Dominated Choices and Medicare Advantage Enrollment

Christopher Afendulis, Anna Sinaiko, Richard Frank

NBER Working Paper No. 20181
Issued in May 2014
NBER Program(s):Economics of Aging, Health Care

Research in behavioral economics suggests that certain circumstances, such as large numbers of complex options or revisiting prior choices, can lead to decision errors. This paper explores the enrollment decisions of Medicare beneficiaries in the Medicare Advantage (MA) program. During the time period we study (2007-2010), private fee-for-service (PFFS) plans offered enhanced benefits beyond those of traditional Medicare (TM) without any restrictions on physician networks or additional cost, making TM a dominated choice relative to PFFS. Yet more than three quarters of Medicare beneficiaries remained in TM during our study period. We explore two possible explanations for this behavior: status quo bias and choice overload. Our results suggest that status quo bias plays an important role; the rate of MA enrollment was significantly higher among new Medicare beneficiaries than among incumbents. Our results also provide some evidence of choice overload; while the MA enrollment rate did not decline with an increase in the number of plans, among incumbent beneficiaries it failed to increase. Our results illustrate the importance of the choice environment that is in place when enrollees first enter the Medicare program.

download in pdf format
   (228 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20181

Published: Christopher C. Afendulis & Anna D. Sinaiko & Richard G. Frank, 2015. "Dominated choices and Medicare Advantage enrollment," Journal of Economic Behavior & Organization, vol 119, pages 72-83.

Users who downloaded this paper also downloaded* these:
Newhouse, Price, McWilliams, Hsu, and McGuire w20021 How Much Favorable Selection Is Left in Medicare Advantage?
Sinaiko, Afendulis, and Frank w19639 Enrollment in Medicare Advantage Plans in Miami-Dade County: Evidence of Status Quo Bias?
Duggan, Starc, and Vabson w19989 Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program
Stockley, McGuire, Afendulis, and Chernew w20208 Premium Transparency in the Medicare Advantage Market: Implications for Premiums, Benefits, and Efficiency
Abaluck and Gruber w14759 Choice Inconsistencies Among the Elderly: Evidence from Plan Choice in the Medicare Part D Program
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us