The Evidence Base

Informing Policy in Health, Economics & Well-Being
A collaboration with
USC Dornsife Center for economic and social research

For Vulnerable Populations, the Medicare Part D Doughnut Hole Disrupts Medication Adherence

During the annual Medicare Open Enrollment period, senior citizens have from October through early December to re-enroll or change their Medicare Part A, B and D coverage elections for the following plan year. Part D is the prescription drug component of the alphabet soup of Medicare. Earlier this year, researchers from the USC Schaeffer Center for Health Policy and Economics examined the impact of the coverage gap, embedded in the Part D design, on low-income and minority populations to determine if the gap in coverage changes individuals’ use of medications. Their findings show that the gap is particularly disruptive to minorities and low-income households.

“Although the coverage gap is being phased out under the Affordable Care Act, the trend toward more consumer-directed health care compels patients to take an active role in plan choice and managing their health care. Supporting vulnerable groups in this process will continue to require more than just premium subsidies,” said Julie Zissimopoulos, Associate Director of the Schaeffer Center.

A Medicare Part D Primer

Medicare Part D is part of the Medicare Prescription Drug, Improvement, and Modernization Act, which aimed to provide seniors with affordable coverage for their prescription medications. The plans became effective on January 1, 2006 and now have more than 35 million beneficiaries enrolled.

Individuals who are enrolled in Medicare Part A or B are eligible to enroll in one of the Part D prescription drug plans, which vary based on plan design, out of pocket costs and monthly premiums.

The standard Part D plan works as follows:

• Beneficiaries pay towards a deductible followed by 25% coinsurance until they hit the initial coverage limit ($2,960 in 2015).
• After the beneficiary reaches this amount, they are responsible for paying the full prescription drug cost until they hit the overall out-of-pocket maximum ($4,700 in 2015)
• Once the annual out-of-pocket maximum is reached, they pay a small cost share of the drug.

The gap in coverage between the initial coverage limit and the overall out-of-pocket amount is commonly referred to as the “doughnut hole” in Medicare Part D coverage. The typical beneficiary will reach the “doughnut hole” in August. The plan resets the following year in January.

The Impact of the Part D Donut Hole

In the study, published in the American Journal for Managed Care, Zissimopoulos and her colleagues Geoffrey Joyce, Lauren Scarpati, and Dana Goldman examined the effects of cycling in and out of coverage on prescription drug use of racial and ethnic minorities.

The researchers were interested in whether beneficiaries subject to the coverage gap behaved differently from individuals who have continuous coverage throughout the year. They also were interested in whether race or ethnicity had any effect on adherence to prescription drugs in the coverage gap.

To do this, Zissimopoulos and her colleagues exploited a design element of the coverage gap. Medicare beneficiaries, whose income falls within 150% of the Federal Poverty Limit, are eligible for Low Income Subsidies (LIS). These subsidies cover a portion of the premium and remove the coverage gap from the Part D plans. Thus the researchers looked at the prescription drug adherence behavior of black, white and Hispanic beneficiaries enrolled in standard Part D plans and those eligible for the LIS subsidy to measure the impact of the “doughnut hole” on different racial/ethnic groups. They specifically focused on prescription adherence among LIS and non-LIS Medicare beneficiaries with diabetes.

Evidence Points to the Coverage Gap Disrupting Medication Utilization Patterns

The researchers found that the Medicare Part D coverage gap disturbed drug patterns across all groups studied but had a particularly disruptive effect on minorities and low-income beneficiaries. For the combined 9 diabetes-related drug classes they analyzed, they found medication use during the gap period declined by 6 percentage points (pp) for Hispanic beneficiaries, 4pp for black beneficiaries, and 3 pp for white beneficiaries.

The results were more pronounced for the non-diabetes related medications; the study showed a 9 percentage point decline for Hispanic beneficiaries, 8 for black beneficiaries, and 6 for white beneficiaries.

Though minorities were more likely to stop taking a medication after reaching the gap than white beneficiaries, they were also more likely to resume therapy once coverage restarted in January, which highlights the disruptive nature of the coverage gap.
Zissimopoulos and her colleagues also found that all individuals reduced their use of costly medications, as drugs over $60 per script declined more sharply than cheaper medication. In addition, beneficiaries substituted away from brand drugs to generics: overall medication use declined in the coverage gap, but the fraction of drugs dispensed as generic increased.
Medication Adherence Plays an Important Role in Health Management

While the ACA does phase out the Part D coverage gap, this study provides important insights into the consequences of coverage gaps, especially for high-risk populations. Though substitution towards less expensive or generic drugs is an important component of reducing overall health care costs, the change in prescription adherence the researchers identified for all, but particularly, low-income and minority populations during the coverage gap, could lead to higher health care costs and poor health outcomes in the long-term.

“Next steps are understanding whether insurance expansion for drug coverage has brought health benefits to the program’s beneficiaries overall and at the same time, whether those impacted by an insurance design that includes a coverage gap have suffered negative health consequences,” said Zissimopoulos.

The results of this study point to the importance of increasing patient education about the significant role medication adherence plays in disease management, and the need to improve health information techniques for better patient and doctor communication.