How Much Choice Is Too Much? The Case of the Medicare Prescription Drug Benefit

Abstract

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.

The Behavioral Economics of Health and Health Care

“…Few people are picking the most cost-effective plans: those that minimize the sum of premium payments and out-of-pocket copayments (20). Gruber (19) estimates that fewer than 10% of enrollees are choosing the cheapest plan; similar results were obtained in a different study by Heiss and colleagues (21).…”

Choosing the right medicare prescription drug plan: The effect of age, strategy selection, and choice set size.

“…One investigation (Bundorf & Szrek, 2010) has shown that increasing the number of drug plans available (2, 5, 10, and 16) boosted participants' satisfaction with their choice; however, it also amplified their desire to see fewer options on the menu. Another study (Hanoch, Rice, Cummings, & Wood, 2009) found that larger drug plan choice-set size (10 and 20 compared to 3) reduced both older and younger participants' performance. It is perhaps not surprising, then, that earlier surveys found that the majority of older adults thought the Medicare Part D program was too complicated (Kaiser Family Foundation, 2006) and had too many choices ).…”

Choice, numeracy, and physicians-in-training performance: The case of Medicare Part D.

“…Regardless of the driving factor, Medicare beneficiaries would benefit from a simplified program and fewer number of plans (Cummings, Rice & Hanoch, 2009). Additionally, despite our efforts to provide a decision task that mimics the actual Medicare drug benefit, it was not possible to render them identical.…”

“…The instruments and design of the present study are based on an earlier investigation (Hanoch et al, 2009). A member of the research team briefly described the study and distributed surveys, the completion of which required approximately 10 minutes.…”

“…Earlier research indicates that choice set size and numeracy skills are key factors affecting an individual's ability to wade through the complexities of health insurance options (Iyengar & Lepper, 2000;Iyengar, Wells, & Schwartz, 2006;Iyengar, Huberman, & Jiang, 2004;Hanoch, Rice, Cummings, & Wood 2009). Unfortunately, research on physicians' numeracy levels is scant, even though numeracy is essential for practicing evidence-based medicine (Rao, 2008).…”