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Medi-gap insurance policies, available in the private market, are designed to cover many expenses that Medicare...

Medi-gap insurance policies, available in the private market, are designed to cover many expenses that Medicare does not cover. Can such policies lead to an inefficient amount of health care? Explain.

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Solution:-Yes,such policies can lead to an inefficient amount of health care why because Medi-gap insurance policies, available in the private market, are designed to cover many expenses that Medicare does not cover. It can because individuals who previously were not willing to pay a coinsurance to receive treatment now can receive treatment for practically free. This increases the moral hazard costs associated with coverage and may increase the costs of the Medicare program altogether.

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