Reducing the Number of Drug Plans for Seniors: A Proposal and Analysis of Three Case Studies

The Medicare prescription drug benefit relies on private insurers. In most states, there are nearly fifty competing insurance plans available. The sheer number of choices makes it extremely difficult for Medicare beneficiaries, many of whom must cope with declining cognitive abilities, to choose the best plan for themselves. This article proposes an alternative to the current system, where government acts as a broker to winnow the number of choices so that beneficiaries face a small subset of those judged to be best on several dimensions. The study is based on three case studies where government has acted as such a broker. Two are from health (Medicaid's system of competitive bidding in Arizona, and a Medicare demonstration project on selective contracting for medical equipment and supplies), and one from the pension field (so-called 457 plans). The case studies were used to help evaluate the proposal based on competition, choice, quality, simplicity, and stability. We conclude that the proposal meets most of the positive features embodied in these five evaluation criteria. Consideration of this idea can ultimately result in a Medicare prescription drug benefit that best serves the needs of Medicare beneficiaries.