Paying Attention or Paying Too Much in Medicare Part D

Abstract

We study whether people became less likely to switch Medicare prescription drug plans (PDPs) due to more options and more time in Part D. Panel data for a random 20 percent sample of enrollees from 2006–2010 show that 50 percent were not in their original PDPs by 2010. Individuals switched PDPs in response to higher costs of their status quo plans, saving them money. Contrary to choice overload, larger choice sets increased switching unless the additional plans were relatively expensive. Neither switching overall nor responsiveness to costs declined over time, and above-minimum spending in 2010 remained below the 2006 and 2007 levels. (JEL H51, I13, I18)