August 22, 2019

Health Plan Confusion and Bad Decisions

A popular idea for reducing healthcare costs is to arm consumers with detailed information about the prices of drugs and medical procedures so they can make smarter decisions.

But the academic community is reaching the opposite conclusion: people don’t understand the information they already have and are making bad decisions based on these misconceptions. The latest example is a survey of Wisconsin state workers who sometimes defer care because they are under the mistaken impression that they can’t afford it.

“Workers do not understand how health plans work, the role of deductibles, co-insurance and co-pays … and what goes into out-of-pocket costs,” concludes a report by the University of Wisconsin public affairs school, which surveyed 2,200 government workers.

Before getting into the specific findings, it’s important to note that Wisconsin’s employees are in an enviable position. They choose from just four health insurance options approved and overseen by the state. The broader implications of the report are more distressing, if one considers that millions of Americans buying insurance through the Affordable Care Act exchanges, Medicare Advantage plans, or Medicare Part D drug plans must sort through oodles of plan options with different copayments, deductibles, physician and hospital networks, or drug coverages.

The confusing patchwork of Part D plans hurts retirees’ pocketbooks, according to research in Health Affairs, which found that only one out of 20 retirees selects the cheapest drug plan to meet their medication needs. A different study found that health insurance buyers purchase overly expensive plans when they have to choose from a complex menu of options.

The Wisconsin report said state workers there are also overwhelmed: …
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