The Effects of the Coverage Gap on Drug Spending: A Closer Look at Medicare Part D

We calculated prescription drug usage in two groups of Medicare beneficiaries: employer group with no coverage gap, and individual Part D group with no coverage or some generic drug coverage in the coverage gap. Among those with employer coverage, 40 percent reached the doughnut hole, compared with 25 percent of those without such coverage. Overall, 5 percent went through the doughnut hole to reach the catastrophic coverage level. Those lacking coverage in the doughnut hole reduced their drug use by 14 percent; those with generic coverage reduced their use by 3 percent. Coverage of generic drugs with a $0–$10 copayment in the doughnut hole could be financed by, at most, a six-to-nine-percentage-point increase in initial coinsurance.