help his mother choose one of the new drug discount cards, it should have been
a piece of cake.
But Stephen W. Schondelmeyer spent 45 minutes trolling a Medicare Web site
to determine which of 73 card offers might work best for his mom, then was
amazed when he hit the print button on his computer.
“Two hundred eighty-nine pages,” exclaimed Schondelmeyer, who heads an
institute of pharmaceutical economics at the University of Minnesota. “I
didn’t have any idea about what I could do with 289 pages.”
Designed to help seniors combat the rising cost of drugs, Medicare drug
cards have instead been criticized as the latest contributor to “consumer
overload.”
From retirement investment options to phone plans, from energy providers to
Oreo cookie varieties, consumers have never been greeted by more choices.
One author on the topic found twice as many vehicle models today compared
with the early 1970s, five times as many varieties of milk and nearly 60 times
as many styles of running shoes.
The reasons for the multiplicity of options are, well, many: deregulation,
government actions, new technologies, a shift from public to private sector
providers that began under President Ronald Reagan.
Having many options can be liberating and empowering, but also bewildering.
Sometimes, consumers simply freeze in the face of a free market’s freedoms.
For instance, cell phone users didn’t switch carriers as liberally as
predicted after the advent last year of “portability,” the ability to transfer
a phone number between companies.
And a Columbia University study found that the rate of employee
participation in 401(k) retirement savings plans dropped as the number of
investment choices multiplied. Workers were so befuddled they were willing to
forfeit an employer’s matching funds, according to a study by Sheena Iyengar,
a professor of psychology and management at Columbia.
“People feel overwhelmed,” said Emily Pasterick, a representative from
Computer Sciences Corp., one of dozens of companies that offer drug discount
cards.
She sat at a table in the Sandtown-Winchester Senior Center in West
Baltimore one morning early this month at a forum on the cards attended by
about 60 seniors. Pasterick came armed with pamphlets, price lists and a dish
of candy. But few of the seniors approached to ask questions, and none filled
out enrollment forms.
“They just want to take one of everything and take it home and look at it,”
she said.
‘Jumbling together’
“They explained it pretty well, but it’s all jumbling together,” said
Maybelle Brown, of West Baltimore, after listening to experts from the state,
city and AARP.
Across the country, seniors haven’t been rushing to sign up for the cards,
which promise some relief from the high cost of medications. The
Pharmaceutical Care Management Association, an industry trade group, estimates
that the cards save an average 17 percent off retail prices on brand-name
drugs and 35 percent on generics.
Of 41 million Americans covered by Medicare, many have retiree, veteran or
other drug benefits, but the government estimates that 15 million seniors
could benefit from the new cards. With signups beginning in May, only 1.2
million seniors had enrolled themselves as of last week, according to the
Center for Medicare and Medicaid Services, the federal agency that runs the
program. Another 2.4 million were enrolled automatically because they’re
already in Medicare HMOs.
The cards were created as part of a sweeping Medicare reform law passed
early this year, and will disappear in 2006, when Medicare begins to offer a
prescription benefit. Designed to help with drug costs over the next year and
a half, the cards are offered by insurers and others who are able to get
discounts through bulk purchases.
Each card offers different discount rates on different drugs, and each has
a different list of participating pharmacies who have agreed to honor it.
Prices, listed drugs and participating pharmacies can change, so seniors have
a hard time deciding which card will offer the best deal for their medicines.
Supporters of the discount card plan say that participation will pick up
once seniors have a chance to absorb the wealth of material.
“What’s going to matter is seniors talking to other seniors who are using
the card and seeing tangible benefits,” said Mark Merritt, president of PCMA,
the trade group. “Once that happens, I think you’ll see a flood of people to
the program.”
But those who have studied consumer choice say too much choice leads to
hesitation and, sometimes, reluctance to participate at all.
“The impact on the consumer is essentially one of confusion,” said Jack
Trout, a marketing consultant and author of “Differentiate or Die: Survival in
Our Era of Killer Competition”.
His book recounts how, among other things, the number of Frito-Lay chip
varieties burgeoned to roughly 80 from 10; dental floss choices rose to 64
from 12, and running shoe styles jumped to 285 from five during the past 30
years.
The escalation of choice in the marketplace is partly the result of
businesses that think, “You don’t want there to be a single breathing person
who’s attached to a credit card who isn’t interested in your product,” said
Barry Schwartz, a psychology professor at Swarthmore College in Pennsylvania.
Technology has helped feed the product explosion, said Schwartz, author of
“The Paradox of Choice: Why More is Less”. “Digitized production” makes it
easier for a factory to vary products efficiently, such as mixing a batch of
soda with sugar or with artificial sweetener, with or without caffeine, with
lemon or cherry or vanilla flavoring.
Proliferation of product choices can sometimes expand a market, pushing
sales in such products as coffee and bottled water, said Susan Broniarcyzk, a
professor of marketing at University of Texas who has published articles in
academic journals about how consumers deal with product choice.
“Consumers are very interested in choice and variety, and they like to try
new things,” said Kelly Brooks, a spokesman for Coca-Cola Co.
The beverage giant has been a soft-drink innovator for more than a century.
But it quadrupled its product line in the past decade alone to more than 400
from 75 varieties. “Our hope is that when they switch to a different kind of
beverage, they drink one of the brands of the Coca-Cola Co. whether it’s a
soft drink or a water or a sports drink,” Brooks said.
But some experts wonder if the options have become overwhelming at times.
“It confuses what a brand represents,” Trout said. “A Porsche SUV is not a
good idea – it can turn off the sports car crowd.” Clear beer, potato chips
with text printed on them, and vitamin deodorant are among product variations
that didn’t sell, he said.
Broniarcyzk, the marketing professor, for a field study persuaded two
convenience stores to halve the number of items they offered in candy, soft
drinks, beer, cigarettes and “salty snacks.” Those products produce 80 percent
of their sales. Although fewer products were offered, sales went up slightly
and customers reported feeling less confusion in the aisles.
Some companies may also be getting the message that simplicity can be good.
J. Crew, the clothing retailer, recently cut back on the number of garments it
carries. Wal-Mart, the world’s largest retailer, is famous for its steely
control of an inventory that’s wide, but not deep.
Confusion over drug card choices was debated on Capitol Hill this month.
“It’s a very difficult challenge for seniors. I wish somehow we had come up
with one card,” Sen. John B. Breaux, a Louisiana Democrat who is a key
architect of this year’s Medicare bill, said at a meeting of the Senate
Finance Committee.
Losing by waiting
Dr. Mark McClellan, administrator of CMS, the agency that runs Medicare,
said seniors could call his agency to get a list of a few cards that seem
best, then pick one. Since the savings would begin immediately, he said, “by
waiting, they may end up leaving a lot of money on the table.”
Merritt, the industry representative, testified that competition among card
providers – with prices posted on the Medicare Web site – was behaving as a
free market desires and driving down price. For the five most popular cards,
prices had fallen an average of 13 percent between May 11 and June 1 alone, he
said.
But Sen. Kent Conrad, a North Dakota Democrat, introduced a Drug Discount
Card Simplification Act to cut the number of cards to three per region – just
a week after the discount cards took effect.
“Choices are important,” Breaux said, “but we may now have too many
choices.”
Sun reporter Cyril T. Zaneski contributed to this article.
