Seniors need more Medicare choices, or do they? The answer depends, of course, on who’s doing the asking.
Republicans and others advocating a voucher plan for Medicare invoke the choice argument as the rationale for transforming Medicare from social insurance provided by the government to privatized arrangements between individuals and the marketplace. Under a voucher system, the government would give seniors and people who are disabled a fixed amount of money to buy insurance from private carriers much the way the rest of America does.
Those on the other side believe there’s plenty of choice—even too much—in the Medicare program. I’m in that camp having found last year that as a new Medicare beneficiary I had more than 100 choices to cover gaps in Medicare benefits. The new Medicare Handbook for next year indicates that those in New York City have 83 choices for Medicare Advantage plans and 28 choices for prescription drug plans. Add to that another 50 or so choices for traditional Medigap policies and you’re talking about 160 different plans to consider. So who’s going to shop? That’s way too many, even for experts, to distill.
Research, more scientific than mine, confirms my belief. Once seniors pick a plan—based on coverage, customer service, friendly salespeople, price, or whatever—they tend to stick with it even though they might be able to find a cheaper one if they went shopping. Medicare beneficiaries, it seems, are like bank customers. Once people pick a bank, they tend to stay put despite the heavy bank advertising enticing them to switch. A study from the National Bureau of Economic Research, a private, nonprofit research organization, found that if seniors with Medicare drug plans stayed in a plan too long, they could end up paying premiums that were ten percent higher than had they had switched to a new plan.
Researchers examined data showing that new plans often had cheaper price tags than older ones that had been on the market for two or three years. That’s hardly surprising since insurance sellers, especially in competitive markets like Medicare plans, try to grab market share with low premiums and then jack up prices of older policies. You might call it a kind of a “bait and switch” sales practice on the part of insurers. Remember: This is private insurance we’re talking about, and insurers have to make a profit.
Researchers concluded that “a sizeable fraction” of consumers either value other features not reflected in the cost of the plan or else don’t make the optimum choices. “Our results do not support the proposition that consumers can make and benefit from good choices in health insurance markets,” they concluded. Were they blaming the victim for failing to sort through zillions of data points to “optimize” their decision effectively, as they put it? Are seniors to blame for a system that generates a vast number of choices that even experts are barely able to navigate and optimize effectively? The researchers, apparently, are saying consumers lack the ability to make those choices.
I would argue that most people believe the task is daunting and hopeless—too many data points to sort out and too little time to do it. So it’s easiest to stick with what you have even it costs an extra $50 a year, the trade-off for the aggravation of choosing and switching to a new plan.
Perhaps it’s the system itself that makes the task of choosing so impossible. Decisions by policymakers to allow all kinds of sellers to make a buck off of seniors in the Medicare marketplace with a cornucopia of plans may actually be working against what they want the marketplace to do. If their aim is for market forces to drive insurers to provide seniors with the highest quality for the lowest cost, it will take more than lots of choices to make that happen.
Trudy Lieberman is a journalist and an adjunct associate professor of public health at Hunter College in New York City. She blogs regularly on the Prepared Patient Forum.