Question

Medicare Part B has a co-insurance of 20% and no-cap on the co-insurance amount a person pays in the event of high medical bills. For example, if the patient has a major health event and the physicians’ fees are $50,000, the patient pays $10,000. A proposed policy reform would introduce an annual cap of $5,000 for co-insurance payments under Medicare Part B. Advocates maintain that the cap would not increase patients’ moral hazard for physician health services. Explain the advocates’ reasoning.

Answer 1

Medicare Part B has a co-insurance of 20% and no-cap on the co-insurance amount a person pays in the event of high medical bills. For example, if the patient has a major health event and the physicians’ fees are $50,000, the patient pays $10,000-----

Coinsurance is a type of insurance where there is cost sharing of the loss or expenses that are incurred in the event of bad health, the cost is shared between the insured and the insurance company.

For example, if John gets ill and he has a coinsurance plan that states cost sharing in the ratio of 20:80. If John gets ill and he gets health care services and that cost him $100 than 20$ will be paid by John and 80$ will be borne by the insurance company. This cost sharing is the coinsurance policy. Since the insured has to bear the expense then there will be no unnecessary claims and in this way, the consumption limits will be regulated for the patients that they make.

Copay insurance is another type of insurance in which there is cost sharing but the amount that is to be shared is fixed and this does not increase or decrease with the amount of claim that is made.

So in copay insurance the insured is always under the liability to pay fix sum of amount despite how much big the claim is.

This amount in copay insurance is fixed.

A proposed policy reform would introduce an annual cap of $5,000 for co-insurance payments under Medicare Part B. Advocates maintain that the cap would not increase patients’ moral hazard for physician health services. Explain the advocates’ reasoning.----

An annual cap of $5K will not interfere in providing relax of mind in case of critical Illness as the insured is always assured that he has to pay the fixed amount, no matter how much big the claim amount is.

uppose John has a copay insurance and he had bad health and becomes critically ill and the total cost of hospitalization comes out to be $100K, in this case, John is only liable to pay the $5K amount. So this has given John peace of mind in the event of critical illness also.