Reference no: EM133259379 , Length: word count:3000

Business Analytics Project

Task

The task is to write a report comprising an analysis of a case about market equilibrium and a government policy intervention making use of comparative statics (i.e., what would happen if X changed, holding other factors constant; think back to how P* and Q* change when the supply/demand curve shifts) to investigate the impact of government policy.

Your report will focus on the Australian market for private hospital insurance (PHI). In recent years (before COVID-19 pandemic), the number of people purchasing private hospital insurance has been declining. In particular, it has been argued that younger people (who tend to be healthier) are increasingly not insuring, which may lead to a market ‘death spiral' - young, healthy people drop out, which puts upward pressure on premiums, which in turn causes more people to drop out. Some people are concerned about the impact this will have on the public health care system. In the last two years the decline in PHI membership has been reversed, however, the majority of new insureds came from the older cohorts of the population, reinforcing concerns about the long-term sustainability of the private health insurance market.

To ‘save' the private hospital insurance market, the government is considering three policy responses:

Response 1: Provide a new subsidy to insurers for every policy they sell. The subsidy will be decreasing with age (i.e., the subsidy will be higher for younger people and lower for older people).

Response 2: Lower the threshold for the Medicare levy surcharge - a tax penalty for people without private cover - from $90,000 to $50,000 for singles and from $180,000 to $100,000 for couples/families.

Response 3: Implementing regulatory reforms to the production and supply of medical equipment, which are expected to lower the price of surgeries and hospital care.

Your report should be written in the usual style (i.e., divided into sections with different headings and, if necessary, subheadings). It will need to include the following details:

An investigation of claims that the private health insurance market is in decline.

A critical analysis of each of the government's policy options. Your analyses should:

Be cognisant of the policy context (see below).

Make use of relevant statistics or research reports where possible.

Demonstrate the expected effects of the policies on market equilibrium, using the concepts of supply, demand and market equilibrium.

You should use (hand drawn or computer generated) figures to show how these interventions would shift the supply/demand curve, and the corresponding change in Q* and P*.

You should also discuss any incentive effects that may fall outside this simple framework. For example, how might a subsidy that depends on age affect the way products are marketed?

Discuss potential effects on other closely related markets.

Discuss ‘winners' and ‘losers' from each of the reform options.

Your report should conclude with a recommendation about what policy option(s) the government should pursue, if any. Alternatively, you can recommend that the government take no action, or an action different from the three responses listed above. You need to justify your chosen recommendation, drawing on your analyses of the different policy options. Assume the goal of the government is to deliver a high-quality level of health care at the lowest possible cost (forget about politics, voting blocks etc, just focus on the economics).
Policy context

Australia has a mixed public/private healthcare system. A system of public health insurance, known as Medicare, heavily subsidises most primary health care visits (e.g., GP appointments) and essential hospital treatment. People can also purchase private health insurance. Private hospital insurance is mostly duplicate to Medicare - that is, it covers the same procedures (although can also cover additional procedures, like cosmetic surgery). The advantages of being treated as a ‘private patient', in either a private or public hospital, are shorter waiting periods for your treatment, the ability to choose your physician, and potentially better amenities (e.g., own room). General treatment or ‘extras' private health insurance is separate from private hospital insurance. It covers expenses that are generally not also covered by Medicare, like dental, optical and out-of-hospital physiotherapy. Most people who privately insure (around 83%) purchase bundled private hospital/extras insurance.

Length

Report is no more than 3,000 words.

Your assignment must be typed using 12 point font, 1.5 line spacing and 2.5cm margins on all sides.

Sources for data and any other resources you use (e.g., journal articles) should be appropriately cited (use in-text citation and a reference list). The reference list does not count towards the word limit. You can write your reference list in whatever format you prefer (e.g., APA) but it must be sufficiently detailed to allow the reader to find the resources themselves.