Nudging consumers in Medicare Advantage
CMS efforts to empower consumer behavior in Medicare Advantage offer exciting clues into the future of transparency.
TL:DR: Recently CMS rolled out an exciting new Star Rating nudge so as to encourage higher quality shopping for Medicare insurance coverage. But it won’t have a meaningful effect in 2023.
Consumerism is just around the corner…
Consumerism is a trend with tons of hype in health care, and like almost everything else in the industry, the pace of change in this area can be immensely frustrating - often there are structural barriers to information that only the government has the power to unlock. To that end, I always pay attention when the government implements new policy, data, or tools that support “normal” consumer behavior we expect in other parts of everyday life.
Last week, I noticed an exciting new nudge that CMS was employing in the CMS Plan Compare.
For those who don’t know, CMS manages a website so as to help consumers make informed decisions about Medicare coverage. This site is updated with all the new Medicare Advantage (MA) health plans on October 1 of each year in advance of the Annual Election Period (AEP) that occurs from October 15 to December 7.
The way the site works is that a user inputs data about where they live, what medications they take from what pharmacies, and whether they qualify for income assistance. With this information, the site displays a list of plans available to the user.
Joe Namath - your grandfather’s trusted advisor?
Historically, choosing a Medicare has been a big source of confusion given the complexity of the process, the technical intangibility of insurance, the magnitude of the decision, and the lack of transparent information available to consumers. Opaque markets open doors for savvy marketers, and in MA these marketers are notably prolific targeting night owls in 1am-5am half hour TV slots on the Sci Fi channel, featuring the likes of Joe Namath.
CMS efforts to change the MA buying process
One of CMS’ answers to the late night ads has been to continually invest in the Medicare Plan Compare website and offer more transparency into plan options and information:
The original Plan Compare site was an important advance forward in and of itself. Not only was it designed well, it worked! This is in sharp contrast to the ill-fated Healthcare.gov site that Andy Slavitt famously fixed.
CMS iteratively weaved in UI effects that drew attention to information that the agency believed was important for purchasers to consider. For example, one of the first nudge’s CMS employed was to list the plans, by default, in order of affordability (premium and drug costs). Specifically, the plans with the lowest premium and out of pocket drug costs to the member were listed first.
After CMS first started to employ Star Ratings, the agency’s designers shared on the site the visual rating of each plan ⭐⭐⭐⭐⭐. The intent was to nudge users, all else equal, to the plans with the highest quality rankings, and discourage election in lower quality plans.
Earlier this year, the agency added in the ability to search for both MA plans and MediGap plans and other usability features based on frequently asked questions.
Recently CMS implemented arguably its biggest nudge yet. MA plans are now listed first in order of CMS Star Rating, and secondly by premium/drug costs. The UI effect of this nudge is significant, and CMS is effectively drawing more attention to those plans that demonstrate the highest quality. We can actually see the effect of this change because there is a 1-week lag between when plan information is available October 1 on CMS Plan Finder and when Star Ratings are published to the site.
The example below are Medicare Advantage plans for an average beneficiary in Clark County, Nevada, which is the county home to Las Vegas, one of the most hotly contested Medicare Advantage markets in the US.
Based on affordability, AARP (which the United Healthcare branded MA plan) ranks #1, but when including Star Ratings, SelectHealth is #1. If you rank by affordability alone, SelectHealth is ranks several pages down.
The impact of the nudge on 2023
Does this mean CMS has engineered a way for SelectHealth to outgrow United in Las Vegas 2023? Far from it. The old algorithm remains a much better predictor of growth in a given community, given the complexity of the factors that go into Medicare Advantage plan selection for a given individual. And I am betting that United will grow the most members in Las Vegas by the time the enrollments are official in early 2023.
While the change won’t materially change behavior this year, the CMS Plan Compare site has never been more powerful as a supporting tool to be used in coordination with a trained, trusted resource. Those trusted advisors I recommend to my friends and family include SHIP Advisors, independent brokers (there are exciting digitally-enabled local broker organizations like Connie Health that have emerged in the last 2 years), or sales people from a Medicare Advantage plan. Each of these professionals’ job is to help older adults make the decisions that are best for the individual based on their needs and preferences.
What we can expect in MA consumerism
CMS will continue to invest in more ways to guide individuals to the highest quality plans, and this will put even more pressure on MA industry to demonstrate the role plans have in improving outcomes and lowering costs. Meanwhile the prominence of the Medicare Advantage market will continue to draw more entrepreneurs who can apply technology, analytics and other processes so as to liberate information that previously been a cottage industry of information available only to Medicare Advantage plan executives. Innovation will accelerate with this trifecta of trends: CMS extending investments in transparency, plans under pressure, and entrepreneurs more deeply understanding the mind-numbing nuances of Medicare and MA.
One of the ways I see my role in accelerating change is to help these talented people numb their minds in the business, operations, and culture of health care so that they can fix it. So if this sounds up your alley, stay tuned for more thoughts! In my next post we will dig into Las Vegas a bit more, using that market to show how MA plan executives used consumer behavior and game theory to design insurance products that grow in an increasingly competitive environment, and why we likely know the winners and losers even before Open Enrollment starts.
Correction
A reader pointed out that I had the affordability concept wrong. CMS’s previous ranking was based on premium and total out of pocket drug costs, not total plan actuarial value. That is too bad, b/c CMS should figure out a way to do this! MA plans use tools like Milliman’s MACVAT. This information would be valuable for consumers to have. Maybe a startup can figure it out…
Big thanks to Andrew Schutzbank, MD MPH for great writing feedback and helping me ship this first post.
Great post, Duncan. Very understandable and love your writing style
As one of those "healthcare executives" I very much agree and wish some of the tools I've helped develop were more available to the public and broader healthcare community.
I would add that there is a somewhat hidden dimension of value that plans and consumers need to consider and that is the breadth and quality of the providers in a plan's network. People will quickly become dissatisfied with a plan with high star rating or actuarial value if it's built on a narrow network or puts in place a lot of "gatekeeping".
~Zach