Can Limiting Choice Increase Social Welfare? The Elderly and Health Insurance

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Abstract
Herbert Simon's work on bounded rationality has had little impact on health policy discourse, despite numerous supportive findings. This is particularly surprising in regard to the elderly, a group marked by a decline in higher cognitive functions. Elders' cognitive capacity to make decisions will be challenged even further with the introduction of the new Medicare prescription drug benefit program, mainly because of the many options available. At the same time, a growing body of evidence points to the perils of having too many choices. By combining research from decision science, economics, and psychology, we highlight the potential problems with the expanding health insurance choices facing the elderly and conclude with some policy suggestions to alleviate the problem.