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Choice Set Size and Decision Making: The Case of Medicare Part D Prescription Drug Plans

Author

Listed:
  • M. Kate Bundorf

    (Department of Health Research and Policy, Stanford University, Stanford, California, bundorf@stanford.edu)

  • Helena Szrek

    (Centre for Finance and Economics, University of Porto, Portugal)

Abstract

Background. The impact of choice on consumer decision making is controversial in US health policy. Objective. The authors’ objective was to determine how choice set size influences decision making among Medicare beneficiaries choosing prescription drug plans. Methods. The authors randomly assigned members of an Internet-enabled panel age 65 and older to sets of prescription drug plans of varying sizes (2, 5, 10, and 16) and asked them to choose a plan. Respondents answered questions about the plan they chose, the choice set, and the decision process. The authors used ordered probit models to estimate the effect of choice set size on the study outcomes. Results. Both the benefits of choice, measured by whether the chosen plan is close to the ideal plan, and the costs, measured by whether the respondent found decision making difficult, increased with choice set size. Choice set size was not associated with the probability of enrolling in any plan. Conclusions. Medicare beneficiaries face a tension between not wanting to choose from too many options and feeling happier with an outcome when they have more alternatives. Interventions that reduce cognitive costs when choice sets are large may make this program more attractive to beneficiaries.

Suggested Citation

  • M. Kate Bundorf & Helena Szrek, 2010. "Choice Set Size and Decision Making: The Case of Medicare Part D Prescription Drug Plans," Medical Decision Making, , vol. 30(5), pages 582-593, September.
    • Handle: RePEc:sae:medema:v:30:y:2010:i:5:p:582-593
    DOI: 10.1177/0272989X09357793
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    References listed on IDEAS

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    Cited by:

    1. Conor Keegan & Conor Teljeur & Brian Turner & Steve Thomas, 2019. "Switching benefits and costs in the Irish health insurance market: an analysis of consumer surveys," International Journal of Health Economics and Management, Springer, vol. 19(1), pages 15-32, March.
    2. Sai Krishnan S. & Subramanian S. Iyer & Sai Balaji SMR, 2022. "Insights from behavioral economics for policymakers of choice‐based health insurance markets: A scoping review," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(2), pages 115-143, June.
    3. Jeffrey R. Kling & Sendhil Mullainathan & Eldar Shafir & Lee C. Vermeulen & Marian V. Wrobel, 2012. "Comparison Friction: Experimental Evidence from Medicare Drug Plans," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 199-235.
    4. Emmert, Martin & Kast, Kristina & Sander, Uwe, 2019. "Characteristics and decision making of hospital report card consumers: Lessons from an onsite-based cross-sectional study," Health Policy, Elsevier, vol. 123(11), pages 1061-1067.
    5. Steven Glazerman & Ira Nichols-Barrer & Jon Valant & Jesse Chandler & Alyson Burnett, "undated". "Nudging Parents to Choose Better Schools: The Importance of School Choice Architecture," Mathematica Policy Research Reports dd5063086be143fb75deb193b, Mathematica Policy Research.
    6. Spears Dean, 2011. "Intertemporal Bounded Rationality as Consideration Sets with Contraction Consistency," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-16, June.
    7. Ericson, Keith M. Marzilli & Starc, Amanda, 2016. "How product standardization affects choice: Evidence from the Massachusetts Health Insurance Exchange," Journal of Health Economics, Elsevier, vol. 50(C), pages 71-85.
    8. Helena Szrek, 2017. "How the number of options and perceived variety influence choice satisfaction: An experiment with prescription drug plans," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 12(1), pages 42-59, January.
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