Problem: In some state Medicaid programs, the coinsurance rate for prescription drugs is 0 (recipients have no out-of-pocket expenses for prescription drugs). Assume the inverse demand for the number of prescriptions filled per month without insurance is P=45-5Q. Graph the demand curve with and without insurance.
Over the past 15 years, many state Medicaid programs have adopted some form of cost sharing for prescription drugs. Suppose a state adopts a copayment rate of $9 per prescription. Graph the demand curve in this case. Suppose the average prescription is $15.
What is demand under i) no insurance, ii) 0% coinsurance, and iii) $9 copayment?