How are Seniors Choosing and Changing Health Insurance Plans?

Several leading Medicare reform proposals are predicated on the assumption of a well-functioning marketplace, where beneficiaries are offered a choice of competing health plans and choose a specific plan that is most likely to meet their individual needs and preferences.  The proposals are further based on the supposition that as plans change, or beneficiaries’ needs change, beneficiaries will re-evaluate health plan options available to them and change plans as necessary to optimize their coverage.  These ideals are critical elements for a dynamic, competitive marketplace of private plans, and are the underpinnings of Medicare Part D and Medicare Advantage.

The plan environment in Medicare today is quite unlike that of 10 or 20 years ago, when the vast majority of seniors was enrolled in traditional Medicare and may only have had to decide whether or not to purchase a Medigap supplemental policy.  In recent years, the Medicare plan landscape has been transformed, with dozens of private Medicare Advantage and Part D drug plans available to most people on Medicare.  With so many plans and options to review, beneficiaries have many choices to make when they enroll in the Medicare program.

If they choose traditional Medicare, they often need to choose a specific stand-alone Part D prescription drug plan (PDP), and perhaps a supplemental Medigap plan if they are not otherwise receiving supplemental coverage under a retiree health plan or Medicaid.  If instead they choose coverage under Medicare Advantage, they often face a myriad of plan choices, including HMOs and PPOs, with different provider networks, benefits, and premiums.  Medicare Part D plans and Medicare Advantage plans are both subsidized by the Medicare program.  Each year, plans may change their premiums, benefits, and other features and beneficiaries have the opportunity to assess these changes and, if deemed necessary, switch plans during the annual open enrollment period.

However, many studies show that few beneficiaries revisit their coverage decisions each year to determine which option is best for them based on their individual needs and the specific features of the plans available to them.1  At the same time, analyses indicate that for PDPs, premiums and formularies have changed over time.2  Medicare Advantage plans’ premiums, out-of-pocket limits, and provider networks have also changed over time.3  Based on these studies, most seniors seem to prefer to stick with their original plans despite changes in costs, coverage, and providers.

Further, several studies have shown that most beneficiaries who are enrolled in a Part D plan are not in the lowest cost PDP available to them.4  Similarly, many Medicare Advantage enrollees are not enrolled in the lowest premium Medicare Advantage plans, with significant geographic variation in the preference for zero-premium plans.5  It would appear that Medicare Advantage enrollees are attracted to plans with high quality ratings,6 but it is not clear whether the ratings are the reason for beneficiaries’ plan enrollment or if it is a coincidence.  Overall, beneficiaries may be enrolling in plans for reasons other than premiums or out-of-pocket costs, which could have important implications not only for beneficiaries’ costs but also Medicare spending to subsidize plans.

In light of these critical issues, KFF partnered with PerryUndem to conduct a series of focus groups with seniors about their health plan decision making.  These focus groups were undertaken to shed light on the following questions:

  1. What factors drive seniors to choose one plan over another when they first go on Medicare?  How do they decide between traditional Medicare and Medicare Advantage, and once they make this decision, how do they choose among available Part D or Medicare Advantage plans in their area?
  2. Why do most seniors stay in the same plan year after year, rather than review and switch plans during the annual open enrollment period, even when they may face higher costs by remaining in the same plan?
  3. Among the minority of seniors who switch plans in a given year, what prompted them to change plans?

The aim of these focus groups was to understand the experiences of beneficiaries today, assess whether the Medicare Part D and Medicare Advantage marketplaces are working as envisioned from the beneficiary perspective, and identify potential opportunities for policymakers to improve the marketplaces and make it easier for beneficiaries to assess and choose Medicare Advantage and Part D plans.

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