The effectiveness of consumer choice in the Medicare supplemental health insurance market.

This article examines the factors that affect Medicare beneficiaries' choices in the supplemental health insurance market. Data include detailed survey information as well as copies of the health insurance policies owned by a sample of approximately 2,500 Medicare beneficiaries in six states during 1982. Logit analysis is employed to analyze the determinants of four dependent variables: whether a person owns (1) one or more private supplemental insurance policies, (2) two or more policies, (3) at least one policy that we define as "effective," and (4) a policy we define to be "less effective." Those who are better off from a socioeconomic standpoint appear to be making more effective choices in the supplemental health insurance market. However, there does not appear to be a relationship between consumer ignorance or vulnerability and the purchase of multiple supplemental insurance policies. Study results imply an important role for public policy in helping to provide the information necessary to ensure that the most vulnerable beneficiaries make insurance choices that are in their best interest.     

How Successful Is Medicare Advantage?

Context

Medicare Part C, or Medicare Advantage (MA), now almost 30 years old, has generally been viewed as a policy disappointment. Enrollment has vacillated but has never come close to the penetration of managed care plans in the commercial insurance market or in Medicaid, and because of payment policy decisions and selection, the MA program is viewed as having added to cost rather than saving funds for the Medicare program. Recent changes in Medicare policy, including improved risk adjustment, however, may have changed this picture.

Methods

This article summarizes findings from our group''s work evaluating MA''s recent performance and investigating payment options for improving its performance even more. We studied the behavior of both beneficiaries and plans, as well as the effects of Medicare policy.

Findings

Beneficiaries make “mistakes” in their choice of MA plan options that can be explained by behavioral economics. Few beneficiaries make an active choice after they enroll in Medicare. The high prevalence of “zero-premium” plans signals inefficiency in plan design and in the market''s functioning. That is, Medicare premium policies interfere with economically efficient choices. The adverse selection problem, in which healthier, lower-cost beneficiaries tend to join MA, appears much diminished. The available measures, while limited, suggest that, on average, MA plans offer care of equal or higher quality and for less cost than traditional Medicare (TM). In counties, greater MA penetration appears to improve TM''s performance.

Conclusions

Medicare policies regarding lock-in provisions and risk adjustment that were adopted in the mid-2000s have mitigated the adverse selection problem previously plaguing MA. On average, MA plans appear to offer higher value than TM, and positive spillovers from MA into TM imply that reimbursement should not necessarily be neutral. Policy changes in Medicare that reform the way that beneficiaries are charged for MA plan membership are warranted to move more beneficiaries into MA.     

Designing health insurance information for the Medicare beneficiary: a policy synthesis.

Can Medicare beneficiaries make rational and informed decisions about their coverage under the Medicare program? Recent policy developments in the Medicare program have been based on the theory of competition in medical care. One of the key assumptions of the competitive model is the free flow of adequate information, enabling the consumer to make an informed choice from among the various sellers of a particular product. Options for Medicare beneficiaries in supplementing their basic Medicare coverage include the purchase of private supplementary insurance policies or enrollment in a Medicare HMO. These consumers, in a complex health insurance market, have only limited information available to them because many health plans do not make adequate comparable product information available. Moreover, since the introduction of the Medicare HMO option, the long-range plan for management of the Medicare budget has become based on the large-scale voluntary enrollment of beneficiaries into capitated health plans. The policy instrument that has been used to improve beneficiary decisions on how to supplement Medicare coverage is the informational or educational program. This synthesis presents findings regarding the relative effectiveness of different types of health insurance information programs for the Medicare beneficiary in an effort to promote practical use of the most effective types of information.     

The impact of public performance reporting on health plan selection and switching: A systematic review and meta-analysis

The dissemination of public performance reporting (PPR) cards aims to increase utilisation of information on quality of care by consumers when making health plan choices. However, evaluations of PPR cards show that they have little impact on consumer choices. The aim of this study is to undertake a systematic review and meta-analysis of the impact of PPR cards in promoting health plan selection and switching between health plans by consumers. We searched five online databases and eight previous reviews for studies reporting findings on PPR and health plans. We extracted data and conducted quality assessment, systematic critical synthesis and meta-analyses on the included studies. We identified eight relevant health plan articles related to selection (n?=?2), switching (n?=?4), selection/switching (n?=?2). Meta-analyses showed that PPR was associated with an improvement in health plan selection and a very small deterioration in switching health plans though these changes were not statistically significant. Differences were observed between employer-sponsored health insurance and Medicare/Medicaid insurance. Given the small number of studies included in the review, further research examining the impact of PPR on health plan selection and switching in a range of insurance markets is required.     

Paying Medicare Advantage plans: To level or tilt the playing field

Medicare beneficiaries are eligible for health insurance through the public option of traditional Medicare (TM) or may join a private Medicare Advantage (MA) plan. Both are highly subsidized but in different ways. Medicare pays for most of costs directly in TM, and subsidizes MA plans based on a “benchmark” for each beneficiary choosing a private plan. The level of this benchmark is arguably the most important policy decision Medicare makes about the MA program. Many analysts recommend equalizing Medicare’s subsidy across the options – referred to in policy circles as a “level playing field.” This paper studies the normative question of how to set the level of the benchmark, applying the versatile model developed by Einav and Finkelstein (EF) to Medicare. The EF framework implies unequal subsidies to counteract risk selection across plan types. We also study other reasons to tilt the field: the relative efficiency of MA vs. TM, market power of MA plans, and institutional features of the way Medicare determines subsidies and premiums. After review of the empirical and policy literature, we conclude that in areas where the MA market is competitive, the benchmark should be set below average costs in TM, but in areas characterized by imperfect competition in MA, it should be raised in order to offset output (enrollment) restrictions by plans with market power. We also recommend specific modifications of Medicare rules to make demand for MA more price elastic.     

Consumer information and biased selection in the demand for coverage supplementing Medicare.

This study examines how the relationship between health insurance knowledge and the health status of health insurance consumers influences their decisions to purchase insurance coverage. Data from the federal Medicare health insurance program for the elderly in the United States are used. The basic Medicare program provides a limited amount of coverage for health care services obtained from any provider in the private fee-for-service (FFS) market. Beneficiaries of this program may choose to supplement the basic coverage which they receive by two mechanisms: either they may purchase private insurance designed to fill some of the gaps left by the federal program ('Medigap' policies), thereby remaining in the FFS market and preserving their choice of provider, or they may enroll in health maintenance organizations (HMOs), thereby leaving the FFS market and agreeing to use only those providers affiliated with the HMO, and in return receiving broader coverage at little additional out-of-pocket cost. The study was made possible by a unique data set which combines measures of beneficiary knowledge of Medicare coverage with measures of perceived health status, socio-economic characteristics, and insurance coverage choices for a sample of Medicare beneficiaries who participated in an educational workshop about their insurance coverage options. These data were used to estimate a multinomial logistic model of the determinants of insurance choices, where the options included the two listed above and a basic Medicare option. The study explicitly recognizes the interaction between insurance information and health status in health plan choice. These results show that knowledge of coverage does have a differential impact on the decision to purchase health insurance depending on health status. With a high level of knowledge, sicker beneficiaries are less likely to have basic Medicare alone, compared with HMOs or Medigap policies, while healthier beneficiaries are less likely to be enrolled in HMOs, compared with Medigap policies. This finding has important implications for the use of health status measures to adjust capitated payment formulas when knowledgable consumers have the option to enroll in HMOs or remain in the FFS environment. In the absence of health status adjusters for the HMO capitation payments, high levels of coverage knowledge may exacerbate inherent selection bias among these coverage options by healthier and sicker consumers of health insurance.     

Drug insurance and the strategic behavior of drug manufacturers: Evergreening and generic entry after Medicare Part D

For branded drug manufacturers, maintaining market power by managing product lifecycle – evergreening – is an important tool to navigate pharmaceutical markets. For generic manufacturers, the key decision is to enter the market at all. Expansion of drug insurance may lead firms to change their behavior because of increased demand-side market power – due to consolidation of buyers into a small number of insurers – and because of increased drug utilization. We analyze manufacturer responses to such changes through the introduction of Medicare Part D, which expanded drug coverage among seniors, in a difference-in-differences design comparing drugs used frequently by those over age 65 to those used infrequently by this population. The results show that Part D reduced generic entry, and suggest that it increased evergreening. Furthermore, while these effects are associated with higher drug prices, they are more than offset by the consolidation of demand, reducing prices overall.     

Medigap reform legislation of 1990: have the objectives been met?

The 1990 medigap reform legislation had multiple objectives: To simplify the insurance market in order to facilitate policy comparison, provide consumer choice, provide market stability, promote competition, and avoid adverse selection. Based on case study interviews with a cross-section of individuals and organizations, we report that most of these objectives have been achieved. Consumers of medigap plans are able to make more informed choices, largely because they can adequately compare policies based on standard benefits. Marketing abuses have apparently declined, as evidenced by a decrease in the number of consumer complaints. Finally, no major detrimental impact on the insurance industry was detected. Beneficiaries still face some confusion in this market, however, such as understanding the rating methodologies used to set premiums and how this may affect their choices. Confusion could increase with the growth of managed care options.     

Market factors that influence Medicare recipients' choice of health plan

This study examines those market factors that were most influential regarding decision making made by Medicare recipients in choosing a particular health insurance plan. Since Medicare recipients can now choose health care insurance providers, companies are actively competing for this possibly very lucrative market share. A cross sectional cohort research design using a sample of 135 subjects was surveyed. Two separate groups of contributing factors to an individual's selection of a plan were measured. Factors such as level of understanding, level of perceived health, and satisfaction with the plan in terms of hospital choice were most important. Surprisingly, preference of marketing media did not provide any significant results.     

Health care reform through the eyes of patients: a qualitative look at Medicaid redesign

This research examines consumer choice in Medicaid insurance plans. As part of the 2005 Federal Deficit Reduction Act, a number of states have implemented new Medicaid programs targeted to a subset of the Medicaid population. These programs offer consumers a choice of plans and this research examines consumer choice in one state's program. As part of a broader survey, participants were given the opportunity to explain, in their own words, why they selected their plan. We systematically interpret this qualitative data and then develop a series of propositions relating to Medicaid health care plan choice and marketing/public policy issues surrounding this choice.     

Health Care Reform Through the Eyes of Patients: A Qualitative Look at Medicaid Redesign

This research examines consumer choice in Medicaid insurance plans. As part of the 2005 Federal Deficit Reduction Act, a number of states have implemented new Medicaid programs targeted to a subset of the Medicaid population. These programs offer consumers a choice of plans and this research examines consumer choice in one state's program. As part of a broader survey, participants were given the opportunity to explain, in their own words, why they selected their plan. We systematically interpret this qualitative data and then develop a series of propositions relating to Medicaid health care plan choice and marketing/public policy issues surrounding this choice.     

Creating more effective health plan quality reports for consumers: lessons from a synthesis of qualitative testing

OBJECTIVE: Social marketing techniques such as consumer testing have only recently been applied to develop effective consumer health insurance information. This article discusses lessons learned from consumer testing to create consumer plan choice materials. DATA SOURCES/STUDY SETTING: Data were collected from 268 publicly and privately insured consumers in three studies between 1994 and 1999. STUDY DESIGN: Iterative testing and revisions were conducted to design seven booklets to help Medicaid, Medicare, and employed consumers choose a health plan. DATA COLLECTION METHODS: Standardized protocols were used in 11 focus groups and 182 interviews to examine the content, comprehension, navigation, and utility of the booklets. PRINCIPAL FINDINGS: A method is suggested to help consumers narrow their plan choices by breaking down the process into smaller decisions using a set of guided worksheets. CONCLUSION: Implementing these lessons is challenging and not often done well. This article gives examples of evidence-based approaches to address cognitive barriers that designers of consumer health insurance information can adapt to their needs.     

The "choose with care system" - development of education materials to support informed Medicare health plan choices

People aging into Medicare need to choose a health plan. Several challenges exist for consumers in choosing a Medicare health plan, including limited knowledge of Medicare, limited experience in using comparative health plan quality information, and limited experience and ability to pull together and use plan information from different sources like employers and the Medicare program. The Choose with Care System was developed to help consumers aging into Medicare make informed Medicare health plan choices. Choose with Care is an innovative decision support tool for employers to use to assist people approaching age 65 to learn about their Medicare health plan options and how to incorporate information on the quality of care and services offered by health plans into their choices. Employers are the targeted channel for distributing the Choose with Care materials because they are one of the most recognized and accessible formal intermediaries for information about health insurance. We used multiple methods to test the Choose with Care products. Product testing showed that the Choose with Care materials increase older consumers' knowledge of Medicare and how it relates to retiree health insurance and improves their comprehension and use of comparative quality information when choosing a health plan.