Most Do Not Switch Medicare Part D Plans Even If They Would Save Money

A study by the Kaiser Family Foundation revealed that most Medicare Part D beneficiaries did not change plans during open enrollment even though they could have saved money by doing so. Although lawmakers expected beneficiaries to participate actively in the marketplace to lower their costs, few actually made a change during the first five years of the program.

Focus of the Study

The analysts used a sample of 5 percent of Medicare beneficiaries who were enrolled in a Part D plan between 2006 and 2010 and did not receive the low-income subsidy (LIS) to see whether they were enrolled in the same plan in January of each year as in December of the preceding year. They excluded changes that were required because a plan sponsor had discontinued the plan or left the market. In addition, they did not count changes made by the sponsor when it replaced a plan with another offering essentially the same terms.

Comparisons of Available Plans

Medicare beneficiaries’ out-of-pocket costs for medication are affected by the premiums, copayments, deductibles, gap coverage, formularies and utilization review requirements of the plan and by the drugs they take. The plan sponsors often changed the costs and benefit design of their plans from one year to the next. The investigators compared each of the plans available to the beneficiaries each year with respect to the specific prescription drugs each beneficiary used.

Beneficiaries’ Choices

Over the five-year period, the overwhelming majority of Medicare beneficiaries remained with the same plan. The results were about the same for enrollees in stand-alone Part D plans (87 percent) and Medicare Advantage, or Part C, plans (88 percent). The percentage of beneficiaries who changed Medicare Advantage Prescription Drug (MA-PD) plans rose significantly, from 10.1 percent to 16.8 percent in 2010, perhaps because of changes to the program and the availability of private fee-for-service plans. Beneficiaries who were enrolled in Part D plans in all five years had four opportunities to change plans; 72 percent of them did not change plans voluntarily in any open enrollment period.

Factors Affecting Decisions

About one beneficiary in three changed plans when they were faced with a large premium increase. Increases in deductibles or changes in benefit design prompted beneficiaries to change plans. When plans dropped coverage of brand name drugs during the gap period at the end of 2006 and 2007 the rate of change quadrupled; 39 percent of these beneficiaries chose a new plan for 2007 and 50 percent did so for 2008.

Beneficiaries under age 75 were more likely to change plans than those over 85. However, the authors noted that these differences were small and were not necessarily consistent from year to year. Regional differences were more pronounced. Beneficiaries in the New Jersey, Pennsylvania, and West Virginia area were the most likely to change, while those in New Mexico and Hawaii were the least likely, about 20 percent and 5 percent, respectively. Beneficiaries who changed plans were likely to have more chronic illnesses or higher drug costs than average. Women were a bit more likely to change than men.

Savings

Forty-six percent of the beneficiaries reduced their premiums by 5 percent or more, compared to 8 percent of those who stayed put. However, total out-of-pocket costs of those who switched were only slightly more likely to drop.

Possible Explanations

The authors could not draw any definite conclusions, but they noted some factors that might influence beneficiaries: lack of engagement with the program, inertia, and a confusing array of choices. The average beneficiary had 31 stand-alone Part D plans and 20 Medicare Advantage plans from which to choose in 2013. The study cited other research that showed that only 60  percent of beneficiaries said either they went to the CMS Plan Compare web site to review their choices or someone else did so for them, and 25 percent said they never did.