The Choice Architecture of Medicare Advantage

Slowly and partially, we see information begin to appear in the press about the different enrollment procedures for traditional Medicare and Medicare Advantage.  These differences are important for product market definition in merger analysis, as I discussed in an earlier post on the difficulty in moving between Medicare Advantage and traditional Medicare augmented with Medicare Supplemental Insurance, but they are also significant for Medicare beneficiaries.  As the default option in a "seamless enrollment" exception to Medicare's general rule that a Medicare beneficiary must opt-in to Medicare Advantage, it turns out it is possible to be enrolled in Medicare Advantage without knowing you are (because you didn't read or understand your mail about Medicare Advantage), without having affirmatively chosen to be, and while believing that Medicare Advantage is irrelevant to you after believing you have affirmatively elected enrollment in traditional Medicare. The latter is most intriguing because, I suspect, it documents a Medicare beneficiary attempting to navigate the system of election and enrollment, as they broadly understand it, to enroll it without understanding that Medicare election and enrollment rules are malleable and can be distinctive to time and place.

One of the things about changes to choice architecture or defaults is the difficulty in addressing the  time lag  during which people's expectations of how the system will work as it is has previously clash with a very different new default rule.  This may be of particular concern when an older, more vulnerable population is involved, though there is ample evidence that Americans of all ages do not understand Medicare.  Lurking here, also, is the huge problem with the complexity of Medicare that leads many elders to rely on what I call Medicare "urban legends." Some of these urban legends — take, for example, the idea that Medicare funds long term care beyond a very limited benefit — have proven very sticky indeed.

Here, we have commercial insurers Medicare-authorized to seamlessly transition some of their enrollees, at the point of Medicare eligibility, to the Medicare plan that most closely matches their current insurance enrollment, presumably because their choices in commercial insurance will likely mimic their preferences in Medicare enrollment and to save any of those involved from missing Medicare enrollment timelines and deadlines.

What is interesting about this is the premise, that a choice in a certain kind of commercial insurance product signals an interest in a particular kind of managed care Medicare insurance product, appears to be based on a fascinating understanding of consumer choice in health insurance products. Most insureds do not choose their own health insurance, in the purest sense, but rather choose among a very limited range (or no range) of options actually chosen for them by their employer. If the purchase is through one of the state health insurance exchanges, choice is among the plans open for enrollment in their geographic area within the exchange, often a quite limited slate of plans.  

Very few Americans are exposed to the kind of choice between traditional Medicare (with or without Medicare Supplemental Insurance) and a Medicare Advantage product — the difference between, for example, broad choice of provider and a plan based on narrow networks.  Very little commercial insurance offers the kind of wide open provider options that are found in traditional Medicare.  Whether this is Medicare's glory or its bane, those over 65 years of age and those approaching 65 years of age are well aware that their health care access and choice may well improve upon enrollment in traditional Medicare, provided they have the funds to take advantage of it.  This may be why the evidence shows that those with higher incomes and assets naturally gravitate to traditional Medicare with Medicare Advantage the choice of the lower income, specifically those who cannot afford the Medicare Supplemental Insurance needed to wraparound traditional Medicare's limited coverage. 

I have to wonder if the surfacing of changed enrollment defaults for Medicare Advantage isn't because of these mis-matched assumptions about consumer choice and who really elects what in Medicare. After all, Medicaid beneficiaries, overwhelmingly low income individuals, have long had little choice about Medicaid managed care.

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