[gov3009-l] Mullainathan on 'How We Choose'

Justin Grimmer jgrimmer at fas.harvard.edu
Tue Dec 4 10:38:11 EST 2007

Dear Applied Statistics Community,

Please join us for the final applied statistics workshop of the semester
when Sendhil Mullainathan, Professor of Economics Harvard University,
will present 'How We Choose: Medicare Drug Plan Selection', work that is
joint with Jeff Kling, Eldar Shafir, Lee Vermeulen, and Marian Wrobel.
Sendhil provided the following abstract:

Choices increasingly abound for various government supported services,
ranging from charter schools to health plans. 24 million elderly Americans
have enrolled in Medicare Part D prescription drug coverage during the past
two years, and may choose among at least 40 plans. In this paper we examine
the informational context in which choices are made and conduct an
experiment of information provision, focusing on the decision about whether
to switch plans during the open enrollment period in 2006, one year after
the program began. We find that most participants obtain their information
from mailings from plans and from Medicare. This information is not
personalized, although the costs and benefits for a given plan vary greatly
depending on specific prescriptions are used. Knowledge of how plans work is
low. Personalized information is available by calling Medicare, but most
participants do not seek information.

      Our randomized experiment provided an intervention of personalized
information (highlighting the predicted out-of-pocket cost of the current
plan and the least expensive plan, and also listing costs of all plans --
based on information about prescription use) in comparison to a group that
was provided information about accessing the Medicare website. The
intervention group plan-switching rate was 28 percent, while the comparison
group rate was 17 percent. The potential cost savings for those affected by
the intervention was at least $230 on average. The impacts on switching and
potential savings were larger for those with greater absolute and relative
potential savings, and for those in small market share plans. The impacts on
switching were larger for those initially in low premium plans. We conclude
that additional efforts to distribute simple, personalized drug plan
information would lead to significant reductions in Medicare beneficiaries'
out-of-pocket costs and that the costs of such a program would likely be
offset by reduced Medicare expenditures on subsidies to drug plans.

I've also attached a draft of the paper.

As a reminder, the workshop meets at 12 noon and we provide a light lunch.
We are located in room N-354, CGIS Knafel, 1737 Cambridge St.

Please contact me with any questions, or suggestions for next semester's

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