Impact of Medicare Part D Gap Closure on Health Outcomes

The Affordable Care Act (ACA) included provisions to gradually close the Medicare Part D coverage gap (or “doughnut hole”) for prescription drugs. Starting in 2011, drug manufacturers began offering a 50% discount on all brand name drugs for individuals in the coverage gap. Between 2011 and 2020, government subsidies for both brand name and generic drugs will slowly fill in remaining parts of the gap. The coverage gap has led to significant decreases in medication adherence for patients with chronic illness, which has, in turn, resulted in uncontrolled symptoms and adverse health outcomes. As the policy goes into effect, the total annual cost of purchasing medications will decrease for individuals that would have reached the gap under the old policy, which could lead to significant improvements in adherence and health outcomes. Two-thirds of Medicare beneficiaries have multiple chronic conditions, and often require treatment with many costly medications. Treatment presents unique challenges in minority patients, who have a higher prevalence of chronic illness, and often require more medications and more costly medications in order to manage their conditions. In this study, we plan to examine whether the closure of the coverage gap leads to real-world improved adherence and health outcomes. Using a 5% national sample of Medicare Claims data from 2006-2016, we will examine the early impact of the coverage gap closure on: 1) medication adherence across benefit phases and drug types, 2) non-pharmacy healthcare utilization and outcomes and 3) whether the policy led to differential outcomes for racial and ethnic minorities. Our study will use a difference-in-differences approach with nonparametric matching, comparing the impact of the policy between those who previously had coverage in the gap, and those who faced standard benefits. Beneficiaries who received low-income subsidies did not face a coverage gap, and thus will not have any change in benefits as a result of the policy. This study will be the first to examine the impact of the initial coverage gap closure under the ACA, and will provide timely and critical information on the impact how benefit designs with high patient cost sharing influence patient behavior. In addition, we will determine whether the design of the coverage gap resulted in decreases in drug utilization throughout the entire year or only during the coverage gap period, indicating the degree to which individuals are able anticipate future health care spending. This has important implications for understanding behavior under other insurance benefit designs that have different coverage phases (e.g., deductibles, coverage limits). We predict that the coverage gap closure will lead to increased medication adherence and spending on medications. While improvement in adherence is an important goal, the coverage gap closure could also result in an increased utilization of expensive brand name medications, even when similar generic medications are available. Because curbing prescriptions drug spending is critical for ensuring the future of the program, it is important to understand the effect of the policy on adherence, prescription drug choice, and health outcomes.