Choosing the right medicare prescription drug plan: The effect of age, strategy selection, and choice set size.

Abstract

Objective-The Medicare Modernization Act of 2003 (better known as Medicare Part D) represents the most important change to Medicare since its inception in the mid-1960s. The large number of drug plans being offered has raised concern over the complex design of the program. The purposes of this article are to examine the effect of age and choice set size (three vs. nine drug plans) on decision processes, strategy selection, and decision quality within the Medicare Part D program.Methods-One hundred and fifty individuals completed a MouselabWeb study, a computer based program that allowed us to trace the information acquisition process, designed to simulate the official Medicare website.Results-The data reveal that participants identified the lowest cost plan only 46% of the time. As predicted, an increase in choice set size (3 vs. 9) was associated with 0.25 times the odds of correctly selecting the lowest cost plan, representing an average loss of $48.71. Older participants, likewise, tended to make poorer decisions. Conclusion-The study provides some indication that decision strategy mediates the association between age and choice quality, and provides further insight regarding how to better design a choice environment that will improve the performance of older consumers. KeywordsAttribute/alternative processing; choice; prescription drugs; Medicare; older adultsThe Medicare Modernization Act of 2003 (better known as Medicare Part D) represents the most important change to Medicare since its inception in the mid-1960s. The program offers millions of older adults the ability to purchase subsidized prescription drug coverage. One feature that has attracted much attention (Hanoch & Rice, 2006) is the large number of drug plans being offered (a median number of 48 among the states; Kaiser Family Foundation, * Send correspondence to: Yaniv Hanoch, University of Plymouth, School of Psychology, Drake Circus, Plymouth PL4 8AA, UK, Tel. 44 (0) 1752-662779, yaniv.hanoch@plymouth.ac.uk. HHS Public AccessAuthor manuscript Health Psychol. Author manuscript; available in PMC 2017 September 12. ). This large choice set, however, is only one factor rendering the Medicare Part D program one of the most complex health decision environments ever designed (Frank, 2004). As drug plans can also differ in their key features, such as which drugs are included in the formulary, premiums, and cost-sharing requirements, beneficiaries find it difficult to choose among the dozens of drug plans available.The purposes of this article are to examine the effect of age and choice set size (three vs. nine drug plans) on decision processes, strategy selection, and decision quality by using a process-tracing method, Mouselab (Bettman, Johnson, & Payne 1990;Payne, Bettman, & Johnson, 1993). Mouselab allows us to examine the information being sought, the time spent on each piece of information -both the total amount of information and the order in which information is acquired -as well as how age and the decision environment (3 vs. 9 plans) a...

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