Is Less More? The Effect of Simplifying Plan Information on Medicare Part D Choices

Research Objective: Medicare Part D enrollees frequently make suboptimal plan choices, typically leaving hundreds of dollars on the table every year. This overspending is largely driven by systematic errors in the way enrollees assess the value of plan attributes (e.g., over-valuing premiums, under-valuing expected out-of-pocket [OOP] costs), despite the existence of decision support tools that facilitate accurate valuations through the provision of personalized cost estimates. In particular, CMS’s Plan Finder tool has had limited effects on consumer choices, in part because the complexity and presentation of the information it provides limits the salience of the personalized cost estimates. Simplifying Plan Finder has the potential to improve plan choices. This study uses a survey-based randomized experiment to examine the effect of simplifying the financial information presented on Plan Finder on the way individuals choose Part D plans.

Methods: We used the American Life Panel, a nationally representative internet panel, to field an experiment among 1,278 adults age 55+. Participants made simulated Part D plan choices on behalf of a friend with a stated preference for minimizing total drug spending. Respondents were randomized into 4 study arms (1 control, 3 treatment). The control group was shown a plan menu which mimicked the current Plan Finder tool. Total cost estimates were displayed for each plan alongside detailed financial information (premiums, deductibles, copays) and non-financial information (e.g., 5-star quality scores, pharmacy network size). The 3 treatment groups, which varied in the amount of financial information shown by default, were as follows: 1) total cost only; 2) total cost and premium; 3) total cost, premium, and estimated OOP cost. All treatment groups could view full financial information by clicking a link within the plan menu. Plan choices were evaluated using discrete choice analyses and conditional logit estimation. Differences in the decision weights placed on plan attributes across study arms were evaluated to test the effect of Plan Finder simplifications on the trade-offs individuals make when selecting a plan.

Results: Simplifying financial information resulted in the selection of lower cost plans in all treatment groups relative to the control group. These improvements were largely driven by increases in the weight placed on OOP costs and reductions in the weighting of deductibles. Respondents in the “total cost, premium, and OOP cost” group had decision weights that were most consistent with cost-minimization: they placed equal weight on premium and OOP costs and no additional weight on cost-sharing attributes beyond their direct impact on anticipated spending. The “total cost and premium” group continued to weight premiums more than OOP costs, while the “total cost only” group was more likely to seek additional plan information which resulted in plan choices more like those of the control group.

Implications: Simplifying the financial information on Plan Finder helps individuals adhere to a cost-minimization decision rule. Displaying plan premiums and OOP costs alongside total cost estimates was most effective in encouraging cost-minimization and reducing additional information seeking, suggesting that this format improves individuals’ trust of the information and ability to use it.