Ralph will consume any health care service just as long as i

Ralph will consume any health care service just as long as its MB exceeds the money he must pay out of pocket. His insurance policy has a zero deductible and a 10 percent copay, so Ralph only has to pay 10 percent of the price charged for any medical procedure. Which of the following procedures will Ralph choose to consume? An $800 eye exam that has an MB of $100 to Ralph. A $90 hearing test that has an MB of $5 to Ralph. A $35,000 knee surgery that has an MB of $3,000 to Ralph. A $10,000 baldness treatment that has an MB of $16,000 to Ralph

Solution

Ralph will choose the option D: A $10,000 baldness treatment that has an MB of $16,000 to Ralph

The last option will be preferred by Ralph since, he has a terms of 10% copay, for his $10,000 treatment he would be expected to pay, only $5000, where as the medical benefits for this treatment is almost triple than the amount he spends. Hence Ralph will choose the option of having a baldness treatment done.

For eye exam Ralph will be spending $400 whereas his MB will be only $100.

For hearing test Ralph will be paying $45, whereas his MB will be only $5.

For knee surgery Ralph will be paying $17,500 where as he will be getting a MB of only $3,000.

Hence Ralph will choose the final option.