Project 1 – Beneficiary Choice and Medicare Advantage

Richard G. Frank, PhD, principal investigator

Consumers must choose health insurance effectively if Medicare Advantage (MA) is to succeed. MA is premised on the assumption that offering beneficiaries a broad choice of health plans promotes both beneficiary and social welfare. The Congress, in the Balanced Budget Act (BBA) of 1997 and more recently in the Medicare Modernization Act (MMA) of 2003, expanded the types of plans that could participate in MA and raised payment rates dramatically. In response, plans entered and in many regions of the country beneficiaries can now choose from among more than 20 plans. We know little, however, about how beneficiaries choose among the menu of plans, whether beneficiary choices effect good matches, or whether the policy of maximizing the range of choices serves beneficiaries or the Medicare program.

Aim 1
To use Medicare administrative data to examine the impact of plan attributes (e.g. extent of network), market conditions (e.g., presence of a Part D choice) and personal characteristics (e.g. provider attachment) on a Medicare beneficiary’s decision to enroll in MA. Test the effect of the number and diversity of choices on the decision to enroll in MA.

Aim 2
Conditional on joining MA, use Medicare administrative data to examine the impact of plan attributes, market conditions, and personal characteristics on a beneficiary’s choice of a specific type of MA plan (HMO, PPO, and Private Fee for Service [PFFS]) and a specific plan. Use the choice between PFFS and TM in “floor counties” to examine which beneficiaries tend to forgo choosing “dominant” health plans.

Aim 3
To use the Health and Retirement Study (HRS) data to study the impact of health status, health insurance history and cognitive capacity on the decision of new Medicare beneficiaries to join an MA plan versus TM, and the decision of incumbent beneficiaries to switch into or away from MA. Test for a "status quo bias".

Aim 4
To use the HRS data to examine the impact of health status, cognitive capacity, and health insurance history on the types of health plans chosen for new and incumbent beneficiaries electing to participate in MA.