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Many Seniors Not Selecting Lowest Cost Medicare Drug Plan
By
Steven Reinberg, US News
March
13, 2009
Most seniors facing the staggering choices of drug plans available through Medicare don't select the plan with the lowest costs, a new report says.
The report found that the more than 50 standalone drug plans in many states should let people pick the best value for their individual medical and financial needs, but most consumers aren't making the smart economic choice.
"The idea that was touted, when it became clear that there would be so many plans available, was that seniors would compare plans and choose the best possible plan given their individual needs and economic circumstances," said Tricia Neuman, the Kaiser Family Foundation's vice president and director of its Medicare Policy Project.
But most people did not end up in the lowest-cost plan, she said.
The report, Choosing a Medicare Part D Plan: Are Medicare Beneficiaries Choosing Low-Cost Plans? was commissioned by the Kaiser Family Foundation. Its release is timely: Seniors have until March 31 to switch plans before they are locked into their choice for the rest of the calendar year.
"Elders are not choosing the lowest-cost option available to them -- and many elders don't even choose one of the few lowest-cost options," said report author Jonathan Gruber, a Massachusetts Institute of Technology professor of economics.
"Based on more detailed analysis, it looks like this is because elders pay too much attention to premiums and not enough attention to their out-of-pocket costs," he added.
The study found that only 6 percent of participants opted for the lowest-cost plan offered in their area in 2006. People could have saved an average of $520 if they had chosen the lowest-cost plan.
In addition, the 10 percent of seniors who chose one of the lowest-cost plans saved an average of $400 over those who enrolled in costlier plans. And the 53 percent of seniors who enrolled in one of the 25 percent lowest-cost plans saved an average of $220 over those who opted for more expensive plans, according to the report.
A number of factors, other than bottom-line cost, may be influencing decisions, Neuman said. "They wanted to go with a plan that had good brand recognition or one of the lowest-premium plans -- not necessarily a plan with lower pharmacy costs," she said.
Still, most people are not maximizing their savings when choosing a Part D plan, the report concluded.
One problem might be that there are too many plans available, Neuman said. "Seniors have said they think there are too many plans, and people don't do well when confronted with so much choice," she said. "It could well be that people found the process difficult."
While the federal government has a useful Web site to help seniors find the best plan for them, many seniors don't use the Internet, Neuman said.
Seniors would do well to go through the process of comparing plans, Neuman said. "It's not an easy or fun process, but there could be significant savings that could result from comparing plans and choosing one that provides the best deals for particular drugs a senior takes," she said.
Consumers also might benefit from a simplified approach to plans.
"Elders might be better off with a smaller set of choices, particularly across benefits structures," Gruber said. "At a minimum, elders would certainly be better off if they made more use of the calculator on the medicare.gov Web site that tells them the implications of different plan choices given their drug utilization. Policy-makers should think hard about restricting the broad set of benefit designs available under Part D.
Paul Precht, director of policy and communications at the Medicare Rights Center, said many Medicare clients would like a government-run drug plan, rather than having to choose from an array of confusing private plans.
"Talking to folks with Medicare drug plans, the frustration of the selection process and the confusion and the hassle means that even if they have a terrible experience with their plan, they will stick with it," he said. "Even if they know they can get a better deal, they just don't want to be bothered."
The report was compiled using data from pharmacy claims from 2005 and 2006 for Part D enrollees ages 65 and older. The study also examined choices people were likely to make based on their 2006 prescription needs.
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