Falling into the Coverage Gap: Part D Drug Costs and Adherence for Medicare Advantage Prescription Drug Plan Beneficiaries with Diabetes

Medicare Part D outpatient prescription drug benefits were introduced in 2006 with the goal of improving beneficiary access to prescription drugs. To limit estimated federal program costs, the standard benefit design includes a gap in coverage after drug spending exceeds an annual threshold (U.S.$2,250 in 2006). After entering the gap, beneficiaries pay the full price of all prescriptions until reaching catastrophic coverage. Individual plans, however, could offer Part D plans with more generous coverage including coverage during the standard gap. Among the 22.5 million beneficiaries enrolled in a Part D plan in 2006, approximately 89 percent enrolled in a plan without gap coverage, with the remainder enrolled in more generous plans with generic-only or generic and brand coverage during the gap (The Kaiser Family Foundation 2007). Beneficiaries also could choose between Medicare Advantage Prescription Drug (MAPD, 6 million in 2006) plans, which bundle drug, inpatient, and outpatient benefits; and stand-alone Prescription Drug Plans (PDP, 16.5 million in 2006). Another 10.4 million beneficiaries received coverage through employer or union plans in 2006 (The Kaiser Family Foundation 2006). Gaps in coverage may increase out-of-pocket spending for beneficiaries because they pay the full price of drugs filled during these periods; beneficiaries also may decrease drug use or treatment adherence, leading to decreases in total drug costs. Studies before Part D have found both effects, that is, total drug spending and adherence decrease for both discretionary and necessary drugs, while out-of-pocket expenditures increase (Tseng et al. 2004; Hsu et al. 2006;). In at least some cases, lack of coverage leads to higher rates of downstream clinical events, including hospitalizations (Hsu et al. 2006). The Part D coverage gap involves substantial periods of uncovered drug use, but it affects only beneficiaries with high annual drug spending levels. How the Part D coverage gap affects drug spending and adherence depends in part on which and how many beneficiaries enter the gap, when during the year this occurs, and how beneficiaries respond. The effect of the Part D program on adherence is controversial, and it depends in large part on the reference point (Zhang et al. 2009). While beneficiaries may face potentially substantial cost-sharing levels under Part D, including the coverage gap, many previously did not have coverage or had less generous coverage before the introduction of Part D. Some recent studies suggest that drug use and adherence have increased while patient out-of-pocket spending decreased with Part D (Lichtenberg and Sun 2007; Madden et al. 2008; Yin et al. 2008;). Other studies, however, indicate that many beneficiaries experience cost-related nonadherence, especially among beneficiaries who enter the coverage gap (Neuman et al. 2007; Hsu et al. 2008;). There also is uncertainty about how much of a drug use barrier Part D cost-sharing creates, with some suggesting eliminating the Part D coverage gap entirely or at least providing generic drug coverage during the standard gap period (H.R. 3962 2009; Frank and Newhouse 2007;). Within the Part D market, the number of plans providing at least some generic and brand-name drug coverage has increased from 5 percent of MAPDs in 2006 to 17 percent in 2008, and decreased from 2 percent of PDPs in 2006 to 0.1 percent (a single PDP) in 2008. The number of plans offering generic-only gap coverage has increased from 23 percent of MAPDs in 2006 to 34 percent in 2008, and from 13 percent of PDPs in 2006 to 29 percent in 2008 (Medicare Payment Advisory Commission 2006, 2008). These plans provide more generous coverage during the standard gap period to attract beneficiaries, often in exchange for higher premiums. Since 2006, more beneficiaries have been enrolling in plans offering at least some gap coverage (Medicare Payment Advisory Commission 2007, 2009). Although the program is now entering its fourth year, the effects of the coverage gap and existing types of gap coverage on total drug costs, out-of-pocket spending, and adherence are still unknown. We conducted parallel analyses to compare Medicare beneficiaries with a coverage gap versus without a gap in an integrated delivery system MAPD, and to compare beneficiaries with a gap versus with generic-only gap coverage in a network-model MAPD. To focus on a group with substantial and regular need for drug therapy, we examined total and out-of-pocket drug spending and drug treatment adherence among Medicare beneficiaries with diabetes mellitus. About 20 percent of Medicare beneficiaries are estimated to have diabetes (Sloan et al. 2008), and these beneficiaries may be at particularly high risk of reaching the coverage gap because they are often prescribed multiple, chronic medications to control their diabetes and prevent cardiovascular complications (Tjia and Schwartz 2006). A recent industry report estimated that 33 percent of MAPD and 43 percent of PDP beneficiaries with diabetes reached the gap in 2006 (Karaca et al. 2008).