Medicare Medicare Part D Pharmaceuticals

The impact of filling the donut hole

Medicare Part D has a confusing benefit system. Prior to 2011, patients had a deductible, then a general coverage benefit (with 25% coinsurance) then a donut hole (with no coverage) and then catastrophic insurance (with a 5%) copayment. When the Affordable Care Act passed, it aimed to fill the donut hole. Beginning in 2011, Part D enrollees who reach the coverage gap receive a 50 percent discount on the total cost of their brand-name drugs in the gap. A key question is how this provision affected consumer behavior.

A recent paper by Park and Look (2021) in Health Services Research uses 2008‐2015 data from the Medicare Current Beneficiary Survey (MCBS) to answer this question. The look at changing beneficiary drug cost using a difference-in-difference approach comparing LIS beneficiaries (who never had any cost sharing) with non-LIS beneficiaries (who received the 50% discount in the donut hole). Using this approach, the authors found that:

After the ACA reform, annual out‐of‐pocket drug spending significantly decreased by $88 (P < .01) among non‐LIS beneficiaries compared to LIS beneficiaries, with growing decreases over time (average decreases of $41 in 2011, $49 in 2012, $105 in 2013, and $135 in 2015, P < .01 or <.05). Changes in out‐of‐pocket costs were largely driven by significant decreases among brand‐name drugs (overall decrease of $106, P < .01). Despite significantly reduced out‐of‐pocket spending, there were no significant changes in the overall number of 30‐day drug fills and total drug spending; however, changes in the use of brand‐name and generic drugs were seen after the ACA (increase of 1.9 fills for brand‐name drugs and decrease of 2.3 fills for generic drug in 2015, P < .05).

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