Understanding Seniors’ Choices in Medicare Advantage

S everal years ago, a family member asked me to help with decisions about herMedicare coverage. Even though I am a general internist who studies health policy, the complexity of this apparently straightforward task surprised me. Between Part D and Medicare Advantage (MA) plans, there were dozens of options available. Identifying the best one required a thorough understanding of her medical conditions, current physicians, regular medications, retirement savings, and income. Premiums were straightforward to understand, but predictions about the amount of physician copayments or the likelihood of incurring a hospital deductible were more uncertain. Traditional Medicare offered unfettered choice of physicians, but no cap on out-of-pocket spending. In contrast, MA plans offered an out-of-pocket spending cap but constrained the network of providers. No single Part D formulary included all of my relative’s medications in its preferred tier. Only after many visits to Medicare’s website and careful inspection of insurance plan directories did we reach a tentative selection. This experience is not uncommon among Medicare’s 54 million enrollees, who confront a complex, growing, and often daunting set of choices about coverage and benefits. The average Medicare beneficiary can choose from among 30 Part D prescription drug plans and 18 Medicare Advantage (MA) plans. MA plans, which enrolled approximately 30 % of all Medicare beneficiaries in 2015, have the flexibility to deviate from Medicare’s standard benefit package, cover additional services, restrict the network of available providers, and require pre-authorization to receive some types of care. Enrollees must therefore consider premiums, cost-sharing, covered services, provider networks, and the plan’s quality. Ideally, beneficiaries would revisit their decisions annually, since benefits among plans, as well as seniors’ health needs, change over time. The proliferation and complexity of coverage options in Medicare represents a Bfeature^ rather than a Bbug^ of prevailing federal health policy thinking, which emphasizes market competition and consumer choice. Under this view, increased choice among competing private insurers will improve the quality of care, reduce health care spending, and satisfy consumers’ varied preferences for optimal coverage. In an efficient market, insurers strive to lower the price of their product and improve quality, and informed, rational consumers will reward firms that successfully achieve these objectives. However, is it reasonable to assume thatMedicare beneficiaries will operate as the rational consumers described in standard economics textbooks? Insights from behavioral economics and emerging empirical evidence suggest otherwise. From trivial decisions among jams in a supermarket to consequential ones about retirement investments, increasing the number and complexity of options can erode decision-making or lead to an individual making no choice at all. As an example, over fourfifths of Medicare enrollees in the Part D program could have selected a more generous plan at a lower cost. If seniors had selected optimally, their spending on prescription drugs would be 31 % lower compared to their spending in the plan they actually chose. Beneficiaries with lower cognitive ability fare particularly poorly in Medicare’s insurance markets. Such beneficiaries are less likely to enroll in a supplemental insurance plan to reduce their out-of-pocket medical expenses or respond to more generous benefits and lower premiums among Medicare Advantage plans. Another problem relates to decisional inertia or Bstickiness^. Once enrolled in a plan, seniors persevere in that option, evenwhen switchingwould save them substantially. This evidence casts doubt about whether seniors, at least in the current environment, can reliably identify and select insurance options that maximize protection from financial risk at the lowest price. Ideally, Medicare beneficiaries should consider quality in addition to cost in their plan decisions. To facilitate seniors’ choices among MA plans, the Centers for Medicare and Medicaid Services (CMS) developed a five-star rating system that incorporates over 50 separate quality measures. CMS also employs these ratings to assign MA payment bonuses. While condensing many measures of quality into a composite score may sacrifice important detail, a single measure has more intuitive appeal and poses less cognitive burden for consumers. Of note, the five star ratings are ubiquitous and highly influential in settings outside healthcare (Amazon,Google, Netflix, TripAdvisor, andYelp all use five-star rating scales), but there is limited evidence examining how seniors interpret star ratings and how they negotiate cost–quality tradeoffs in their selection of MA plan options. In this issue of the Journal of General Internal Medicine, Reid and colleagues examined the predictors of plan selection among newly enrolled Medicare Advantage beneficiaries in 2011. They employed a rigorous discrete choice model that includes the full set of available MA plan options for each beneficiary and produces the marginal Bwillingness to pay^ for a better plan star rating. The model explained about onefifth of the variation in plan choices among their cohort. Published online September 11, 2015