Choice in Health Care Plans and Medicare: It’s More Complicated

12/11/2020 12:00am

Margot Sanger-Katz had a very good NYT piece on the difficulty of choosing among health insurance plans. The gist of the piece is that people have a very difficult time choosing among plans, and even well-educated people often make choices that are bad for them. (The highlight is that Nobel Prize winning economist Paul Krugman could not sort through the plan options at his university job.)

After presenting evidence that most people make bad choices, and low-income people do worst, at the end of the piece she turns to Medicare and notes that over a third of the people receiving benefits choose a private Medicare Advantage plan rather than the traditional government plan. Sanger-Katz takes this to mean that people do value choice in health care plans.

However, it is inaccurate to present the issue here as the traditional Medicare plan being a vote for no-choice versus Medicare Advantage as a vote for choice. The traditional plan now involves three separate programs: Part A, Part B, and Part D. Part D is actually a set of private plans, offering prescription drug benefits, that people must choose between.

In addition, the vast majority of people in traditional Medicare (81 percent) also have a private supplemental plan. This is in large part because the traditional plan has not been modernized in many decades. It doesn’t cover dental care, hearing aids, and many other health care services that would generally be regarded as essential. It also, unlike Medicare Advantage plans, has no out-of-pocket spending cap. These gaps have likely been by design to force people to either opt for Medicare Advantage or buy a private supplemental plan.

The key point for the choice issue is that even those opting for the traditional Medicare plan still have to deal with many choices in arranging their coverage. So it is wrong to present the selection of Medicare Advantage or traditional Medicare as a choice/no-choice scenario.

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