Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans

Abstract

This chapter analyzes an Internet-based survey of individuals who became eligible for prescription drug coverage through Medicare Part D. The chapter focuses on the decisions made in the initial enrollment period, and the influence on plan choice of previous prescription drug use, health risks, health-related expectations, and subjective factors. It draws on all three waves of survey data. The study finds generally that seniors' choices respond in predictable ways to the incentives provided by their own health status and the plan options available to them. In some circumstances, however, consumers selected inexpensive plans even though more expensive and comprehensive alternatives were actuarially favorable. The model developed in the study also suggests that given the subsidies to the program, as well as the penalties for late enrollment, not enrolling immediately in a plan in 2006 would have been the optimal choice for just 2.5 percent of the sample. Despite these caveats, however, the proportion of individuals who appear not to have made an optimal choice is relatively small.

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