The Costly, Confusing Medicare Choices Facing 62 Million Americans

October 28, 2021

Photo by Dan Gorenstein

It’s Medicare open enrollment the one chance each year that all 62 million beneficiaries have to shop for better coverage. But choosing a new plan is much harder and riskier than it seems.

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The Basics: The Medicare Enrollment Maze

Medicare’s annual open enrollment period is an important opportunity for the program’s 62 million beneficiaries to ensure they have the coverage that best suits their medical and financial circumstances. But in a new Kaiser Family Foundation survey, just 29% of beneficiaries reported comparing plans during the 2018 open enrollment period. People with low incomes, less education and who identify as Black or Hispanic were even less likely to shop around for coverage.

Those that do shop are vulnerable to making suboptimal decisions, wasting money and even harming their health. Leaving money on the table can be an especially costly mistake for adults over 65, whose median income is roughly $27,000 per year. Research shows even small financial hardships, like a copay increase of $10, can cause seniors to cut back on important services, such as primary care and life-saving medications.

The Problem: Difficult Decisions

Overwhelming options

The average person now has more than 60 Medicare products to choose from, including Part D prescription drug plans, Medicare Advantage options and supplemental insurance known as Medigap. Research shows that offering people too many choices can dissuade them from shopping altogether.

Complex comparisons

In one study, roughly 70% of people failed to pick the lowest cost prescription drug plan available to them and spent 25% more on drug coverage than they needed to. While most Americans struggle to make optimal health insurance decisions, research shows these types of complex decisions can be especially challenging for older adults.

Lack of information

Nearly half of Medicare beneficiaries say they've never visited the Medicare website, the country's primary source of unbiased plan information. Nearly three-quarters of people who did try Medicare's online Plan Finder tool found it difficult to use. Many older adults turn to insurance agents for help, but agents are compensated by insurance companies and are not required to share information about all available plans.

Potential Policy Fixes

Standardize plan options

Back in 1990, Congress simplified the market for Medigap insurance, creating a menu of 10 standard offerings that could be easily compared. More recently, the Obama administration attempted to pare back Part D and Medicare Advantage offerings, but the changes were rolled back under President Trump. Private insurers argue that standardizing benefits inhibits their ability to offer innovative add-ons, like dental care or meal delivery.

Cap out-of-pocket spending

Although Medicare Advantage plans do have limits on out-of-pocket spending, traditional Medicare coverage (Part B) and Part D prescription drug plans do not. Limits like these can help minimize the damage that a suboptimal plan choice can do to a beneficiary's finances. In recent years, lawmakers from both parties have supported legislation to add an out-of-pocket maximum to Part D.

Invest in navigators

The Medicare State Health Insurance Assistance Program provides people in all 50 states, DC, Guam, Puerto Rico and the U.S. Virgin Islands with free, unbiased counseling about their Medicare coverage. Congress could boost funding for this resource, which received $52 million in federal dollars in 2021 — less than $1 for every one of the 62 million beneficiaries nationwide.

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Episode Resources

Additional Reporting and Research on Medicare Enrollment:

Seven in Ten Medicare Beneficiaries Did Not Compare Plans During Past Open Enrollment Period (Wyatt Koma, Meredith Freed, Juliette Cubanski and Tricia Neuman; KFF; 10/13/2021)

Mortality Effects and Choice Across Private Health Insurance Plans (Jason Abaluck, Mauricio Caceres Bravo, Peter Hull and Amanda Starc, Quarterly Journal of Economics, 5/6/2021)

The Health Costs of Cost-Sharing (Amitabh Chandra, Evan Flack and Ziad Obermeyer, NBER, 2/2021)

When Medicare Choices Get ‘Pretty Crazy,’ Many Seniors Avert Their Eyes (Mark Miller, New York Times, 11/13/2020)

Research Corner: Picking Plans (Tradeoffs, 10/13/2020)

Why Consumers Often Err in Choosing Health Plans (Austin Frakt, New York Times, 11/1/2015)

Choice Inconsistencies Among the Elderly: Evidence from Plan Choice in the Medicare Part D Program (Jason Abaluck and Jonathan Gruber, American Economic Review, 8/18/2011)

Episode Credits


Lilyan Grossman, Medicare beneficiary

Tricia Neuman, ScD, Senior Vice President and Executive Director of the Program on Medicare Policy, Kaiser Family Foundation

Amal Trivedi, MD, Professor of Medicine and Health Services, Policy, and Practice, Brown University

The Tradeoffs theme song was composed by Ty Citerman, with additional music this episode by Blue Dot Sessions.

This episode was produced by Leslie Walker and mixed by Andrew Parrella.

Additional thanks to:

Jason Abaluck, Saurabh Bhargava, Sungchul Park, Fred Riccardi, Anna Sinaiko, Jane Sung, the Tradeoffs Advisory Board and our stellar staff!