Mind the Gap: Medicare Part D's Coverage Gaps May Affect Patient Adherence
Medicare Part D will lower medication expenditures for many older patients. However, its complex design incorporates a staggered series of cost-sharing mechanisms that create gaps in coverage and may have a negative impact on medication adherence.
Part D's staggered cost-sharing mechanisms (i.e., a deductible, a coinsurance zone, a "doughnut hole," and a catastrophic limit)1 will produce coverage gaps for individual patients-periods within any year where they are responsible for 100 percent of their medication costs. Although many prescription drug plans will eliminate deductibles and replace the 25 percent coinsurance zone with tiered co-pays, the majority will preserve the doughnut hole. This is the most significant cost-sharing mechanism and creates the biggest potential coverage gaps for patients.
To illustrate potential coverage gaps experienced under Part D, take the example of Mrs. Jones. She makes $19,000 per year (twice the federal poverty level) and spends $250 per month on medications ($3,000 annually). Under Part D she pays the first $250 of drug costs as a deductible, thus experiencing a coverage gap in her first month of enrollment. Over the next eight months, she spends another $2,000, of which she is responsible for 25 percent, or $500. Medicare covers the remaining $1,500. Her drug expenses now total $2,250, putting her into the doughnut hole. For the remaining three months of the year, she pays 100 percent of drug costs, or $750. By the end of the year, she has spent around $1,500 out of pocket on prescription drugs and another $384 ($32 per month) in premiums to take part in the plan. Medicare has spent $1,500. Overall, the patient has had four months of coverage gaps when she paid 100 percent of drug costs.
Figure. Number of months with coverage gaps
under Medicare Part D based on total annual drug costs
Source: Information from reference 2.
With health insurance packages bought and sold as profitable commodities, adequate health insurance coverage will soon be a product of shrinking benefits, to be bought by the wealthy and sold to the healthy. Most individuals cannot shoulder the burden of rising health care costs, and medical expense now tops the list of reasons for personal bankruptcy.5,6 If the system remains the same, the number of uninsured will continue to grow.
Shifting health care coverage from a commodity to a social good could reduce disparities and produce better population health. Changes in health care coverage will require more equitable and sustainable models of health care delivery and aligned advocacy to support them. The instability of health care financing and delivery provides an opportunity for family physician leaders to develop new models of efficient practice, with care that is accessible to everyone.7
The 7 million beneficiaries projected to spend into the doughnut hole and beyond will have gaps in coverage that last from 1.5 to 7.2 months.1,2 This gap grows or shrinks based on total annual drug costs (see accompanying figure).2 A study3 of Medicare beneficiaries with drug spending limits and subsequent gaps in coverage similar to those resulting from Part D's doughnut hole suggests that such patients are significantly more likely to engage in cost-lowering strategies such as taking less medication than prescribed or switching to cheaper medications. Two thirds of patients had difficulty paying for prescriptions, and this overall greater financial burden potentially jeopardizes other necessities such as housing and utilities.3
Part D will reduce the burden of prescription costs for most beneficiaries, but physicians should expect differing effects on individual patients depending on their coverage gaps. Efforts by benefit plan organizers and policy makers to smooth the month-to-month variability in coverage will be essential to maximize the positive impacts of Part D.
- Estimates of Medicare beneficiaries' out-of-pocket drug spending in 2006. Menlo Park, Calif.: Actuarial Research Corporation and The Henry J. Kaiser Family Foundation, 2004.
- Stuart B, Briesacher BA, Shea DG, Cooper B, Baysac FS, Limcangco MR. Riding the rollercoaster: the ups and downs in out-of-pocket spending under the standard Medicare drug benefit. Health Aff 2005;24:1022-31.
- Tseng C, Brook RH, Keeler E, Steers WN, Mangione CM. Cost-lowering strategies used by Medicare beneficiaries who exceed drug benefit caps and have a gap in drug coverage. JAMA 2004;292:952-60.
The information and opinions contained in research from the Graham Center do not necessarily reflect the views or the policy of the AAFP.
Published in American Family Physician, Feb 1, 2006. Am Fam Physician. 200;73(3):404. This series is coordinated by Sumi Sexton, MD, AFP Associate Medical Editor.