Medicare Prescription Drug Access After Part D Implementation | HSC Tracking Report | HSChange

Tracking Report No. 23, March 2009

By James D. Reschovsky and Laurie E. Felland

When Medicare Part D launched in January 2006, it represented the most sweeping expansion of the program since its creation in 1965. For the first time, Medicare offered outpatient prescription drug coverage to all beneficiaries. The new benefit was expected to dramatically reduce the number of elderly Americans who went without needed medications because they could not afford them. But how well did Part D actually deliver on that promise? Research from the Center for Studying Health System Change (HSC), drawing on the 2007 Health Tracking Household Survey, found the answer was more complicated than many had hoped.

The Big Picture: Access Held Steady for the Elderly

According to the HSC survey data, roughly 8 percent of Medicare beneficiaries aged 65 and older reported going without prescription drugs they needed because of cost in 2007. That figure was essentially unchanged from 2003, the last time the survey was conducted — before Part D existed. On the surface, this stability might seem like a disappointment: a major new benefit, and no measurable improvement?

But the researchers cautioned against reading the numbers that way. During the same period, the share of working-age adults (18 to 64) who reported skipping prescriptions because of cost actually increased. That divergence suggests Part D may have played a protective role for the elderly, holding the line on drug access at a time when rising medication costs were pushing more non-elderly adults into unmet need. Without Part D, the elderly might well have experienced the same deterioration.

A Troubling Pattern Among Dual-Eligible Beneficiaries

Perhaps the most alarming finding involved seniors who qualified for both Medicare and Medicaid — the so-called "dual-eligible" population. These individuals are among the poorest and sickest Medicare beneficiaries. Before Part D, their prescription drugs were covered through Medicaid. When Part D took effect, drug coverage for dual-eligibles was transferred from Medicaid to Medicare's new program.

The transition did not go smoothly for many of them. The share of dual-eligible seniors who reported going without needed prescriptions due to cost nearly doubled, jumping from 10.8 percent in 2003 to 21.3 percent in 2007. Researchers pointed to several possible explanations. Under Medicaid, many of these beneficiaries had paid nothing or very small amounts for their drugs. Part D introduced new cost-sharing requirements — even for those receiving the low-income subsidy — that were unfamiliar and sometimes confusing. Formulary differences between Medicaid and Part D plans also meant that some previously covered drugs were no longer available, or required prior authorization steps that created gaps in treatment.

This finding raised serious concerns about whether the shift to Part D had inadvertently harmed the very population it was supposed to protect.

Persistent Racial Disparities in Prescription Drug Access

The research also documented significant racial gaps in drug access that Part D had done little to close. Among elderly Medicare beneficiaries, 17.6 percent of African Americans reported going without needed medications due to cost, compared with just 6.2 percent of white beneficiaries. Hispanic beneficiaries likewise experienced higher rates of unmet prescription drug needs than their white counterparts.

These disparities reflected broader patterns of income inequality, differences in supplemental coverage, and varying levels of familiarity with the Part D enrollment process. Minority beneficiaries were more likely to have lower incomes, less likely to have employer-sponsored supplemental coverage, and more likely to face difficulty navigating the complex plan-selection process that Part D required.

Disabled Beneficiaries Under 65 Faced the Steepest Barriers

Medicare is not exclusively a program for older Americans. Individuals under 65 who qualify for Social Security Disability Insurance also receive Medicare benefits after a waiting period. The HSC data showed that these younger, disabled beneficiaries had far worse drug access than the elderly population. Fully 27.5 percent of Medicare beneficiaries under 65 reported going without prescriptions because of cost — roughly three times the rate among those 65 and older.

Several factors contributed to this gap. Disabled beneficiaries tended to have more complex medical conditions requiring multiple medications, which meant higher out-of-pocket spending. They were also more likely to fall into the Part D coverage gap — commonly known as the "doughnut hole" — where beneficiaries at the time were responsible for 100 percent of drug costs between $2,400 and $5,451 in annual spending. For someone taking several expensive medications, that gap could arrive quickly and create a period of real financial hardship.

The Coverage Gap and Its Real-World Consequences

The Part D doughnut hole was one of the most controversial features of the program's original design. Once a beneficiary's total drug costs exceeded $2,400, the plan stopped paying. Benefits did not resume until out-of-pocket spending reached $3,850 (or total drug costs hit $5,451). In that window, beneficiaries bore the full cost of their medications.

For many people, this meant making difficult choices: splitting pills, skipping doses, or abandoning a medication entirely until the next calendar year. The coverage gap disproportionately affected beneficiaries with chronic conditions who required ongoing, expensive drug regimens. The HSC research confirmed that beneficiaries who lacked supplemental coverage to fill the doughnut hole were significantly more likely to report unmet drug needs.

Employer Coverage Provided the Strongest Safety Net

Not all Medicare beneficiaries relied on standalone Part D plans for their drug coverage. A substantial share had prescription benefits through former employers or unions, either as retiree health benefits or through Medicare Advantage plans with integrated drug coverage. Among beneficiaries with employer-sponsored drug coverage, just 2.5 percent reported going without needed medications due to cost — the lowest rate of any coverage category.

This finding underscored how much the generosity of supplemental coverage mattered. Employer plans typically offered broader formularies, lower copayments, and no coverage gap. Beneficiaries in these plans rarely faced the kind of cost barriers that plagued those in basic Part D or those without any drug coverage at all.

Policy Implications and Remaining Questions

The HSC findings carried several important policy implications at the time of publication. First, the data suggested that while Part D had expanded drug coverage to millions of previously uninsured beneficiaries, coverage alone was not sufficient to guarantee access. Cost-sharing structures, formulary restrictions, and the coverage gap all created barriers that prevented some beneficiaries from filling the prescriptions their doctors ordered.

Second, the sharp deterioration in access for dual-eligible beneficiaries signaled that transferring coverage from one program to another — even with the intention of improving coordination — could produce unintended harm if the transition was not carefully managed. The dual-eligible population required special attention due to their higher rates of chronic illness, cognitive impairment, and limited English proficiency.

Third, the persistent racial disparities and the disproportionate burden on disabled beneficiaries pointed to structural inequities that a one-size-fits-all drug benefit could not address on its own. Targeted outreach, simplified enrollment, and more generous subsidies for the most vulnerable groups were all discussed as potential remedies.

About the Research

This report was based on the HSC 2007 Health Tracking Household Survey, a nationally representative telephone survey of the civilian noninstitutionalized population. The survey gathered information on health insurance coverage, access to care, use of health services, and health status. By comparing the 2007 results with those from 2003, researchers could assess changes in prescription drug access before and after Part D implementation. The research was conducted by James D. Reschovsky and Laurie E. Felland of the Center for Studying Health System Change, with funding from the Robert Wood Johnson Foundation.

Additional Resources

For further reading on Medicare Part D and prescription drug access, the following resources offer additional context: