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Comparative Study
. 2013 Dec;32(6):1345-55.
doi: 10.1016/j.jhealeco.2013.04.007. Epub 2013 May 6.

Digesting the doughnut hole

Geoffrey F Joyce  1 , Julie Zissimopoulos, Dana P Goldman
Affiliations
Comparative Study

Digesting the doughnut hole

Geoffrey F Joyce et al. J Health Econ. 2013 Dec.

Abstract

Despite its success, Medicare Part D has been widely criticized for the gap in coverage, the so-called "doughnut hole". We compare the use of prescription drugs among beneficiaries subject to the coverage gap with usage among beneficiaries who are not exposed to it. We find that the coverage gap does, indeed, disrupt the use of prescription drugs among seniors with diabetes. But the declines in usage are modest and concentrated among higher cost, brand-name medications. Demand for high cost medications such as antipsychotics, antiasthmatics, and drugs of the central nervous system decline by 8-18% in the coverage gap, while use of lower cost medications with high generic penetration such as beta blockers, ACE inhibitors and antidepressants decline by 3-5% after reaching the gap. More importantly, lower adherence to medications is not associated with increases in medical service use.

Keywords: Coverage gap; I1; I13; I18; Insurance Design, Price Elasticity; Medicare Part D; Prescription Drugs.

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Figures

Figure 1
Figure 1
Standard Part D Benefit Has a Non-linear Price Schedule (2007) * Entry into coverage gap conditional on reaching a true out-of-pocket expense of $798.75 in 2007 ** Entry into catastrophic phase gap conditional on reaching a true out-of-pocket expense of $3,849.75
Figure 2
Figure 2
Percent of Drug Costs Paid by Beneficiaries, by Coverage Phase NOTE: Sample is individual with diabetes and ages 65 and older. LIS=Low Income Subsidy. Year: 2007
Figure 3
Figure 3
A: Behavioral Change to Coverage Gap: Non-LIS, Gap coverage vs. LIS B: Behavioral Change to Coverage Gap: Non-LIS, No gap coverage vs. LIS NOTE: Sample is individuals with diabetes and ages 65 and older that reach the coverage gap in 2006 or 2007 Individuals had to stay in coverage gap for at least 40 days. Individuals were considered to lower MPR if they reduced MPR by at least 2.5 percentage points. Individuals were considered to increase GDR if they increased GDR by at least 2.5 percentage points. We dropped insulin from our analysis because it is typically covered under Medicare Part B. * p<.050 relative to LIS group. Years 2006, 2007
Figure 4
Figure 4
Effect of Coverage Gap on Stopping Therapy and Resuming Therapy NOTE: Sample for stopping and resumption analyses include beneficiaries age 65 and older with diabetes who reach coverage gap in 2007. Resumption is defined as stopping a drug in the coverage gap in 2007 and resuming in the first quarter of 2008. The therapeutic classes listed above reflect the three most expensive diabetes-related classes. Results for all 9 classes are shown in the appendix. Years: 2007, 2008
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References

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