The Fine Line Between Choice and Confusion in Health Care

The following originally appeared on The Upshot (copyright 2020, The New York Times Company). 

American opponents of proposed government-run health systems have long used the word “choice” as a weapon.

One reason “Medicare for all” met its end this year has been the decades-long priming of the public that a health system should preserve choice — of plans and doctors and hospitals. To have choice is to be free, according to many.

So how many Americans actually have choices, and what type of freedom do choices provide?

Current Medicare enrollees have more choices than any other Americans — to some, in fact, an overwhelmingly large number of them.

In 2019, 90 percent of Medicare enrollees had access to at least 10 Medicare Advantage plans, which are government-subsidized, private-plan alternatives to the traditional public program.

But this is just the beginning. If Medicare beneficiaries who elect to enroll in the traditional public program want drug coverage, they must choose from large numbers of private prescription drug plans. In 2014, beneficiaries could choose from an average of 28 drug plans. They can also select private plans that wrap around traditional Medicare, filling in some of its gaps, and this doesn’t even count plan options that may be available through former employers as retiree benefits.

Choosing among all these options would be a challenge for anyone, or, as a Kaiser Family Foundation report put it, “a daunting task.”

“Medicare beneficiaries are so confused, overwhelmed and frustrated with the number of choices and the process of choosing among them, they end up taking shortcuts,” said Gretchen Jacobson, now with the Commonwealth Fund and an author of the report. “Those shortcuts can lead them to select plans that aren’t as beneficial to them as other options.”

In other words, freedom to choose is also freedom to make mistakes.

For instance, in the first year that drug plans were available to Medicare beneficiaries, economists have shown that 88 percent of them chose a more costly plan than they could have. This cost them 30 percent more, on average, and the tendency to select needlessly costly plans persisted in subsequent years. This is the kind of error, as other studies have found, that is easy to make when inundated by choices.

More generally, without some assistance, many people don’t understand the health insurance choices and features. Even common terms can be confusing. In one study, all the subjects said they understood what a “co-pay” was, but 28 percent could not answer a question testing their knowledge of the term; 41 percent couldn’t define what “maximum out-of-pocket” meant.

Of course, just because people make mistakes when faced with choices doesn’t imply that a single plan for all would be a better fit for more people. It all depends on the details.

Medicaid also offers the vast majority of enrollees private-plan choices. States, on average, offered seven plans for enrollees to choose from in 2017. Some types of enrollees — particularly those with more complex health problems — are not able to choose plans and are put into one that specializes in their needs.

According to a systematic review by Michael Sparer, a professor at Columbia University’s Mailman School of Public Health, studies do not find much cost savings to Medicaid programs stemming from all this choice. But some studies indicate that private Medicaid plans do provide better access to some types of care, including primary care.

A caution, however: “Since Medicaid is a state-based program, broad averages don’t tell you much about what is happening in specific states,” he said. “Some states have been able to save money through the managed care options enrollees can select, and some have not.”

It’s much less clear how many choices people with employer-sponsored plans have, because that data isn’t public. Generally speaking, employers serve as a filter, selecting or working with insurers to devise a small number of plans offered to employees.

What we do know is that three in four employers offer just a single plan. These are mostly small businesses, so only a minority of workers are employed by them. Most workers (64 percent) are employed by firms that offer some choice among plans. But most of these workers are at firms that offer just two options. Does this imply workers at these firms have less freedom?

About 4 percent of firms with more than 50 employees offer coverage in private exchanges, akin to what the Affordable Care Act established for individuals. “Private exchanges generated a lot of hype five years ago,” said Paul Fronstin, director of health research at the Employee Benefit Research Institute. “For some reason, they just never became popular.”

He gets his coverage from an exchange that offers a whopping 60 plans. “Choosing among them is no small task, particularly because information about them is so confusing,” he said.

One employer that stands out in offering choices is the federal government. Federal employees can typically choose from about two dozen plans (the number and details vary by state). There are 28 plans in Washington and 21 in Rhode Island, for example.

This year, all A.C.A. marketplace enrollees have choices among plans, on average about 19 of them. Some have over 100.

All told, a rough calculation suggests that about 80 percent of insured Americans have a choice of health plan.

It’s worth considering what accompanies health insurance choice for some Americans. If you work at a company, you could lose access to affordable coverage if you lose your job or if the company decides to stop offering it.

Other people choose coverage plans that can be too skimpy to pay for a major treatment.

Yet others may have options, but they may not be affordable. None of this is necessarily a condemnation of choice per se, just the nature of health insurance choice in America today.

Medicare for all was supposed to address problems like these. As the Finnish author Anu Partanen wrote of a single-payer system: “The point of having the government manage this complicated service is not to take freedom away from the individual. The point is the opposite: to give people more freedom.”

The Medicare for All Act would have offered no choice, enrolling everyone in the same, comprehensive plan with no out-of-pocket cost. Proponents of this approach trust the government to devise a program suitable for all. Detractors of it favor choices precisely because they have less faith that government will do a better job than plans that are in competition. For them, freedom to choose is freedom from tyranny. But too much choice without enough guidance can be overwhelming.


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