Question

Get data from at least 3 allergy doctors: what does the doctor charge for allergy shots for uninsured patients? What is charged for insured patients (the important number here is the total amount received by the doctor, including the payment coming from the insurance company)? In which market segment would you expect a lower price elasticity, and given the formula concerning price and elasticity, is the doctor's pricing consistent with the theory?

Answer 1

Since I cant get data for the allergy doctors of US, I will use the data from this website- http://health.costhelper.com/allergy-shot.html and answer the question. You can later plug in your own data, if you have any. Otherwise just use the data in the answer.

1. what does the doctor charge for allergy shots for uninsured patients?- Any allergy shot has two cost factors- the cost of the shot itself and the cost of administering the shot. Lets assume that the doctor charges only for administering and the patient already has the vial. This would mean that for an uninsured patient is between $20-$100, based on factors such as whether the nurse administered it or the doc administered it himself etc. It is fair to assume that the average would fall somewhere around $60.

2. What is charged for insured patients (the important number here is the total amount received by the doctor, including the payment coming from the insurance company)? For an insured patient, the doctors charge a rate that was negoatiated between them and the insurance company. It is usually higher than what they charge to uninsured patients. Out of the total amount, the insured patient pays a fixed percentage amount (co-pay) and the rest is paid by the insurance comapny. Usually this is somewhere between 10%-40%. Since the doctor is charging higher for insured patients, lets say the charge is $100. Out of this, some 10-40 will be paid by the patient and rest by the insurance company.

3. In which market segment would you expect a lower price elasticity, and given the formula concerning price and elasticity, is the doctor's pricing consistent with the theory?- We would expect lower price elasticity in the insured segment. Price elasticity is how much the demand moves when the price changes by one unit. In our case, it is obvious that the uninsured patients, who have to pay full, would be far more sensitive to price than the insured ones as they dont have to pay the full amount.

Is the pricing consistent with the theory?- yes. We can see that insured patients are being charged more total cost than uninsured patients cause the insured patients are less price sensitive.