Question

Discuss the following – What feature(s) of Medicare would cause an economist to say that “Medicare stinks as insurance”? Medicare supplement insurance is available from the commercial market and most commonly covers ‘up-front’ deductibles and least commonly covers “high-end” risks. Does this model of coverage afford well or poorly with the model of demand for insurance set forth in Ch. 10? What should we conclude from this

Answer 1

Medicare pays for many healthcare service but not for all. Medicare will pay the full Medicare-allowed rate for the first 20 days for required skilled nursing or rehabilitation care. After that, you pay a part of the cost ($141.50 per day) for up to 100 days. Medicare doesn’t provide skilled nursing or rehabilitation coverage for services that exceed 100 days in a row. Inpatient charges for a private hospital room, or in-room television or telephone, will not be covered by Medicare. The cost of personal care assistance are not covered unless you are homebound. When you select Medicare coverage you will be responsible for monthly premiums as well as annual deductibles. In some cases for co-insurance & co payments.

Medicare provides first dollar coverage for hospitalization but limited coverage for extended duration stays in the hospital. This results in poor risk reducing characteristics of Medicare compared to private insurance. Therefore Economists say that “Medicare stinks as insurance”.