title: Plan selection in Medicare Part D: evidence from administrative data.
abstract: We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets, focusing on the ability of consumers to evaluate and optimize their choices of plans. Our analysis of administrative data on medical claims in Medicare Part D suggests that fewer than 25% of individuals enroll in plans that are ex ante as good as the least cost plan specified by the Plan Finder tool made available to seniors by the Medicare administration, and that consumers on average have expected excess spending of about $300 per year, or about 15% of expected total out-of-pocket cost for drugs and Part D insurance. These numbers are hard to reconcile with decision costs alone; it appears that unless a sizeable fraction of consumers place large values on plan features other than cost, they are not optimizing effectively.
authors.affiliation: University of Düsseldorf, Düsseldorf, Germany.
authors.forename: Florian
authors.initials: F
authors.lastname: Heiss
authors.forename: Adam
authors.initials: A
authors.lastname: Leive
authors.forename: Daniel
authors.initials: D
authors.lastname: McFadden
authors.forename: Joachim
authors.initials: J
authors.lastname: Winter
mesh_terms: D002755:Choice Behavior; D016208:Databases, Factual; D006801:Humans; D007345:Insurance Claim Review; D019458:Insurance Coverage / Q000191:economics*; D054524:Medicare Part D; D008962:Models, Theoretical; D014481:United States
keywords: Administrative data; C25; D12; H51; Health insurance demand; I11; I18; Insurance claims data; Medicare; Prescription drugs