WASHINGTON, DC—Elderly Americans are much less willing than working-age Americans to limit their choice of physicians and hospitals to save on out-of-pocket medical costs, according to findings from a new national study by the Center for Studying Health System Change (HSC).

In 2003, only 45 percent of seniors 65 and older were willing to trade broad provider choice to save money, compared with 70 percent of people aged 18 through 34, the study found.

"The findings suggest that Medicare managed care plans will face a tough sell in convincing seniors to switch from fee-for-service Medicare where they have unfettered choice of doctors and hospitals to private plans that limit provider choice but offer cost savings," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded principally by The Robert Wood Johnson Foundation.

Based on HSC's Community Tracking Study Household Survey, the nationally representative survey asked people in 1997, 1999, 2001 and 2003 whether they were strongly unwilling, somewhat unwilling, somewhat willing or strongly willing to accept a limited choice of physicians and hospitals to save money on out-of-pocket health care costs. The first three rounds of the survey contain information on more than 45,000 adults, including 6,300 to 7,300 adults aged 65 and older; the 2003 survey contains responses from about 36,000 adults, including 6,700 aged 65 and older. The study's findings are detailed in a new HSC Issue Brief—Medicare Seniors Much Less Willing To Limit Physician-Hospital Choice for Lower Costs—available here.

The U.S. Department of Health and Human Services (HHS) has projected that, by 2013, the enrollment share of Medicare managed care plans, known as Medicare Advantage, will increase to 30 percent from the current level of 12 percent, while the Congressional Budget Office has estimated a more modest increase to 16 percent.

Medicare seniors already enrolled in health maintenance organizations (HMOs) are the most inclined to favor out-of-pocket savings over broad provider choice—about 65 percent are either somewhat or strongly willing to limit provider choice. The Medicare beneficiaries least willing to sacrifice provider choice to save on costs are those with supplemental coverage: Among seniors with either retiree or Medigap supplemental coverage, almost two-thirds are unwilling to limit provider choice and about four in 10 are strongly unwilling to do so.

"If strong willingness to sacrifice choice is indicative of readiness to switch insurance plans to save on costs, then only about one in nine seniors with supplemental coverage seems prepared to make the change," said Ha T. Tu, M.P.A., an HSC health researcher and study author.

Given widespread beneficiary concerns about restricted provider choice, it appears that Medicare Advantage plans will need to offer broad provider networks, along with richer benefit packages or lower out-of-pocket costs, to attract enough seniors from traditional Medicare to boost enrollment significantly.

During the current period when Medicare Advantage payments are exceeding traditional Medicare payments, plans may not have much trouble enhancing benefits and keeping out-of-pocket costs low, but they are likely to find this approach unsustainable in the face of future budget pressures that may force the government to slow payment increases.