How Much Choice is Too Much Choice?

May 22, 2014

Hmm, you are thinking. How are options a bad thing? Options aren’t necessarily a bad thing, but if a person has too many options, does that become a bad thing, impairing the person’s ability to make a choice? This is the subject of an article and report about the choices with which beneficiaries on Medicare are faced.

Phil Galewitz writes for the May 14, 2014 Kaiser Health Network (KHN) Capsules blog on Short Takes On News & Events, Do Seniors Have Too Many Medicare Plans to Choose From? There are on “average … 18 health plans and 31 prescription drug plans. In South Florida, … [there are] 88 plan choices altogether.” The article references a recent report that shows that because of the number of choices, it becomes onerous for beneficiaries to try to compare plans, so they stick with their current plan, regardless of whether it is the best one for them. At a briefing on the report, the author of a book about choice explained that younger people strive for “the perfect choice” while elders will take the “good enough” choice. The article quotes my good friend, former NAELA president, knowledge queen of all things Medicare and the executive director of the phenemonal Center for Medicare Advocacy (full disclosure—I’m on the CMA board), Judy Stein that “good enough” for a well beneficiary may not be “good enough” when that same beneficiary becomes ill.

The article references the 5-star rating system from CMS, but notes that seems to have little impact on beneficiary choice. An investment analyst was quoted that

the fastest-growing plans have been those with just three stars – many of which have seen 12 percent enrollment growth. He added that price, particularly monthly premiums, often drive seniors’ choices…[b]ut one reason why seniors have not flocked to the best-rated plans may be because there are so few of them.For 2014, the Centers for Medicare and Medicaid Services awarded five-star ratings to 14 health plans and 5 prescription drug plans…. About 75 percent of Medicare’s 54 million beneficiaries are enrolled in a private health or drug plan. The rest get traditional Medicare. [The investment analyst] said because health insurers know seniors are most likely to pick plans based on price, they are hesitant to charge a monthly premium if they have not had one, or to implement a major rate hike.

The Kaiser report, released May 13, 2014, How are Seniors Choosing and Changing Health Insurance Plans?, may be accessed here. The report offers 4 key findings:

Seniors cited a number of factors that were important in choosing a plan when they first enrolled in Medicare, including: premiums and out-of-pocket costs, access to desired providers, familiarity with the name of the company offering the plan (such as AARP), favorable experience with a plan representative, and adequate coverage for their health care needs. Some also said they enrolled in a particular Part D or Medicare Advantage plan in order to have the same coverage as their spouse. Star quality ratings of plans did not play a role in seniors’ plan choices. In the case of seniors choosing among Part D plans, some wanted to be sure the specific drug they were taking was covered by the plan before signing up.
Seniors say they found it frustrating and difficult to compare plans due to the volume of information they receive in the mail and through media (television and radio) and their inability to organize the information to determine which plan is best for them. Most seniors did not use the “Medicare Compare” tool available on the medicare.gov website, and many of those who did said they found it confusing, lacking information, and poorly constructed for comparisons on their desired factors. For this reason, many rely on insurance agents as trusted advisors or receive suggestions from friends, family, doctors’ offices and/or pharmacists to help them narrow down their options.
Many senior Medicare beneficiaries said they did not want to switch plans because the process of their initial plan selection was so frustrating. They believed they did their homework the first time and most did not want to revisit the decision. In general, they did not view the annual open enrollment period as a time to review their health plan options and confirm they were still in the plan most likely to meet their needs. Instead, they feared that a change in plan may disrupt their care or lead to an unforeseen increase in out-of-pocket costs, and require them to learn a daunting new set of rules and requirements. To many senior beneficiaries, the grass was not necessarily greener in other plans, and other plans could be worse. They were skeptical that any other plan would be much better, even if they were less than satisfied with their coverage or costs. Most viewed premium increases as inevitable, and were reluctant to switch plans unless premiums rose considerably. For these reasons, many will go to considerable lengths to make their existing plan work.

Among the relatively small number of seniors in the focus groups who said they did switch plans, some cited a desire to stay with a particular health care provider. Seniors would consider switching plans in response to a significant change in their personal health care needs, a major modification to their coverage or provider network, or, in the case of Part D plans, a big increase in the cost of a particular drug that they take, or a change in their plan’s formulary or utilization management requirements.

The conclusions offered in the executive summary are particularly instructive. Although the beneficiaries surveyed

appreciated being able to choose among many plans, and did not want their number of choices to be limited … they also felt unqualified to choose among plans and would like the process to be easier. Beneficiaries wanted to make well-informed and financially sound decisions but did not feel confident in their ability to do so under the current system. While they tried to compare costs, coverage, and provider networks, [they] found the process frustrating and confusing. Many said they wanted advice from experts, so they relied on input from an insurance agent or a plan representative, or suggestions from family, friends, and medical professionals.

The results of the research showed “a high demand for clear, concise, and easily comparable information presented in a digestible format focusing on the factors most important to consumers, namely cost, provider networks, and coverage.” This may or may not surprise you, but “[f]ew [beneficiaries] described the materials they have received as easy to use, and even fewer said they would turn to Medicare Compare… Making it easier for beneficiaries to compare and switch plans, … would help achieve the goal of having consumers choose a plan that best meets their … needs and preferences.” Additionally, if a less costly plan is a better fit for the beneficiary, then the beneficiary could save money, as could Medicare.