Medicare Seniors Much Less Willing to Limit Physician-Hospital Choice for Lower Costs

Originally published by the Center for Studying Health System Change (HSC) as Issue Brief No. 96, June 2005.

Medicare Seniors Reluctant to Trade Provider Choice for Cost Savings

Elderly Americans were much less willing than younger adults to accept limits on their choice of physicians and hospitals in exchange for lower out-of-pocket medical costs, according to a national study by the Center for Studying Health System Change. Only 44 percent of seniors aged 65 and older were willing to trade broad provider choice to save money, compared with more than 70 percent of people aged 18 through 34.

The willingness to accept restricted provider networks declined substantially with age, and elderly Americans represented the only age group where a majority was opposed to provider choice limitations, even when paired with financial savings. This strong preference for unrestricted provider choice among seniors posed a significant challenge for policy makers seeking to expand enrollment in Medicare Advantage managed care plans, which typically require enrollees to use a defined network of providers.

Preferences Vary by Medicare Coverage Type

Among Medicare seniors, willingness to limit provider choice varied significantly depending on their coverage arrangement. Those already enrolled in Medicare HMOs were the most willing to accept provider restrictions for cost savings, which was logical since they had already made that trade-off. Medicare seniors with supplemental private coverage, known as Medigap, were the least willing to accept restrictions. Since seniors with supplemental coverage accounted for nearly six in ten Medicare beneficiaries, and nearly two-thirds of them opposed provider choice restrictions, the findings suggested that managed care enrollment growth among Medicare seniors would face inherent resistance.

The strong attachment to provider choice among seniors likely reflected several factors, including established relationships with physicians built over years of care, anxiety about disrupting those relationships during a period of life when health needs are increasing, and a general preference for the flexibility that traditional fee-for-service Medicare provides. For many seniors, the freedom to see any Medicare-participating provider without referrals or prior authorization is a valued feature of traditional Medicare that financial incentives alone may not overcome.

Sources and Further Reading

Tu, Ha T., "Medicare Seniors Much Less Willing to Limit Physician-Hospital Choice for Lower Costs," Issue Brief No. 96, Center for Studying Health System Change (June 2005).