Final answer:
True, Medigap coverage is proportional to the premium paid, with more coverage costing more due to actuarially fair premiums. Cost-sharing measures like deductibles and co-payments are used to discourage overuse of medical services without harming health status.
Step-by-step explanation:
The statement that Medigap coverage is roughly proportional to the premium paid is indeed true. More comprehensive coverage will typically cost more in premium payments. Insurance premiums are often set at actuarially fair levels, which means they are calculated to reflect the expected healthcare costs of different risk groups accurately. High-risk individuals, such as those with chronic diseases or the elderly, are charged higher premiums due to their greater expected healthcare costs.
Cost-sharing mechanisms such as deductibles and co-payments play a role in reducing moral hazard by ensuring that insured individuals bear some out-of-pocket costs. This discourages over-consumption of medical services and fosters more responsible use of healthcare resources. However, these costs do not negatively impact health status, demonstrating that individuals can consume less medical care without deteriorating health outcomes when they have skin in the game financially.