If the supply of medical services is perfectly elastic, then the effect of Medicaid is to:

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If the supply of medical services is perfectly elastic, it means that providers are willing and able to supply as much medical services as needed without any increase in market price. Therefore, Medicaid will not increase the market price of medical services. However, Medicaid recipients may consume medical services beyond the point at which their marginal benefits per year equal the marginal social costs of medical services because they do not bear the full cost of their consumption due to the government subsidy. This leads to overutilization and inefficient allocation of resources, which is represented by the difference between the marginal social cost and marginal private cost of medical services.

If the Supply of Medical Services Is Perfectly Elastic, Then