Final answer:
Medicare beneficiaries are responsible for paying premiums, deductibles, and coinsurance, which are out-of-pocket costs that reduce moral hazard by having them share in the cost of their healthcare.
Step-by-step explanation:
Medicare requires its beneficiaries to pay for several out-of-pocket costs similar to other insurance policies. These costs include premiums, deductibles, and coinsurance. The deductible is a set amount that must be paid by the policyholder out-of-pocket before Medicare begins to cover costs.
After the deductible is met, there may be a copayment, which is a fixed fee for certain services, or coinsurance, where the policyholder pays a percentage of the total service cost. These structures help to reduce moral hazard by ensuring that individuals have a financial stake in the healthcare services they use, which can help control overall healthcare costs by making users more discerning about seeking care.
For example, under Medicare Part A, which covers hospital services, beneficiaries must meet a deductible before coverage kicks in and may have copayments for extended hospital stays. Medicare Part B, which covers outpatient services, operates on a premium, deductible, and copayment or coinsurance model where beneficiaries pay monthly premiums, an annual deductible, and typically 20% of the costs as coinsurance for most services after the deductible is met.