Sticker Shock: Personal Financial Factors Leading New Medicare Beneficiaries to Choose Medicare Advantage over Traditional Medicare

BRG professionals simulated the shopping experience of new Medicare beneficiaries choosing between Traditional Medicare and Medicare Advantage (MA) in five markets. We show the premiums beneficiaries enrolling in Medicare for the first time would pay for the most popular Medigap, Medicare Part D, and MA plans in each market. We also model expected out-of-pocket (OOP) costs for patients with “healthy,” “episodic,” and “chronic” health profiles; and compare maximum OOP cost scenarios between Traditional Medicare and MA options. We find beneficiaries will conclude MA plans minimize their total OOP costs more often than Traditional Medicare (including Medigap and Part D), though results vary across markets and health profiles. Additional factors such as network limitations, premium changes over time, and the cost of purchasing dental, vision, and hearing coverage may also contribute to a new Medicare beneficiary’s decision.

The paper was prepared by John Barkett and Mickey Kennedy. The research and analyses performed in preparing this paper were sponsored by America’s Physician Groups.

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