Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans

TitleMind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans
Publication TypeBook Chapter
Year of Publication2010
AuthorsHeiss, F, McFadden, D, Winter, J
EditorWise, DA
Book TitleResearch Findings in the Economics of Aging
Series TitleNational Bureau of Economic Research conference report
Chapter14
Pagination413-481
PublisherUniversity of Chicago Press
CityChicago
KeywordsEnd of life decisions, Healthcare, Medicare/Medicaid/Health Insurance
Abstract

Medicare Part D provides prescription drug coverage through Medicare approved plans offered by private insurance companies and HMOs. In this paper, we study the role of current prescription drug use and health risks, related expectations, and subjective factors in the demand for prescription drug insurance. To characterize rational behavior in the complex Part D environment, we develop an intertemporal optimization model of enrollment decisions. We generally find that seniors' choices respond to the incentives provided by their own health status and the market environment as predicted by the optimization model. The proportion of individuals who do not attain the optimal choice is small, but the margin for error is also small since enrollment is transparently optimal for most eligible seniors. Further, there is also evidence that seniors over-react to some salient features of the choice situation, do not take full account of the future benefit and cost consequences of their decisions, or the expected net benefits and risk properties of alternative plans.

Endnote Keywords

Medicare Part D/prescription drug coverage/health insurance/decision Making

Endnote ID

24160

Short TitleMind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans
Citation Key5232