Nudge by Richard H. Thaler & Cass R. Sunstein

Author:Richard H. Thaler & Cass R. Sunstein [Thaler, Richard H.]
Language: eng
Format: epub
ISBN: 9781101655092
Publisher: Penguin Publishing Group

10

PRESCRIPTION DRUGS: PART D FOR DAUNTING

Prescription drug coverage was a hot topic during the 2000 presidential campaign. As a solution, Democrat Al Gore proposed a classic government mandate. Gore wanted to add prescription drug coverage to Medicare in a single plan, assemble a panel of medical experts to work out the specifics, and offer the package to all seniors. Republican George W. Bush, in contrast, offered what might be considered a good example of the theme of his campaign: compassionate conservatism. Indeed, Bush tried to combine compassionate conservatism with a major role for free markets and the private sector. He offered seniors an expensive new entitlement program—but one that featured a wide variety of drug plans devised by private health care companies and that let consumers choose whether to join and which plan to pick.

Three years later, President Bush’s version passed on a narrow vote in Congress. The largest overhaul in Medicare’s history, Bush’s plan created a half-trillion-dollar federal subsidy for prescription drug coverage called Part D. “The reason why we felt it was necessary to provide choices is because we want the system to meet the needs of the consumer,” President Bush told a clubhouse of Florida seniors in 2006, with the plan’s rollout under way. “The more choices you have, the more likely it is you’ll be able to find a program that suits your specific needs. In other words, one-size-fits-all is not a consumer-friendly program. And I believe in consumers, I believe in trusting people.”1

President Bush’s trust in American seniors left them with a great deal of decision-making responsibility. But this was no laissez-faire system. The national government imposed a lot of structure. Before consumers could even begin to choose, the government set minimum coverage requirements and approved all private plans. This system of constrained free choice might seem like a nice example of libertarian paternalism in action. And in fact, we think that on some dimensions Bush was on the right track. As a health care delivery system, Part D met its planners’ expectations reasonably well. As a piece of choice architecture, however, it suffered from a cumbersome design that impeded good decision making. It offered a menu with lots of choices, which is fine, but it had four major defects:

• It gave participants little guidance to help them make the best selections from that menu.

• Its default option for most seniors was nonenrollment.

• It chose a default at random (!) for six million people who were automatically enrolled, and it actively resisted efforts to match people and plans based on their prescription drug histories.

• It failed to serve the most vulnerable population, specifically the poor and the poorly educated.

Do not misunderstand. Part D has done a lot of good. Contrary to the charges of the critics, it has not been an unmitigated disaster. But there is plenty of room for better choice architecture.

Our discussion in this chapter will be fairly detailed; it is difficult to understand the program, and what is wrong with it, without a sense of the key choices and where they went sour.

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