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When it’s Time to Drop Your Medicare Advantage Plan Trudy Lieberman

November 21st, 2012 | 2

CFAHA few weeks ago, I reported that most seniors on Medicare tend to stick to the plan they initially chose even though as the years go by they might be able to get a cheaper model by junking the old one. Medicare beneficiaries are more like bank customers than car buyers, it seems. Once they choose a plan—whether it’s a traditional Medigap policy or one of the new Medicare Advantage (MA) plans—they keep it.

A study from the National Bureau of Economic Research, a private, nonprofit research organization, checked out this phenomenon and concluded that if seniors stayed in a plan they could end up paying ten percent more in premiums than if they switched to a newer plan. New plans often have cheaper premiums because health insurance sellers—engaging in a kind of bait and switch—entice shoppers with low price tags and then as they get older and sicker and have medical claims, the premiums go up. Still, people hang on to what they have.

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