How does the federal government avoid the asymmetric information problem associated with providing health care to people over 65 years of age?
A) Health care is standardized and is the same for all people over 65 years of age.
B) Health insurers rely on the reputation of the covered individuals.
C) Participation in the Medicare program is mandatory for all people over 65 years of age.
D) Health information about people enrolled in the Medicare program is publically available.

Question

Quizplus · Accepted Answer

Participation in the Medicare program is mandatory for all people over 65 years of age, which means that the federal government has access to health information about all individuals in the program. This avoids the problem of asymmetric information, as the government has full information about the health status and history of all enrollees, allowing them to set appropriate premiums and coverage levels for everyone. Standardization of healthcare (A) may address some other problems but might not address the information asymmetry problem. Health insurers relying on reputations (B) may not have access to all relevant information about an individual's health history. Health information about enrollees being publically available (D) could lead to privacy concerns and is not necessarily the best approach to addressing information asymmetry.

How Does the Federal Government Avoid the Asymmetric Information Problem