the economics of take-up and crowd-out. Consider a population

Question

Figure 21-6 traces the economics of take-up and crowd-out. Consider a population of 1,000 families: 200 had Medicaid insurance, 700 had some other type of insurance, and 100 were uninsured. Suppose now that Medicaid increases eligibility rules that would allow an additional 100 families to get coverage. After one year, 250 families now have Medicaid, 675 now have some other type of insurance, and 75 are uninsured.

a) Calculate the average take-up and crowd-out both in numbers of families and in rates.

b) Calculate the marginal take-up rates occurring due to the eligibility change.

c) Has insurance coverage for the population increased? Why or why not?

d) Has insurance coverage for all families increased? Why or why not?

Explanation / Answer

?Answer (A):

The average take-up in numbers of families and in rates will be given by -

Savg (take-up) = [(200) + (700) + (100)] / 3

Savg (take-up) = (1000) / 3

Savg (take-up) = 333.3

The average crowd-out in numbers of families and in rates will be given by -

Savg (crowd-out) = [(250) + (675) + (75)] / 3

Savg (crowd-out) = (1000) / 3

Savg (crowd-out) = 333.3Answer (B)

The marginal take-up rates occurring due to the eligibility change which will be given as :

Families have Medicaid = [(250) - (200)] = 50

Some other types of insurance = [(700) - (675)] = 25

Uninsured = [(100) - (75)] = 25

?Answer (C)

Yes, an insurance coverage for the population has increased.

?Answer (D)

An insurance coverage for all families has not increased.

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