Question

Many elderly people have purchased medigap insurance policies to cover a growing Medicare copayment. These polices cover some or all of the medical costs not covered by Medicare. use economic theory to explain how these policies likely influence the demand for health care by elderly people.

Answer 1

Solution:

The economic theory of health care and demand  by elderly people is explained as,

Introduction:

it's vital to notice that United States demographics is atilt towards AN increasing variety of
individuals over the age of sixty. The second vital purpose to notice from a aid perspective is that
healthcare could be a "scarce resource" as variety of doctors or beds cannot be accrued considerably in a very short-
time span.

The Impact:

With a growing older population let alone policies that include some or all of the medical
cost (not coated by Medicare), they are doubtless to be a surge in demand for health care services. The supply
demand chart below indicates the surge in demand for health care with the demand curve moving from D0
to D1. Since health care could be a scarce resource, the provision aspect can not be inceased on an instantaneous basis that
this will translate into higher costs for aid services and worth equilibrium moves from P1 to P2
Therefore, the immediate impact is "surge in demand' for health care by older individuals together with an
"Increase' in price of health care services.

If we tend to try and analize the medium-term to long-run impact the insurance corporations can try and protect
rising price by presumably increasing the insurance premiums. On the opposite hand, the govt. will presumably
try and curb insurance on many treatments to deal with the demand shock" arising from a surge in
demand for a "scare resource."