Having Many Medicare Advantage Choices Has Its Disadvantages

Research published in Health Affairs looks at the effect on beneficiaries’ decision-making of having a certain number of choices in plans or plan design.  The research also examined whether there was a exaggerated effect upon beneficiaries with cognitive difficulties.  While standard economic theory posits that the more choices for a consumer or buyer, the better for them because it improves competition on price and other attributes; real life consumer behavior studies have found that too much choice makes it hard for consumers to decide and leaves them feeling less positively about their choices.  In this research, the choice to participate in Medicare Advantage was studied in relation to the number of plan options the beneficiaries had, increases in those choices, the richness of the benefits and certain other factors.   (HA Article)

Not only could some of the usual factors be affecting good decision-making by seniors, but many of them have mild or serious cognitive impairments which may further limit the value of having multiple choices and may result in poor decisions.  The study included 21,815 enrollment decisions made by 6,672 beneficiaries.  For almost all of these beneficiaries Medicare Advantage enrollment would result in lower out-of-pocket costs.  When there was an increase to 15 or less plan options to choose from in an area, enrollment in MA increased significantly; between 15 and 30 options, however, resulted in no enrollment growth and increases to over 30 choices led to lower enrollment.  Beneficiaries with good cognitive functioning were more likely than those without it to take advantage of the lower out-of-pocket costs stemming from MA enrollment.

While the research indicates the need for careful thought about how the Medicare Advantage program is structured, there are already freely available tools to allow a beneficiary to identify which plan is best for them and ensure a good decision.  In addition, the results of the research do not appear to take into account current Medicare Advantage penetration in a particular area.  If penetration is high, there may be less switching simply because the pool of people willing to consider enrollment in Medicare Advantage is near exhaustion and having many plan choices is also likely to be correlated with a high degree of market penetration.  But the article does highlight the value of having a standardized enrollment process that specifically calculates for each enrollee the plans most likely to meet their needs at the lowest out-of-pocket cost.