Sinking, Swimming, or Learning to Swim in Medicare Part D.

Under Medicare Part D, senior citizens choose prescription drug insurance offered by numerous private insurers. We examine nonpoor enrollees' actions in 2006 and 2007 using panel data. Our sample reduced overspending by $298 on average, with gains by 81 percent of them. The greatest improvements were by those who overspent most in 2006 and by those who switched plans. Decisions to switch depended on individuals' overspending in 2006 and on individual-specific effects of changes in their current plans. The oldest consumers and those initiating medications for Alzheimer's disease improved by more than average, suggesting that real-world institutions help overcome cognitive limitations.