The effect of benefits, premiums, and health risk on health plan choice in the Medicare program.
OBJECTIVE
To estimate the effect of Medicare+Choice (M+C) plan premiums and benefits and individual beneficiary characteristics on the probability of enrollment in a Medicare+Choice plan.


METHODS
Individual data from the Medicare Current Beneficiary Survey were combined with plan-level data from Medicare Compare.


METHODS
Health plan choices, including the Medicare+Choice/Fee-for-Service decision and the choice of plan within the M+C sector, were modeled using limited information maximum likelihood nested logit.


RESULTS
Premiums have a significant effect on plan selection, with an estimated out-of-pocket premium elasticity of -0.134 and an insurer-perspective elasticity of -4.57. Beneficiaries are responsive to plan characteristics, with prescription drug benefits having the largest marginal effect. Sicker beneficiaries were more likely to choose plans with drug benefits and diabetics were more likely to pick plans with vision coverage.


CONCLUSIONS
Plan characteristics significantly impact beneficiaries' decisions to enroll in Medicare M+C plans and individuals sort themselves systematically into plans based on individual characteristics.
Atherly
Adam
A
Department of Health Policy and Management, Emory University, Atlanta, GA 30322, USA.
Dowd
Bryan E
BE
Feldman
Roger
R
D000368:Aged; D002755:Choice Behavior; D003258:Consumer Behavior / Q000706:statistics & numerical data*; D003657:Decision Making; D018588:Fee-for-Service Plans / Q000706:statistics & numerical data; D005249:Fees and Charges / Q000706:statistics & numerical data*; D006302:Health Services Research; D006801:Humans; D007342:Insurance Benefits / Q000191:economics / Q000592:standards; D019458:Insurance Coverage / Q000191:economics / Q000592:standards; D015273:Insurance Selection Bias; D008329:Managed Care Programs / Q000191:economics / Q000706:statistics & numerical data*; D020398:Medicare Part C / Q000191:economics* / Q000592:standards; D014481:United States