Too Smart to Forgo: Cognitive
Ability and Subsidized Prescription
D g IInsurance
Drug
Kate Bundorf
Stanford University School of Medicine
Collaborator: Helena Szrek
AcademyHealth
June 27, 2010
We gratefully acknowledge funding for this project from The National Institute on Aging through the Center for Advanced
Decision Making on Aging at Stanford University (AG024957). We also thank Jon Baron, Jay Bhattacharya, Edward
Cokely, Alan Garber, Abby King, and Kosali Simon for contributing to this project in various ways. 1
Plan Choice and Medicare Part D
• Beneficiary choice among plans is a cornerstone
of the Medicare Part D Prescription Drug Benefit.
Benefit
– Making a choice among plans is necessary to obtain a
publicly subsidized benefit.
benefit
• Concern over the large number of choices people
f
face
in
i their
th i d
daily
il li
lives.
– Over 40 Part D plans are available in every region of
the country in 2010.
2010
• Questions regarding the desire and ability of
older
ld adults
d lt tto make
k choices
h i
iin thi
this context.
t t
2
Related Research
• Many studies provide evidence that cognitive
ability is positively correlated with performance
on judgment and decision-making tasks.
– C
Cognitive
iti ability
bilit will
ill nott b
be correlated
l t d with
ith
performance when decisions are too easy or too
difficult (Stanovich and West 2008).
2008)
• People delay decision-making
decision making or are less satisfied
with their decision when choice is extensive
(Iyengar and Lepper 2000; Swartz 2004).
2004)
3
Research Questions
• Does cognitive ability improve decision quality
among older adults choosing whether to enroll in
a Medicare Part D prescription drug plan?
• Does the effect of choice set size on decision
quality vary by cognitive ability?
4
Experiment
• Web-based experiment in which people age 65
and over make hypothetical choices among
Medicare Part D prescription drug plans.
– Plans and information designed to closely resemble
Medicare part D.
• Administered on Knowledge Networks internet
internetenabled panel (n=280, we use data for 240).
• Respondents chose a plan from randomly
assigned choice sets of different sizes (2, 5, 10
and 16)) and then answered a series of q
questions
about their choice and themselves, including
cognition instruments.
5
Dependent Variable
• Expected Enrollment:
If presented with the choice of the above plans,
plans
how likely would you be to enroll in ANY plan
(where the alternative is going without a plan)?
– Response is based on a 7 point scale (1=Certain NOT to
enroll 7=Certain to enroll)
enroll,
• Restrict sample to those for whom enrollment is
normatively
ti l optimal
ti l (prescription
(
i ti d
drugs>=1).
g 1)
– For an individual taking one prescription drug
regularly the expected benefits less the premium for
regularly,
the standard plan are equal to their expected costs if
they do not enroll in a plan (Heiss, Winter and
McFadden 2006).
6
Measures of Cognition
• Numeracy (Lipkus et al., 2001 & Schwartz et al.,
1997)
– Imagine that we rolled a fair, six-sided die 1,000 times. Out of
1,000 rolls, how many times do you think the die would come up
even (2, 4, or 6)?
• Cognitive Reflection (Frederick, 2005)
– A bat and a ball cost $1.10 in total. The bat costs $1.00 more
th th
than
the b
ball.
ll H
How much
hd
does th
the b
ball
ll cost?
t?
• Memory
– Individuals shown the choice set from which they made their
second choice and were asked to recall the plan they chose.
chose
– Also asked how confident they were on the recall question.
7
Data Analysis
• Ordered probit regressions with 3-category
likelihood of enrollment as the dependent
variable (1-3, 4, and 5-7).
• Main
M i effect
ff
off cognition
ii
– Separate models with cognition measures entered
separately
l and
d jointly.
j i l
• Interact cognition measure with choice set size
• Control variables include age, education,
g taken
household income, number of drugs
regularly, gender, marital status, race,
p y
status.
household size, employment
8
Change in Probab
C
bility of R
Response
e
rela
ative to Z
Zero Corrrect
Results: Numeracy and Enrollment
**
*
*
**
9
Change in Probab
C
bility of R
Response
e
rela
ative to Z
Zero Corrrect
Results: Interaction of Numeracy and
Choice Set Size
High Numeracy
0 30
0.30
*
*
0.19 0.18
0.20
0.10
0.00
-0.10
Low Numeracy
0.30
0.20
0.10
*
*
Unlikely to
Enroll
-0.07 -0.07
-0.20
0 20
5 plans
10 plans
0.00
Likely to
Enroll
16 plans
-0.10
Unlikely to
Enroll
-0.20
0 20
5 plans
10 plans
Likely to
Enroll
16 plans
10
Conclusions
• Cognitive ability is a strong predictor of
expected enrollment.
enrollment
– Individuals with higher cognitive ability as measured
by numeracy
numeracy, cognitive reflection
reflection, and memory are
16-27 percentage points more likely to enroll than
those with lower cognitive ability.
– Hypothetical responses are supported by actual
enrollment decisions;; individuals that do not have
drug insurance through Medicare or other sources (8%
of our sample) have lower numeracy scores (mean of
1 39 vs. 1
1.39
1.57),
57) llower cognitive
iti reflection
fl ti scores (mean
(
of 0.32 vs. 0.82), and lower recall.
11
Conclusions (con’t)
• Our results are suggestive of an interaction
between cognitive ability and choice set size
– People with greater cognitive ability seem to be more
sensitive to choice set size.
size
– Older adults with lower cognitive ability do not have
the “mindware”
mindware (Stanovich and West,
West 2008) necessary
for the decisions, and hence they are not sensitive to
the decision frame ((choice set size).
)
12
Some Caveats
• We only consider enrolling vs. not enrolling,
which is only one level of good decision making.
making
• Our population is more educated than a
representative
i sample
l off elderly
ld l A
Americans.
i
• Information was presented in an organized
tabular format.
• Choices made in the context of an experiment
p
may differ from those made in the real world.
13
Policy Implications
• Older adults with low cognitive ability may be
particularly vulnerable under the design of the
Medicare Part D prescription drug benefit.
– Th
The problem
bl
may nott be
b due
d tto extensive
t i choice
h i ((as
many critics argue) but because seniors are forced to
make a decision in the first place
• Policy approach should address the differential
needs and capabilities of both groups.
groups
– Efforts to simplify the process, such as manipulating
the number of choices or providing information,
information most
likely to help those with greater cognitive ability.
– People with less cognitive ability may benefit from
more paternalistic forms of assistance such as
14
automatic enrollment or expert advice.