The benefit structure of Medicare Part D is very strange. First, you have no coverage for your deductible; then you get some coverage, then you have “donut holes” with coverage gaps or no coverage, and finally you have very generous coverage during the “catastrophe phase”. This structure is especially problematic for patients with high drug costs because their out-of-pocket costs during the coverage gap period are very high. However, the Patient Protection and Affordable Care Act (ACA) gradually eliminated the Medicare prescription drug coverage gap between 2011 and 2020 (indeed, the Reducing Inflation Act would eliminate the coverage gap entirely). A key question is how the ACA’s closing of the coverage gap affects patient out-of-pocket (OOP) costs and the availability of brand-name versus generic drugs.
a study Liu et al. (2022) aims to answer this question. They used Medicare Part D claims data from 2011 to 2020 in their analysis. The difference approach was used when assessing changes in OOP costs and brand/generic offerings before and after the ACA intervention. The ‘intervention’ group consisted of individuals (i.e., non-LIS) who were not eligible for low-income subsidies (because these individuals benefited from a reduction in the coverage gap); the control group consisted of LIS beneficiaries because these individuals already had limited or no drug cost-sharing, So the ACA rules won’t affect their out-of-pocket expenses. Using this approach, the authors found that:
…filling the coverage gap significantly lowered OOP spending for patients, primarily due to a significant reduction in OOP spending for branded drugs. We provide evidence that reductions in coverage gaps contribute to greater reductions in OOP expenditures and increased use of brand name drugs by beneficiaries with coverage gaps or more chronic conditions. This is consistent with the intent of the ACA’s coverage gap provisions to reduce the financial burden associated with prescription drugs.We also found that the policy increased the utilization of brand-name drugs due to the large discounts on brand-name drugs during the coverage gap phase in the first few years of policy implementation.
you can read the full text here.
