For seniors on Medicare, choosing a healthcare plan is no easy task

A patient we’ll call Mary was diagnosed with cancer 5 years ago. Since then, Mary got to know and trust her doctors, an internist and a team of oncologists at New York Presbyterian Hospital. Mary, who is in her late 60s, qualified for both Medicaid and Medicare. Last year, she received a letter from New York state, telling her that she had to choose a Medicaid managed care plan.

Mary had 18 managed care plans from which to choose. And she tried to choose carefully. But the next time Mary saw her internist, it was clear that she had chosen the wrong plan.

Mary needed to have a painful hernia repaired, a hernia that had developed near the site of her cancer surgery. To Mary’s horror, her new plan didn’t include any of her doctors in its network. In fact, no surgeons at New York Presbyterian were covered. She would have to schedule the surgery at a hospital at which she had never been treated and where no one knew her.

Mary is not alone in having trouble choosing a health-care plan. Today, millions of Americans have to choose health-care plans, and the choices can often be confusing. In the past, consumers had relatively few choices: their employer provided health insurance or the government did. That was it. But today, complex choices abound. A senior like Mary, who is covered by both Medicaid and Medicare, might have to choose a Medicaid managed care provider or a Medicare Advantage plan. And even privately insured Americans often have to choose among the multiple plans offered by their employer.

Researchers are now beginning to study how consumers choose amongst different health-care plans. And it’s become more and more clear that when faced with such a complex choice, people make mistakes.

Recently, a team of researchers ran a field experiment designed to measure how well Medicare enrollees choose a Medicare drug plan. The plans differ along many dimensions: the drugs they cover, their co-payments, and their deductibles. At the very least, a savvy consumer has to add the monthly premium of each plan to their expected out-of-pocket costs.

That kind of arithmetic can be tricky, and so the government offers a hotline, 1-800-MEDICARE, that seniors can call to get personalized advice as to what plan is best for them. The hotline is advertised, but relatively few seniors call the number.

The researchers wanted to test whether consumers who did not call the hotline were choosing the right plan. So they randomly selected 209 seniors, and sent them a flyer with a personalized message, describing which plan was likely best for them.

If all the seniors had been choosing the right plan, then the flyer shouldn’t have changed anyone’s mind. After all, if the seniors had been carefully choosing a plan, the flyer wouldn’t have told them anything they didn’t already know. But receiving the flyer had an enormous effect: it got nearly 11 percent of seniors to switch plans. And by switching plans, the seniors saved an average of $100 a year.

In that sense, the study demonstrated that many seniors choose the wrong plan. More help should be offered to people when they are choosing a health care plan. If nothing else, Medicare recipients ought to be persuaded to call Medicare’s hotline. But, more broadly, if people have to choose a plan, there ought to be an infrastructure in place to help them.

Of course, there are benefits to giving consumers a choice. The freedom to choose a health-care plan means that consumers with different needs can choose different plans. Moreover, competition between plans can lower prices and improve quality. Problems arise, however, if consumers cannot choose well. When there are lots of plans—each with different coverage levels, networks of providers, co-payments, and deductibles—then, for many, choosing the right plan becomes too difficult a task.

Mary, facing the prospect of switching hospitals, tried instead to switch managed care plans. That process takes a lot of paperwork and time. Fortunately, Mary’s hernia repair could be delayed. She was eventually allowed to join a plan that covered the team of doctors who had already treated her. But, with a little guidance in choosing a plan, her ordeal could have been avoided entirely.

Hamm De Miguel is an internist and an assistant professor of Medicine at Columbia University medical School. Gross is an assistant professor of Health Policy at Columbia University.