Changes in Prescription Drug Utilization Following Closure of the Medicare Part D Donut Hole

Background: Medicare Part D, which provides prescription coverage for elderly individuals, was initially designed with a large coverage gap, or donut hole, where beneficiaries would lose prescription drug coverage once total annual drug spending reached $2,830; and then coverage would resume if total annual drug spending reached $6,440, called the catastrophic coverage phase. Beneficiaries qualifying for the Medicare low-income subsidy (LIS) have remained exempt from this gap in coverage. Beginning in 2011, the Affordable Care Act began to gradually eliminate the coverage gap. The first step, implemented that year, reduced the cost of brand-named drugs by 50% for purchases within the coverage gap.

Methods: We used the 5% sample of Medicare Claims data, selecting non-dual eligible beneficiaries, aged 65 and older, who maintained continuous coverage in both 2010 (the last year prior to the donut hole closure) and 2011 (the first year of the donut hole closure). We identified overall annual prescription drug fills and total out-of-pocket expenditures in each year as our outcome variables. We used a difference-in-differences model to compare beneficiaries not eligible for LIS, and therefore subject to the coverage gap and subsequent 50% discount on brand-named drugs in 2011, with beneficiaries receiving LIS who did not experience a gap in coverage or change in policy.

Results: We find that overall annual out-of-pocket spending among non-LIS beneficiaries decreased by $130 (95% CI: [-148.97, -112.03]) while overall prescription drug fills had no significant change. Among individuals who reached the donut hole, total number of prescriptions increased by about 1.8 (95% CI: [0.77, 2.90]) compared with 2010 fills per year and overall annual out-of-pocket spending decreased by $390 (95% CI: [-420.11, -359.92]). Among individuals whose expenditure put them above the upper limit of the donut hole and into the catastrophic coverage phase, the overall out-of-pocket expenditure decreased by $1,629 (95% CI: [-1681.76, -1576.48]) among the non-LIS beneficiaries and there was no change in the number of prescriptions filled.

Conclusions: The initial ACA policies to close the coverage gap likely contributed to reducing out-of-pocket spending on prescription drugs, however, some of the reduction may have been driven by increased usage of generic drugs. Overall, the coverage gap closure appears to have led to reduced financial burden for Medicare patients, but lower prices for medications do not appear to have affected overall number of prescriptions filled.