The Medicare Part D Coverage Gap: Costs and Consequences in 2007

Read the Foundation’s more recent study on the impact of the Part D coverage gap, using claims data from 2008 and 2009.

This study quantifies the number of Medicare Part D plan enrollees in 2007 who reached a gap in their prescription drug coverage known as the “doughnut hole,” as well as the changes in beneficiaries’ use of medications and out-of-pocket spending after they reached that gap. The analysis excludes beneficiaries who receive low-income subsidies because they do not face a gap in coverage under their Medicare drug plan.

This study of Part D prescription drug utilization finds that one in four (26%) Part D enrollees who filled any prescriptions in 2007 reached the coverage gap. This also includes 22 percent who remained in the gap for the remainder of the year, and four percent who ultimately received catastrophic coverage. Applying this estimate to the entire population of Part D enrollees, the analysis suggests that about 3.4 million beneficiaries (14% of all Part D enrollees) reached the coverage gap and faced the full cost of their prescriptions in 2007.

Conducted jointly by Jack Hoadley of Georgetown University, Elizabeth Hargrave of NORC at the University of Chicago, and Juliette Cubanski and Tricia Neuman of the Kaiser Family Foundation, the study found evidence of patients changing their use of prescription drugs when they are required to pay the full cost of medications in the coverage gap. Across eight classes of drugs examined, used to treat a variety of relatively common chronic conditions, 15 percent of Part D enrollees who reached the gap stopped their drug therapy for that condition, five percent switched to another medication in the class, and one percent reduced the number of drugs they were taking in the class.

This study analyzes retail pharmacy claims data, based on 4.5 million Medicare beneficiaries in Part D plans in 2007, the first year that most people would be enrolled in a Part D plan for a full calendar year. The analysis is based on 2007 data from IMS Health’s Longitudinal Prescription Drug Database, which includes prescription drug information that represents half of all retail prescriptions filled in the U.S.