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

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.