Most Medicare beneficiaries do not compare prescription drug plans – and may be sticking with bad plans

Every fall, millions of Medicare beneficiaries have the chance to pick a new stand-alone prescription drug plan that may be better suited for them, but most stick with the same plan.

A new study published today in Health Affairs Scholar suggests that 52% of Medicare beneficiaries with stand-alone Part D plans did not switch because they made no plan comparisons at all for 2024. Many of these beneficiaries (41%) also reported not knowing how to switch plans.

“Comparing these Medicare Part D plans is hard, so many beneficiaries just don’t do it. But beneficiaries who don’t compare plans may not notice if they are sticking with more expensive plans or plans that are not optimal for their health conditions,” said lead author Wändi Bruine de Bruin, director of the Behavioral Science & Policy Initiative at the USC Schaeffer Institute for Public Policy & Government Service.

This study confirms a long-standing suspicion that beneficiaries with stand-alone Part D plans do not switch because they do not compare plans.

“Not surprisingly, my mother delegated her Medicare Part D decisions to me, her PhD health economist son,” said Dana Goldman, director of the Schaeffer Institute. “I paid close attention the first year. Eventually, the decisions became so complicated that I stopped comparing plans.”

The average beneficiary can choose from about 12 to 18 Part D plans that have varying deductibles, co-pays, access to drugs, pharmacy networks and other features which may change from year to year. Making an active choice may be especially important in the ongoing enrollment period for 2025 coverage, which runs through Dec. 7, due to premium increases in some plans, according to the healthcare policy research organization KFF.

For their study, researchers surveyed 439 Medicare beneficiaries with stand-alone Part D plans from the Understanding America Study at USC, a nationally representative sample of U.S. adults. The survey was conducted in the weeks immediately following the close of the 2024 enrollment period. Among their findings:

• Nearly all of those who said they did not compare coverage options last year did not switch plans (98%). Among those who shopped around, 67% did not switch plans.
• The 52% who said that they didn’t compare or switch plans were more likely than those who switched to say they perceived switching as difficult.
• They were also more likely to report their existing plans were continued, had not been changed and were satisfactory. They were less likely to rely on plan advisors or the Medicare Plan Finder website, which allows people to compare coverage options based on personal need.
• Beneficiaries who did compare plans but kept their coverage said that they didn’t find it hard to compare or switch. However, they reported receiving more mailed marketing, which consumers may find overwhelming, and they were less likely to have a college degree.

Previous research from study co-authors indicated that beneficiaries who did not switch plans risk ending up in plans that aren’t financially optimal, potentially resulting in overspending by hundreds of dollars or more per year. This overspending could have health consequences if people then try to manage their costs by limiting their use of prescribed medicines.

Recognizing that most beneficiaries often stay in the same plan, Part D insurers may be exploiting this complacency to boost profits, other researchers have found.

“Our research on Part D indicates that a common strategy is for plans to start with a low premium to attract enrollees and then take advantage of their inattention by raising premiums year after year,” said Erin Trish, co-director of the Schaeffer Center for Health Policy & Economics. “Since most beneficiaries don’t switch plans, they end up paying higher premiums than they need to.”

The study authors suggested that beneficiaries may welcome policies that reduce the need for shopping, such as auto-enrollment into an optimal plan or extending the coverage period from one year to multiple years. While those options may be politically challenging, policymakers could do more to make plan shopping less daunting for Medicare beneficiaries, said Bruine de Bruin, who is also Provost Professor of Public Policy, Psychology, and Behavioral Science at the USC Price School of Public Policy and the USC Dornsife Department of Psychology.

Bruine de Bruin said: “Policymakers often think that it is good to give people lots of choices because it makes companies compete to offer the best plans. But having lots of choices can be so overwhelming that people just stick with their old plan year after year, potentially at a major cost to themselves and the government.”

Read the release online here.