Medicare beneficiary decision making about health insurance. Implications for a voucher system.

A two-phase study involving focus group interviews and a survey of 2,016 Medicare beneficiaries was conducted to examine beneficiary decision making about health insurance under a hypothetical Medicare voucher program. Some of the major findings were that: beneficiaries lack important information about Medicare and health insurance in general; plans with physician restrictions, no restrictions on hospitals, and benefits for custodial long-term care at home or in nursing homes are most preferred when prices are roughly equal to actuarial costs; plan features often interact rather than combined additively to affect choices; price sensitivity is small in comparison with sensitivity to other plan features; price sensitivity is particularly small for plans with custodial long-term care benefits; Medicare would not experience substantial selection bias in a voluntary system containing a wide range of plans preferred by beneficiaries; physician-restricted plans would experience favorable selection; plans with long-term custodial care benefits would experience some adverse selection which might be handled by modest price adjustments in view of the relatively low price elasticity of preferences.