People often make decisions in health care that are not in their best interest, ranging from failing to enroll in health insurance to which they are entitled, to engaging in extremely harmful behaviors. Traditional economic theory provides a limited tool kit for improving behavior because it assumes that people make decisions in a rational way, have the mental capacity to deal with huge amounts of information and choice, and have tastes endemic to them and not open to manipulation. Melding economics with psychology, behavioral economics acknowledges that people often do not act rationally in the economic sense. It therefore offers a potentially richer set of tools than provided by traditional economic theory to understand and influence behaviors. Only recently, however, has it been applied to health care. This article provides an overview of behavioral economics, reviews some of its contributions, and shows how it can be used in health care to improve people's decisions and health.

Objective. To study the impact of the number of choices and age on measures of performance in choosing a Medicare prescription drug plan. Data Source/Study Setting. One hundred ninty-two healthy individuals age 18 and older, half age 65 or older, in Claremont, California. Study Design. Participants were randomly assigned to 3, 10, or 20 hypothetical drug plans and asked four factual questions. Statistical models controlled for experimental group, age, gender, race, education, income, marital status, and health status. Primary Findings. Older age and greater number of plans were significantly associated with fewer correct answers. Although older adults were less likely to identify the plan that minimized total annual cost, they were more likely to state that they were ''very confident'' they chose the correct plan. Conclusions. The results raise concerns about the difficulties that older adults may have in navigating the wide range of drug plan choices available.Key Words. Choice, prescription drugs, Medicare, elderly A hallmark of personal freedom is choice: having alternatives available, and being given the autonomy to choose among them. Is it possible, then, to have too much choice? This would appear to be heretical, at least in economics, as consumers can always ignore the poorer alternatives. Some researchers, however, are starting to question the merits of consumers having a large array of choices. Large choice sets coupled with the desire to maximize (that is, choose the very best) have been found to be significantly related to greater sense of regret, reduced happiness, and even less satisfaction with the choices made (Schwartz et al. 2002).Given this, it is noteworthy that the Medicare prescription drug benefit has so many plan choices. In 2008, nearly all states had more than 50 standalone drug plans from which to choose. When the stand-alone plans are combined with Medicare managed care plans, older adults often faced over While a number of studies have examined the relationship between choice size and consumers' decision quality and satisfaction, little research has been devoted to examining the effects of age on decision making. This is surprising as older adults are frequently asked to make many complex financial and medical decisions (Hanoch, Wood, and Rice 2007) even though cognitive ability tends to decline with age.This Research Brief reports on an experiment in which older and younger adults were randomly assigned to a different number of hypothetical prescription drug plans that resemble those in the marketplace. Subjects, half of whom were age 65 or older, were assigned to a choice set of 3, 10, or 20 plans. We report on how age and number of plans affect objective measures of performance as well as subjective assessments of the experience, and we draw conclusions about problems associated with the design of the Medicare drug benefit.

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Studies on decision making have come to challenge the idea that having more choice is necessarily better. The Medicare prescription drug program (Part D) has been designed to maximize choice for the consumer but has simultaneously created a highly complex decision task with dozens of options. In this study, in a sample of 121 adults, we examined the impact that increasing choice options has on decision-making abilities in older versus younger adults. Consistent with our hypotheses, we found that participants performed better with less choice versus more choice, and that older adults performed worse than younger adults across conditions. We further examined the role that numeracy may play in making these decisions and the role of more traditional cognitive variables such as working memory, executive functioning, intelligence, and education. Finally, we examined how personality style may interact with cognitive variables and age in decision making. Regression analysis revealed that numeracy is related to performance across the lifespan. When controlling for additional measures of cognitive ability, we found that although age was no longer associated with performance, numeracy remained significant. In terms of decision style, personality characteristics were not related to performance. Our results add to the mounting evidence for the critical role of numeracy in decision making across decision domains and across the lifespan.

This article provides a review of research that has addressed the impact of patient cost sharing on the use of services and resulting health status impacts, among the population age 65 and older. Nearly all of the 22 relevant studies examined that have been published since 1990-16 focusing on cost-sharing for prescription drugs and 6 on cost-sharing for medical services--conclude that increased cost-sharing reduces either or both the utilization and health status of seniors. Most of the studies, however, rely on cross-sectional and self-reported data. Further research, employing stronger study designs as well as clinical and administrative data, is necessary before drawing more definitive conclusions.