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Plan selection in Medicare Part D: evidence from administrative data.
Florian Heiss1, Adam Leive, Daniel McFadden
1University of Düsseldorf, Düsseldorf, Germany.
Journal of Health Economics
|December 7, 2013
Summary
Many Medicare Part D enrollees do not choose the most cost-effective prescription drug plans. Consumers face an average of $300 in excess annual spending due to suboptimal plan selection.
Area of Science:
- Health Economics
- Health Insurance Markets
- Consumer Behavior
Background:
- The Medicare Part D program offers prescription drug insurance.
- Understanding consumer choice in insurance markets is crucial for policy design.
Purpose of the Study:
- To evaluate consumer ability to optimize Medicare Part D plan selection.
- To assess the financial impact of suboptimal choices on beneficiaries.
Main Methods:
- Analysis of administrative data on Medicare Part D medical claims.
- Comparison of enrolled plans against least-cost options identified by the Medicare Plan Finder tool.
Main Results:
- Fewer than 25% of individuals enroll in plans as cost-effective as the optimal choice.
- Consumers incur average annual excess spending of approximately $300 (15% of total out-of-pocket costs).
Conclusions:
- Medicare Part D enrollees often do not optimize their plan choices effectively.
- Decision costs alone do not fully explain suboptimal enrollment; non-cost factors may play a significant role.
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