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Comparison Friction: Experimental Evidence from Medicare Drug Plans
Last registered on April 07, 2017

Pre-Trial

Trial Information
General Information
Title
Comparison Friction: Experimental Evidence from Medicare Drug Plans
RCT ID
AEARCTR-0002141
Initial registration date
April 07, 2017
Last updated
April 07, 2017 7:02 PM EDT
Location(s)
Primary Investigator
Affiliation
NBER
Other Primary Investigator(s)
PI Affiliation
Harvard University
PI Affiliation
Princeton University
PI Affiliation
University of Kentucky
PI Affiliation
Massachusetts Health Policy Commission
Additional Trial Information
Status
Completed
Start date
2006-11-08
End date
2008-04-30
Secondary IDs
Abstract
Consumers need information to compare alternatives for markets to function efficiently. Recognizing this, public policies often pair competition with easy access to comparative information. The implicit assumption is that comparison friction - the wedge between the availability of comparative information and consumers' use of it - is inconsequential because when information is readily available, consumers will access this information and make effective choices. We examine the extent of comparison friction in the market for Medicare Part D prescription drug plans in the United States. In a randomized field experiment, an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However, this additional step - providing the information rather than having consumers actively access it - had an impact. Plan switching was 28% in the intervention group, versus 17% in the comparison group, and the intervention caused an average decline in predicted consumer cost of about $100 a year among letter recipients - roughly 5% of the cost in the comparison group. Our results suggest that comparison friction can be large even when the cost of acquiring information is small and may be relevant for a wide range of public policies that incorporate consumer choice.
External Link(s)
Registration Citation
Citation
Kling, Jeffrey et al. 2017. "Comparison Friction: Experimental Evidence from Medicare Drug Plans." AEA RCT Registry. April 07. https://doi.org/10.1257/rct.2141-1.0.
Former Citation
Kling, Jeffrey et al. 2017. "Comparison Friction: Experimental Evidence from Medicare Drug Plans." AEA RCT Registry. April 07. http://www.socialscienceregistry.org/trials/2141/history/16042.
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Experimental Details
Interventions
Intervention(s)
The researchers conducted a randomized field experiment to examine the effects of reducing comparison friction in the market for Medicare prescription drug plans. The intervention consisted of a baseline survey, a mailing, and two follow-up surveys. Eligible participants were randomly assigned to an intervention or a comparison group. Individuals in the intervention group received a personalized letter that listed the predicted annual cost of their current prescription drug plan as well as that of the lowest-cost plan available to them, the potential savings from switching to the lowest-cost plan, and the closing date for open enrollment. Individuals in the intervention group also received a printout that included costs and data on all available plans, as well as instructions on how to use the Medicare Plan Finder website. The comparison group received a general letter referring them to the Medicare Plan Finder website and instructions on how to use the website.
Intervention Start Date
2006-12-01
Intervention End Date
2006-12-31
Primary Outcomes
Primary Outcomes (end points)
Number of individuals who switched Medicare Part D plans, average cost savings per year
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Patients of the University of Wisconsin Hospital system age 65 and over made up the sample frame. Invitation letters were sent to 5,873 seniors, roughly half of whom agreed to participate. A baseline sample of 451 remained after screening. Participants answered detailed questions about their personal characteristics and their prescription drug use in the baseline survey. The researchers then constructed measures of beneficiary costs by entering this information into the Medicare Plan Finder website. Next, participants were randomly assigned to the intervention or comparison group.

The first follow-up survey was completed by 406 participants, 197 from the comparison group and 209 from the intervention group. Respondents were asked about their choice of plan for the 2007 enrollment period and their decision process. The final follow-up survey was completed by 305 participants, who were asked about their choice of plan for the 2008 enrollment period, their experience with the plan they chose during the 2007 period, and their use of prescription drugs during the period covered by the experiment. Choice of plan from the two follow-up surveys was used to determine when participants switched plans, and annual costs were computed with the Medicare Plan Finder website using reported prescription drug usage.
Experimental Design Details
Randomization Method
Random assignment done in office by computer
Randomization Unit
individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
406 individuals
Sample size: planned number of observations
406 individuals
Sample size (or number of clusters) by treatment arms
197 individuals in the comparison group; 209 individuals in the intervention group
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
University of Wisconsin - Madison Health Sciences Minimal Risk IRB
IRB Approval Date
2006-11-08
IRB Approval Number
M-2006-1381
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
Yes
Intervention Completion Date
December 31, 2006, 12:00 AM +00:00
Is data collection complete?
Yes
Data Collection Completion Date
April 30, 2008, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
406 individuals
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
406 individuals
Final Sample Size (or Number of Clusters) by Treatment Arms
197 individuals in the comparison group; 209 individuals in the intervention group
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
No
Reports, Papers & Other Materials
Relevant Paper(s)
Abstract
Consumers need information to compare alternatives for markets to function efficiently. Recognizing this, public policies often pair competition with easy access to comparative information. The implicit assumption is that comparison friction - the wedge between the availability of comparative information and consumers' use of it - is inconsequential because when information is readily available, consumers will access this information and make effective choices. We examine the extent of comparison friction in the market for Medicare Part D prescription drug plans in the United States. In a randomized field experiment, an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However, this additional step - providing the information rather than having consumers actively access it - had an impact. Plan switching was 28% in the intervention group, versus 17% in the comparison group, and the intervention caused an average decline in predicted consumer cost of about $100 a year among letter recipients - roughly 5% of the cost in the comparison group. Our results suggest that comparison friction can be large even when the cost of acquiring information is small and may be relevant for a wide range of public policies that incorporate consumer choice.
Citation
Kling, Jeffrey R., Sendhil Mullainathan, Eldar shafir, Lee C. Vermeulen, and Marian V. Wrobel. 2012. "Comparison Friction: Experimental Evidence from Medicare Drug Plans." The Quarterly Journal of Economics 127:199-235.
REPORTS & OTHER MATERIALS