Older adults were less likely to identify the Medicare Part D plan that minimized their total annual cost and were likely to mistakenly think they had chosen the lowest-cost plan, according to researchers in the United States and United Kingdom. The researchers took an in-depth look at the consumer behavior patterns of nearly 200 healthy individuals age 18 and older. Half of those participants were 65 or older. The researchers randomly assigned three, 10, or 20 hypothetical Medicare prescription drug plans from which they asked the subjects to choose. They found that regardless of age, an increase in the number of insurance plans available reduced the likelihood of picking the plan with the lowest annual costs.

“Many seniors are unaware that they can be saving hundreds of dollars every year by choosing a different drug plan, because there are entirely too many choices for them to navigate,” says Yaniv Hanoch, lead author and lecturer at the University of Plymouth, School of Psychology, Plymouth, U.K. “The system should limit choice and empower its beneficiaries to make informed and cost-effective decisions about their prescription drug plan.”

The researchers also found that factual questions about the plans were also more likely to be answered incorrectly when participants had more plans to choose from. While older adults were less able than younger ones to choose the plan that offered the lowest annual costs, they were also more confident that their decisions were correct.

The authors recommend a few options for improving the system. These include offering one choice that seniors can opt in or out of (like Medicare Parts A and B); standardizing the benefit; or reducing the number of plans to 10 or less.

“Making Part D easier for seniors to navigate should be part of the administration’s and Congress’ efforts to reform health care,” says Thomas Rice, co-author and professor of health services in the UCLA School of Public Health. “When it comes to Medicare Part D, research shows that seniors prefer less choice and more government intervention.”

Other findings, including a study published earlier this year by Hanoch and colleagues, show that a majority of adults believe that Medicare Part D is too complicated and difficult to comprehend. Most adults favor some form of simplification and support the idea of being able to purchase a plan directly from Medicare. Furthermore, changes in drug consumption and insurance formulary coverage could lead to spikes in a consumer's out-of-pocket expenditures, sometimes by more than $1,000. Because the system is so difficult to navigate, seniors have been reluctant to switch plans during the annual open enrollment period. 

The Robert Wood Johnson Foundation Investigator Awards in Health Policy Research funded the study, which is available online, and will be published in the August 2009 issue of Health Services Research.