INFORMATIONAL MESSAGES & IMPROVED
DECISIONS:
THE CASE OF MEDICARE DRUG PLANS
Marian V. Wrobel, Mathematica Policy Research
Academy Health Annual Research Meeting
June 29, 2009
Authors & Affiliations

Jeffrey R. Kling, The Brookings Institution

Sendhil Mullainathan, Harvard

Eldar Shafir, Princeton

Lee Vermeulen, University of Wisconsin

Marian V. Wrobel, Mathematica Policy Research*
– * Dr. Wrobel was at Harvard at the time most of this work
was completed.
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Acknowledgements

We gratefully acknowledge support from the John D.
and Catherine T. MacArthur Foundation, the Charles
Stuart Mott Foundation, the Robert Wood Johnson
Foundation’s Changes in Health Care Financing and
Organization Initiative, and the National Institute on
Aging (P01 AG005842).

We also thank CVS Caremark Corporation and
Experion Systems (www.planprescriber.com) for
sharing data.
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Introduction
 Medicare drug plans
 A smart but small intervention has big
effect on choices
– Lowers spending with no other adverse
effects
 Randomized field experiment
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Choice among Public Services
 Interest in choice & competition for public
benefits
– Also schools, health insurances exhanges
 Rationale for choice
– Tastes & circumstances differ
– Choices lets people choose what they want
– Private provision & competition yield efficiency
and innovation
 Concerns about choice
– People make dumb choices
– Sometimes we wish to protect or influence them
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Approaches to Influencing Choices

Laws & regulations
– “You must eat your peas!”

Financial incentives
– “If you eat your peas, you can
play on the computer.”

Education
– “Peas promote good health.”

Architecture / environment
– Peas are within easy reach &
potato chips are far away.
– Focus of our intervention
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Psychology of Choice
 Choice can be difficult
– Proliferation of alternatives may be detrimental
– Tendency to delay, pronounced among elderly
 Tendency to focus on “easy” information
– Available, comparable, invariant
– E.g. focus on premium not out-of-pocket costs
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Public Perception that Medicare Part D Confusing
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Medicare Part D

Free-standing private drug plans
– Voluntary, choice-based

Typical senior chooses among ~ 54 plans

Differ by:
–
–
–
–

Premium, deductible, cost-sharing schedule
Formulary
Brand & financial stability of sponsor
Etc.
Plan difference interact with individual differences
– Drugs & other

Drugs are more standard / less personal than some other
services
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Two Theories

Perfect choice
–
Consumers take advantage of all information
–
Make choices that are right for them
• Subject to available information, costs of finding it, costs of change


Fragile choice
–
Consumers may make imperfect or fragile choices
–
Small changes in the environment may influence what they choose
Different implications for policy
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Three Predictions of Fragile Choice

If we carefully design an informational intervention
– Present same information as Medicare
– Use psychological principles known to promote action

Then
1. Choices will change.
2. Predicted costs will be lower.
3. Effect will be concentrated in out-of-pocket costs not
premiums
No judgment about whether choices made better
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Study Concept
 Small intervention
– Information from Medicare website
• Not new / not hard to get
• Tweak to promote action
• Study focuses on costs because Medicare
focuses on cost
– No implication that cost is optimal focus.
– No reduction in effort
• Seniors still had to find Medicare phone number
& make call to change plans
 Design = randomized experiment
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Methods

Participants: patients of University hospital, over
65
– Enrolled in Part D

Baseline interview, Fall of 2006
– Predicted drug utilization for 2007

Intervention letter, December 2006
• First follow-up, Spring 2007
– Whether switched plans, N=406

Second follow-up, Spring 2008
– Actual drug utilization in 2007
– Evaluation of own choices, N=306
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Information Intervention
 Both groups:
– Letter on university stationery
– Standard introductory and concluding paragraphs
– Brochure on using the Medicare website
 Comparison group: address of Medicare
website only
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Intervention Group: Personalized Information

Simple, personalized, comparative information
–
–
–
–

Current plan and estimated annual cost
Lowest cost plan and its estimated annual cost
Potential savings from the lowest-cost plan
Also, Plan Finder printout on all plans & website
address
Behaviorally sensitive / favor action
– Challenge confirmation bias by showing available
savings
– Alternative default: the lowest cost plan
– Deadline
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Distribution of Plan Costs
Medications as of 2006
0-3
4-6
7-10
11+
Share of sample
.36
.33
.20
.10
Least expensive plan
$623
$1417
$2580
$3556
Median plan
$1053
$2010
$3383
$4789
Average cost of
plan selected
$937
$1883
$3142
$4279
Letters showed substantial savings
Seniors not choosing lowest cost plans. Many lower-priced options available.
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Prediction 1: Effect on Choices
 28 percent of intervention group switched plans
– vs. 17 percent of comparison group
– Difference .12**
– Regression adjusted .12**
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Prediction 2: Effect on Predicted Savings
 Predicted savings
– Difference in cost between 2007 plan & 2006 plan
• Zero if don’t change plans
– Computed by the Medicare Plan Finder
– Based on drug utilization collected at baseline
 Predicted savings (all)
–
–
–
–
–
Intervention: $132
Comparison $16
Difference $116**
Regression-adjusted $104**
Regression-adjusted ln (Y 07/Y 06)=.063**
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Prediction 3: Concentration of Effect in Out-ofPocket Spending (Not Premiums)
 Total savings: $104
– Decreases in premiums: $11
– Decreases in OOP: $92
 Out-of-pocket costs as share of total
– Costs in 2006 plan: 81%
– Potential savings from changing to least
expensive plan: 80%
– Intervention effect: 91%
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Retrospective Evaluation of Choices


Based on second follow-up survey (2008)
Difference between intervention &
comparison group
– Realized savings (all)
• Regression-adjusted $83**
• Regression-adjusted ln (Y 07/Y 06)=.043**
– Switch rates in open enrollment 2008: no
difference
– Plan ratings / satisfaction in 2007: no difference
– Reported issues with access in 2007: no
difference
– Medicare quality ratings: no difference
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Summary
 Randomized experiment of information re
Medicare drug plan choice
– Switching increased by 11 percentage points
– Savings of $83 / 4 percent
 Noteworthy that our small intervention had
such a substantial impact
– Consistent with fragile choices & role for information
environment
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Policy Significance – Part D

Additional efforts to distribute information can
affect & potentially improve choices

If goal is to help beneficiaries reduce costs
– Publicize significant cost differences among plans
– Emphasize importance of personalized cost
estimates
– Suggest ways to simplify the choice process
– Make more pro-active efforts to distribute info

Important to pay close attention to design of
information market
– Address some concerns about choices in this way
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Wider Significance

Small, smart interventions can affect behavior in big
ways
– Opportunities to alter environment to promote
smart choices

Interventions which reflect back personalized health
information in actionable manner have potential.

Theories and models that rely exclusively on rational
actors & costs may overlook key drivers on behavior
and key levers/opportunities
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Thank you.
Marian V. Wrobel, PhD
Senior Researcher
Mathematica Policy Research, Inc.
617-301-8971
mwrobel@mathematica-mpr.com
http://mathematica-mpr.com
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