Choosing the right medicare prescription drug plan: The effect of age, strategy selection, and choice set size.

Abstract

The Medicare Modernization Act of 2003 (better known as Medicare Part D) represents the most important change to Medicare since its inception in the mid-1960s. The large number of drug plans being offered has raised concern over the complex design of the program. The purposes of this article are to examine the effect of age and choice set size (3 vs. 9 drug plans) on decision processes, strategy selection, and decision quality within the Medicare Part D program. One hundred fifty individuals completed a MouselabWeb study, a computer-based program that allowed us to trace the information acquisition process, designed to simulate the official Medicare Web site. The data reveal that participants identified the lowest cost plan only 46% of the time. As predicted, an increase in choice set size (3 vs. 9) was associated with 0.25 times the odds of correctly selecting the lowest cost plan, representing an average loss of $48.71. Older participants, likewise, tended to make poorer decisions. The study provides some indication that decision strategy mediates the association between age and choice quality and provides further insight regarding how to better design a choice environment that will improve the performance of older consumers.