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Medigap policies must also include a ___

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Final answer:

Medigap policies must include a core set of benefits, offering supplementary coverage to Medicare Part A and B. These standardized policies help cover additional out-of-pocket expenses that Medicare does not address, although they do not cover all health-related services.

Step-by-step explanation:

Medigap policies, which supplement Medicare, must include a core set of benefits to cover costs not paid by Medicare, like copayments, coinsurance, and deductibles. These private insurance plans are standardized across different insurers, providing consistent coverage options, known as Plans A through N. Medigap serves as a complement to parts A and B of Medicare, the federal insurance program for seniors and certain younger people with disabilities, which pays for many but not all health-related services.

Part B of Medicare is an optional insurance that covers non-hospital medical expenses, including physician services, medical tests, and outpatient visits. Medicare pays for much of the costs, with participants shouldering a portion through monthly premiums, annual deductibles, and copayments. To manage these expenses, beneficiaries might purchase a Medigap policy. The existence of Medigap is partially due to concepts like moral hazard and adverse selection, where individuals might overutilize healthcare services when they're not directly responsible for the full costs, or when insurance plans attract a disproportionate number of high-risk individuals, respectively.

While Medigap provides additional coverage, it doesn't cover everything. Services like long-term care, vision and dental care, hearing aids, eyeglasses, or private-duty nursing are typically not covered under standard Medigap plans. Moreover, Medigap policies are distinct from the Patient Protection and Affordable Care Act (ACA or Obamacare), which is a separate regulation aimed at expanding healthcare coverage and reducing healthcare costs across the broader population.

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