Are prescription drug insurance choices consistent with expected utility theory?

To determine the extent to which people make choices inconsistent with expected utility theory when choosing among prescription drug insurance plans and whether tabular or graphical presentation format influences the consistency of their choices.

Members of an Internet-enabled panel chose between two Medicare prescription drug plans. The "low variance" plan required higher out-of-pocket payments for the drugs respondents usually took but lower out-of-pocket payments for the drugs they might need if they developed a new health condition than the "high variance" plan. The probability of a change in health varied within subjects and the presentation format (text vs. graphical) and the affective salience of the clinical condition (abstract vs. risk related to specific clinical condition) varied between subjects. Respondents were classified based on whether they consistently chose either the low or high variance plan. Logistic regression models were estimated to examine the relationship between decision outcomes and task characteristics.

The majority of respondents consistently chose either the low or high variance plan, consistent with expected utility theory. Half of respondents consistently chose the low variance plan. Respondents were less likely to make discrepant choices when information was presented in graphical format.

Many people, although not all, make choices consistent with expected utility theory when they have information on differences among plans in the variance of out-of-pocket spending. Medicare beneficiaries would benefit from information on the extent to which prescription drug plans provide risk protection.