The ACA vs. the doughnut hole: Medicare part D utilization and costs

By | September 8, 2016

drug-costsPresident Obama’s Affordable Care Act (ACA) included provisions to gradually reduce the Medicare part D “doughnut hole” – a much-maligned gap in coverage that was an economizing feature of President Bush’s legislation. So, how have these changes affected drug use and spending by seniors? A new article in Medical Care provides insights.

Under the standard part D benefit in 2010, Medicare beneficiaries would have had a $310 deductible and 25% copay per prescription, until they reached $2,830 in spending. Beneficiaries were responsible for 100% of all drug costs from $2,831 to $6,440 in total drug costs, after which the “catastrophic phase” of coverage began – with beneficiaries only responsible for a small copayment or coinsurance amount (Medicare is responsible for the remainder). The ACA addressed this issue, gradually reducing the beneficiary’s cost-sharing burden in the doughnut hole from 100% in 2010 to 25% by 2020.

The new study on the post-ACA state of the doughnut hole was done by Ali Bonakdar Tehrani, PharmD, MPH, PhD and Peter J. Cunningham, PhD, from Virginia Commonwealth University. The authors looked at the effects of the ACA’s provisions on prescription drug utilization and out-of-pocket spending among individuals 55 years of age and older who responded to the Medical Expenditure Panel Survey between 2008 and 2013. They used a difference-in-differences (DiD) methodology to estimate changes in prescription drug utilization (overall, generic, and brand-name) and out-of-pocket (OOP) spending after the ACA.

They found that part D enrollees were more likely than non-enrollees to have 3 or more chronic conditions,  poor or fair self-reported health, low income, and less than a high-school education – suggesting substantial adverse selection into the program.

The authors also found that, in adjusted DiD analyses, overall OOP spending significantly decreased by $119, and brand-name OOP spending significantly decreased by $100,  but generic OOP costs were not significantly different. The number of brand-name prescriptions significantly decreased, but there were no other significant differences in adjusted utilization.

So, because of the ACA, some seniors are now paying less out-of-pocket for their medications. From a consumer perspective, this is a very good thing — after all, affording healthcare is the number two concern of Americans  – second only to national security.

However, other researchers have pointed out that Medicare beneficiaries who take specialty drugs still face a large OOP burden because of uncapped cost sharing in the catastrophic coverage phase. In fact, that study, using 2008-12 data, showed that increases in mean annual OOP expenditures incurred while in the catastrophic coverage phase, 5% of purchase price for each drug, almost entirely offset the doughnut hole reductions. Clearly, more efforts are needed to address the unsustainable costs of our healthcare system. Perhaps government negotiations of drug prices could help?

Lisa Lines

Lisa Lines

Health services researcher at RTI International
Lisa M. Lines, PhD, MPH is a health services researcher at RTI International, an independent, non-profit research institute. She is also an Instructor in Quantitative Health Sciences at the University of Massachusetts Medical School. Her research focuses on quality of care, care experiences, and health outcomes among people with chronic illnesses; emergency department utilization; and person-centered care and patient-centered medical homes, among other topics. She is co-editor of TheMedicalCareBlog.com and serves on the Medical Care Editorial Board. She also serves as chair of the APHA Medical Care Section's Health Equity Committee. Views expressed are the author's and do not necessarily reflect those of RTI or UMass Medical School.
Lisa Lines
Lisa Lines

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About Lisa Lines

Lisa M. Lines, PhD, MPH is a health services researcher at RTI International, an independent, non-profit research institute. She is also an Instructor in Quantitative Health Sciences at the University of Massachusetts Medical School. Her research focuses on quality of care, care experiences, and health outcomes among people with chronic illnesses; emergency department utilization; and person-centered care and patient-centered medical homes, among other topics. She is co-editor of TheMedicalCareBlog.com and serves on the Medical Care Editorial Board. She also serves as chair of the APHA Medical Care Section’s Health Equity Committee.

Views expressed are the author’s and do not necessarily reflect those of RTI or UMass Medical School.

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