Most Medicare beneficiaries risk overspending on prescription plans

Poor Part D choices might be hurting patients ©Najmiarif - stock.adobe.com

Each fall, millions of Medicare beneficiaries have the opportunity to select new stand-alone prescription drug plans (Part D) that might better suit their needs. However, the majority stick with their current plans without exploring other options, according to a study published in Health Affairs Scholar.

The research found that 52% of beneficiaries with stand-alone Part D plans made no plan comparisons for 2024. Among this group, 41% reported that they didn’t know how to switch plans.

“Comparing these Medicare Part D plans is hard, so many beneficiaries just don’t do it,” said Wändi Bruine de Bruin, the study’s lead author and director of the Behavioral Science & Policy Initiative at the USC Schaeffer Institute, in a statement. “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.”

The study surveyed 439 Medicare beneficiaries using data from the Understanding America Study at USC. The findings suggest that a lack of plan comparisons is strongly linked to inertia: 98% of those who didn’t compare plans also didn’t switch plans for 2024.

Why beneficiaries don’t switch

Key reasons for staying in the same plan include perceptions of difficulty and satisfaction with existing coverage. The study found that:

- Beneficiaries who didn’t compare plans were more likely to describe switching as challenging.

- Those who compared plans but didn’t switch cited overwhelming marketing materials and dissatisfaction with tools like the Medicare Plan Finder.

- Beneficiaries who don’t switch often remain in plans that grow more expensive over time.

“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, in a statement. “I paid close attention the first year. Eventually, the decisions became so complicated that I stopped comparing plans.”

Sticking with the same plan can result in significant financial consequences. Beneficiaries who do not switch may overspend by hundreds of dollars annually, and this could lead to health impacts if they skip medications to manage costs.

According to co-author Erin Trish, co-director of the Schaeffer Center for Health Policy & Economics, “Part D insurers often exploit this inertia by initially offering low premiums to attract enrollees, then increasing those premiums over time, knowing that most beneficiaries won’t switch.”

To address these issues, the study suggests that policymakers consider measures such as:

- Auto-enrolling beneficiaries into optimal plans.

- Extending coverage periods beyond one year to reduce annual decision-making pressure.

- Simplifying plan comparison tools and offering better guidance through resources like the Medicare Plan Finder.

While these changes may face political challenges, Bruine de Bruin emphasized the importance of reducing choice overload. “Policymakers often think that giving people lots of choices is beneficial, but too many options can overwhelm beneficiaries, leading them to stay in suboptimal plans,” she said.

Researchers say these findings are a reminder to discuss prescription drug costs with Medicare patients and direct them to resources that can help. Ensuring patients are aware of the annual open enrollment period, which runs through December 7 for 2025 coverage, can help them avoid unnecessary expenses and prioritize their health.