Why would the mandate lower the demand for medi gap coverage

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Reference no: EM131198968

One feature of Medicare coverage is that individuals are responsible for 20% of their Part B (primary physician) costs, without limit. Individuals have traditionally purchased Medi-gap policies that cover this gap by paying for the out-of-pocket costs not covered by Medicare. But some Medigap policies did not cover this 20% copayment.

Finkelstein (2002) studied the effects of a federal mandate that Medi-gap plans cover this 20% copayment. She found that this mandate would lead fewer individuals to buy Medi-gap coverage.

a. Why would the mandate lower the demand for Medi-gap coverage?

b. What do you think would be the net effect of this policy on the costs of the Medicare program itself?

Reference no: EM131198968

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