Joe Antos argues there’s a problem with a study released this week by Kaiser, which looked at what seniors would pay for Medicare benefits under a Romney-like plan. It found that, if seniors wanted to keep the benefits they have right now, 59 percent would end up paying more.
Antos says the Kaiser analysts don’t give seniors enough credit here: They’re smart enough to switch to the plan that is a better deal.
“The Kaiser study does not show what sensible seniors could save if they simply followed their supermarket instincts and select the best deal,” he writes. “The study shows how much seniors would lose if they keep their old plan in the face of much better options. My mom isn’t that dumb.”
The Kaiser study does run through an option that is similar to what Antos describes, although with less detail than other options. It shows that if 25 percent of seniors switched to the second-cheapest Medicare option -- the one that their voucher would cover completely -- the number who would see costs increase drops fro 59 to 34 percent. A handful, about 1 percent, would even see a rebate as their plan costs less than the voucher.
There’s a decently large body of health policy research, however that questions whether seniors would actually make this switch. Numerous studies have examined how seniors select their prescription drug benefit. They tend to find that these insurance plans are very “sticky”: Seniors stick with the plan they have, even as its costs go up and up. Once a senior chooses a plan, he or she rarely switches, even when more low-cost options are available.
We know that Medicare benefit plans do tend to be sticky -- and we also know that beneficiaries don’t always choose the most cost-effective option. In the journal Health Affairs this month, University of Pittsburgh’s Chao Zhou and Yuting Zang looked at whether seniors bought the prescription drug coverage plan that would be most cost-effective for their health care needs. Only 5.2 percent chose the least expensive plan based on their medication needs.
Nationwide, beneficiaries on average spent $368 more annually than they would have spent had they purchased the cheapest plan available in their region, given their medication needs. More than a fifth of beneficiaries spent at least $500 a year more than they needed to. Beneficiaries often overprotected themselves by paying higher premiums for plan features that they did not need, such as generic drug coverage in the coverage gap.
Part of that could do with the challenge that shopping for health benefits poses. A Kaiser Family Foundation survey found 40 percent of seniors to describe open enrollment, with the choice of private plans as, "difficult and confusing" to understand.
There are other forces that could push seniors to chose the wrong plan, like health insurers structuring benefit packages in a way that would lure the healthier -- and less costly -- seniors to pick their products. There's already some evidence of this happening in Medicare Advantage right now, where plans with a gym membership benefit tend to have healthier members.
This isn’t an indictment of seniors: Shopping for insurance is an incredibly difficult task for any individuals. Between co-pays, premiums and the unpredictability of health needs, its really difficult to know which plan offers the best value. What we do know of the one private market we have in Medicare right now, however, is that beneficiaries don't always chose the least expensive plan to meet their needs.