By Sewin Chan and Brian Elbel
Health Affairs, August 2012

Abstract

Because traditional Medicare leaves substantial gaps in coverage, many people obtain supplemental coverage to limit their exposure to out-of-pocket costs. However, some Medicare beneficiaries may not be well equipped to navigate the complex supplemental coverage landscape successfully because of their lower cognitive ability or numeracy—that is, the ability to work with numbers. We found that people in the lower third of the cognitive ability and numeracy distributions were at least eleven percentage points less likely than those in the upper third to enroll in a supplemental Medicare insurance plan. This result means that many Medicare beneficiaries do not have the financial protections and other benefits that would be available to them if they were enrolled in a supplemental insurance plan. Our findings suggest that policy makers may want to consider alternatives tailored to these high-need groups, such as enhanced education and enrollment programs, simpler sets of plan choices, or even some type of automatic enrollment with an option to decline coverage.

From the Conclusion

Many public policies focus on individual choice as a means of determining exactly how benefits should be distributed or of assuring that a policy has maximal effectiveness. Inherent in all of these policies is the assumption that all or most people have the mental capacity to make the choices that are in their best interest. We have shown that many people do not have this capacity and that this deficiency can affect their choices in adverse ways.

Overall, people in the lower third of the cognitive ability distribution were six to twenty-three percentage points less likely to enroll in a supplemental Medicare insurance plan than those in the upper third of the cognitive ability distribution, even after controlling for a host of other variables. Furthermore, the chance of enrolling in a supplemental Medicare insurance plan was approximately five percentage points lower for those in the lower third of the numeracy distribution than for those in the upper third.

These problems were most pronounced for those with low incomes, low wealth, and multiple chronic illnesses, where the likelihood of enrollment was forty percentage points lower for the least cognitively able, and an additional thirteen percentage points lower for those with weak numeracy skills. People who are chronically ill and those who do not have the financial ability to self-insure against substantial out-of-pocket costs would almost certainly be better off enrolling in supplemental insurance plans.

The magnitude of our findings on cognitive ability and numeracy was sizable, particularly compared to the influence of health on enrollment decisions. By way of comparison, if we add together the estimated effect on enrollment for people who were hospitalized in the past year and those with three or more chronic illnesses, the sum is still considerably less than the negative effect of being in the bottom third of the cognitive ability distribution.

Given the difficulty associated with making good choices, addressing the problem of low cognitive ability and numeracy is important, and not only for Medicare. Health care reform is likely to increase the set of decisions to be made, particularly for the newly insured. Unless there is comprehensive insurance coverage in which all services are covered and the issue of coverage choices is redundant, understanding the role of cognitive ability and numeracy in making these decisions is essential.

http://content.healthaffairs.org/content/31/8/1847.full

Comment: 

By Don McCanne, MD

This study demonstrates that low cognitive ability decreases enrollment in supplemental Medicare insurance plans, preventing these individuals from having the financial protections and other benefits of supplemental coverage. Other studies have shown that this results in impaired outcomes.

Although the authors recommend approaches that would improve enrollment while preserving choice, they end with a statement that begins, “Unless there is comprehensive insurance coverage in which all services are covered and the issue of coverage choices is redundant…”

Of course, an expanded and improved Medicare which, amongst other improvements, would roll into the benefit package the coverage provided by supplemental plans, would obviate the need to make any choices since all reasonable services would be covered. Low cognitive ability and poor skill with numbers would no longer be determinants in whether or not a person had adequate coverage. Everyone would automatically.

Low Cognitive Ability And Poor Skill With Numbers May Prevent Many From Enrolling In Medicare Supplemental Coverage

By Sewin Chan and Brian Elbel
Health Affairs, August 2012
Abstract
Because traditional Medicare leaves substantial gaps in coverage, many people obtain supplemental coverage to limit their exposure to out-of-pocket costs. However, some Medicare beneficiaries may not be well equipped to navigate the complex supplemental coverage landscape successfully because of their lower cognitive ability or numeracy—that is, the ability to work with numbers. We found that people in the lower third of the cognitive ability and numeracy distributions were at least eleven percentage points less likely than those in the upper third to enroll in a supplemental Medicare insurance plan. This result means that many Medicare beneficiaries do not have the financial protections and other benefits that would be available to them if they were enrolled in a supplemental insurance plan. Our findings suggest that policy makers may want to consider alternatives tailored to these high-need groups, such as enhanced education and enrollment programs, simpler sets of plan choices, or even some type of automatic enrollment with an option to decline coverage.
From the Conclusion
Many public policies focus on individual choice as a means of determining exactly how benefits should be distributed or of assuring that a policy has maximal effectiveness. Inherent in all of these policies is the assumption that all or most people have the mental capacity to make the choices that are in their best interest. We have shown that many people do not have this capacity and that this deficiency can affect their choices in adverse ways.
Overall, people in the lower third of the cognitive ability distribution were six to twenty-three percentage points less likely to enroll in a supplemental Medicare insurance plan than those in the upper third of the cognitive ability distribution, even after controlling for a host of other variables. Furthermore, the chance of enrolling in a supplemental Medicare insurance plan was approximately five percentage points lower for those in the lower third of the numeracy distribution than for those in the upper third.
These problems were most pronounced for those with low incomes, low wealth, and multiple chronic illnesses, where the likelihood of enrollment was forty percentage points lower for the least cognitively able, and an additional thirteen percentage points lower for those with weak numeracy skills. People who are chronically ill and those who do not have the financial ability to self-insure against substantial out-of-pocket costs would almost certainly be better off enrolling in supplemental insurance plans.
The magnitude of our findings on cognitive ability and numeracy was sizable, particularly compared to the influence of health on enrollment decisions. By way of comparison, if we add together the estimated effect on enrollment for people who were hospitalized in the past year and those with three or more chronic illnesses, the sum is still considerably less than the negative effect of being in the bottom third of the cognitive ability distribution.
Given the difficulty associated with making good choices, addressing the problem of low cognitive ability and numeracy is important, and not only for Medicare. Health care reform is likely to increase the set of decisions to be made, particularly for the newly insured. Unless there is comprehensive insurance coverage in which all services are covered and the issue of coverage choices is redundant, understanding the role of cognitive ability and numeracy in making these decisions is essential.
http://content.healthaffairs.org/content/31/8/1847.full

This study demonstrates that low cognitive ability decreases enrollment in supplemental Medicare insurance plans, preventing these individuals from having the financial protections and other benefits of supplemental coverage. Other studies have shown that this results in impaired outcomes.
Although the authors recommend approaches that would improve enrollment while preserving choice, they end with a statement that begins, “Unless there is comprehensive insurance coverage in which all services are covered and the issue of coverage choices is redundant…”
Of course, an expanded and improved Medicare which, amongst other improvements, would roll into the benefit package the coverage provided by supplemental plans, would obviate the need to make any choices since all reasonable services would be covered. Low cognitive ability and poor skill with numbers would no longer be determinants in whether or not a person had adequate coverage. Everyone would automatically.