Health Reform Medicare Medicare Part D Pharmaceuticals

What happened after the implementation of Medicare Part D coverage gap reform?

Since its inception in 2006, Medicare Part D beneficiaries had to contend with the dreaded “doughnut hole”. The “doughnut hole” is a coverage gap during which patients were required to pay 100% of treatment cost. To help defray some of these costs, the Patient Protection and Affordable Care Act (ACA) implemented provisions to reduce the coinsurance rate in the gap from 100% in 2011 to 25% by 2022.

To examine how this provision affected drug spending and drug utilization, a paper by Park et al. (2022) used Medicare Current Beneficiary Survey (MCBS) data from 2008-2013, and 2015. To evaluate the causal impact of the ACA coverage gap provisions, the authors used a difference-in-differences econometric approach where they compared pre-ACA vs. post-ACA drug spending and brand vs. generic utilization for two groups: low-income subsidy (LIS) beneficiaries and non-LIS beneficiaries. Non-LIS beneficiaries had their out-of-pocket expenses lowered by the ACA provisions; LIS beneficiaries did not as they already had very limited or no cost sharing for Part D drugs. More details on the current cost sharing provisions for LIS vs. non-LIS patients can be found here.

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).

In short, the ACA reform was successful in reducing patient out-of-pocket cost, and did not have much of an effect on drug utilization overall. However, the authors did observe a shift from generic to more brand-name drugs after the coverage gap reform was implemented.

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