Examining the Impact of Informational Messages on Seniors' Choice of Medicare Drug Plans

Grant Description: The researchers examined how well people choose from among the large set of alternatives in the Part D plan and evaluated whether psychologically attuned interventions can help improve those choices. Specifically, they evaluated people’s actual choice of plan in light of the medications they use and then experimentally increased the availability of or access to cost information. They encouraged clients to explicitly consider their personal preferences (such as their attitude toward the use of generic medications or mail order prescription drug services) to see how the availability of such considerations might influence chosen plan quality and beneficiary satisfaction with the chosen plan. The objective of this study was to inform policies surrounding Part D and other policies relying on consumer choice in complicated environments.

Policy Summary: Policymakers are increasingly interested in the role of consumer choice in health insurance. While choice and competition have great potential to improve service quality and reduce cost, a recent body of research emphasizes the psychological and cognitive difficulty that consumers may have with complex choices.

Twenty-five million elderly Americans are currently enrolled in Medicare Part D private drug plans and may choose among at least 40 options. The researchers' work suggests that some seniors would make different choices if they were presented with personalized, comparative cost information and would enjoy substantial cost savings - and no adverse effects on quality - as a result.

In the 2006 open enrollment period, the researchers conducted a randomized experiment in which some seniors enrolled in Medicare drug plans were mailed carefully designed personalized information on the potential cost savings from changing plans, while others received more general information not tailored to them.

In the experimental study, 28 percent of the information group switched plans as opposed to 17 percent of the comparison group. The average relative savings for seniors who made different plan choices as a result of the study materials were at least $150 per person or 9 percent of the annual drug bill. The savings were achieved without offsetting differences in plan quality.

The findings highlight the importance of paying close attention to the psychology of choice and the subtleties of information design, when implementing choice-based policies in health insurance and other areas. Behavioral research highlights two important factors, intention and action. Informational and consciousness-raising campaigns can impact intention; the design of helpful access and clever decision-aids can impact action. As scientists, the researchers recommend the testing of alternative presentations of information to determine the formats that lead to the most robust decisions to act as well as the testing of alternative context designs to determine those that promote the most robust choices, ideally defined as choices that are most satisfactory to the affected individuals themselves.