News Release

Medicare Part D too complicated for seniors to identify lowest-cost plan

Researchers urge simplification of Part D to achieve cost savings

Peer-Reviewed Publication

IQ Solutions, Inc.

WASHINGTON, DC —In the face of rising health care costs, a new study has found that older adults were less likely to identify the plan that minimized their total annual cost and were likely to mistakenly think they had chosen the lowest-cost plan. The study, funded by the Robert Wood Johnson Foundation® Investigator Awards in Health Policy Research, is currently available online, and will be published in the August 2009 issue of Health Services Research.

"Many seniors are unaware that they can be saving hundreds of dollars every year by choosing a different drug plan, because there are entirely too many choices for them to navigate," said Yaniv Hanoch, Ph.D., lead author and lecturer at the University of Plymouth, School of Psychology, Plymouth, U.K. "The system should limit choice and empower its beneficiaries to make informed and cost-effective decisions about their prescription drug plan."

Hanoch and colleagues took an in-depth look at the consumer behavior patterns of nearly two hundred mentally and physically healthy individuals age 18 and older, half age 65 or older. Participants were randomly assigned to choose among 3, 10, or 20 hypothetical Medicare prescription drug plans. The researchers found that—regardless of age—an increase in the number of insurance plans available reduced the likelihood of picking the plan with the lowest annual costs. Other factual questions about the plans were also more likely to be answered incorrectly when participants had more plans to choose from. While older adults were less able than younger ones to choose the plan that offered the lowest annual costs, they were also more confident that their decisions were correct.

The authors recommend a few options for improving the system: offering one choice that seniors can opt in or out of (like Medicare Parts A and B); standardizing the benefit; or reducing the number of plans to 10 or less.

"Making Part D easier for seniors to navigate should be part of the administration's and Congress' efforts to reform health care," says Thomas Rice, Ph.D., co-author and professor of health services in the UCLA School of Public Health. "When it comes to Medicare Part D, research shows that seniors prefer less choice and more government intervention."

Other findings, including a study published earlier this year by Hanoch and colleagues, show that a majority of adults believe that Medicare Part D is too complicated and difficult to comprehend. Most adults favor some form of simplification and support the idea of being able to purchase a plan directly from Medicare. Furthermore, changes in drug consumption and insurance formulary coverage could lead to spikes in a consumer's out-of-pocket expenditures, sometimes by more than $1,000. Because the system is so difficult to navigate, seniors have been reluctant to switch plans during the annual open enrollment period.

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The study, "How Much Choice Is Too Much? The Case of the Medicare Prescription Drug Benefit" is available online at http://www3.interscience.wiley.com/journal/122407933/abstract. Additional coauthors include Janet Cummings, B.A., with the Department of Health Services, UCLA School of Public Health, Los Angeles, Calif., and Stacey Wood, Ph.D., with the Department of Psychology, Scripps College, Claremont, Calif.

Investigator Awards in Health Policy Research, a national program of the Robert Wood Johnson Foundation (RWJF), supports researchers whose crosscutting and innovative ideas promise to contribute meaningfully to improving health and health care policy. The program provides one of the few funding opportunities in the United States for investigator-initiated projects that are broad in scope, innovative in approach, and have national policy relevance. For more information visit, http://www.investigatorawards.org/.

The research findings presented here are those of the researcher and are not necessarily the views of the Robert Wood Johnson Foundation.


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