Question

You are working for an insurance company and must determine if a new drug for the treatment of heart failure should be approved for coverage by your insurance company. The information about the drug and the current drug is below. Show your work for credit. The threshold price is $5,500. New drug Old drug Mortality rate 10% 20% Life expectancy 15 years 10 years Initial Cost $11,000 $8,500 Follow Up Cost Year 1 $5,000 $5,000 Follow Up Cost $1,000 $4000 Subsequent years

          You are working for an insurance company and must determine if a new drug for the treatment
of heart failure should be approved for coverage by your insurance company. The information
about the drug and the current drug is below. Show your work for credit. The threshold price is
$5,500.

New drug	Old drug
Mortality rate	10%	20%
Life expectancy	15 years	10 years
Initial Cost	$11,000	$8,500
Follow Up Cost Year 1	$5,000	$5,000
Follow Up Cost	$1,000	$4000
Subsequent years

You are working for an insurance company and must determine if a new drug for the treatment
of heart failure should be approved for coverage by your insurance company. The information
about the drug and the current drug is below. Show your work for credit. The threshold price is
5,500.

New drug Old drug
Mortality rate 10% 20%
Life expectancy 15 years 10 years
Initial Cost11,000 8,500
Follow Up Cost Year 15,000 5,000
Follow Up Cost1,000 4000
Subsequent years

Added by Gonzalo P.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Luke Humphrey

Step 1

The initial cost of the new drug is $11,000. The follow-up cost for the first year is $5,000. So the total cost for the first year is $11,000 + $5,000 = $16,000. Show more…

Show all steps

Thanks for your feedback!

Could anyone help me with this problem? Show work, please! You are working for an insurance company and must determine if a new drug for the treatment of heart failure should be approved for coverage by your insurance company. The information about the drug and the current drug is below. Show your work for credit. The threshold price is $5,500. New drug Mortality rate Life expectancy Initial Cost Follow-Up Cost Year 1 Follow-Up Cost Subsequent years 10% 15 years $11,000 $5,000 $1,000 Old drug Mortality rate Life expectancy Initial Cost Follow-Up Cost Year 1 Follow-Up Cost Subsequent years 20% 10 years $8,500 $5,000 $4,000