The document discusses the history and current state of the Medicare coverage gap, also known as the "doughnut hole." It describes how the Affordable Care Act aims to gradually close the gap by 2020 through discounts on brand name drugs and increased coverage each year. However, some argue that 10 years is too long to close the gap and more needs to be done to help those who currently struggle to afford their medications. The implications of closing the gap on health, economic, and political factors are also examined.

1. SAINT LEO UNIVERSITY
Closing of the Medicare
Gap-A Health Policy Issue
Healthcare Policy-Dr.Haw
Michelle Neeck
4/16/2015

2. 1Neeck
The history of healthcare in the United States has been rather rocky compared to other
nations and one area in particular that has been a victim of various pressures either from citizens,
politicians, and healthcare officials is the Medicare program specifically looking at the doughnut
hole and gaps in coverage for those who are eligible for this program. The history of Medicare
can trace its roots back to the early 20th century when Theodore Roosevelt proposed on his
campaign trail the need for insurance for the American people which at the time was virtually
nonexistent and therefore was considered a topic of necessity on the campaign trail. (Anderson,
2015) However, despite this early interest in changing healthcare and healthcare coverage for
individuals would not be revisited until much later when president Harry Truman in 1945 sent a
letter to the individuals in Congress at the time and suggested the need and creation of a national
insurance fund which at the time was quite controversial. Although Truman would not be
successful with his letter to Congress urging them to create a national health insurance due to
unforeseen circumstances such as the attack on Pearl Harbor and the eventual United States
entrance into World War 2 would over shadow any possible advancements in healthcare until
much later. The 1960s showed a glimpse of promise for Americans and healthcare as this topic
was once again brought to the forefront of discussions after a poll showed that 56% of
Americans over the age of 65 at the time did not have any type of healthcare coverage.
(Anderson, 2015) This statistic would have been useful as well as various other factors in 1965
that lead to the creation of Medicare and its eventual signing into legislation. Medicare still exists
today and in 2014 it was estimated that approximately 49 million individuals were covered under
this program and the amount of benefits paid out to recipients represented roughly 14 percent of
the Medicare budget. Adding to this also included worries about paying for the growing number
of baby boomers and Anderson remarks “The retirement wave of baby boomers was once

3. 2Neeck
expected to cause Medicare to become a budget buster, but the Congressional Budget Office is
now projecting increases in spending to be much smaller than once thought, thanks in part to cost
savings embedded in Obamacare.” (Anderson, 2015) While Medicare was established in 1960s it
wasn’t until 2003 however, that President Bush signed the Medicare Prescription Drug
Improvement and Modernization Act when prescription coverage through Medicare, often
known as Part D coverage, was seriously considered as an area of concern for Medicare
members due to increasing costs that Medicare members pay on annual basis which total roughly
$2,322. (Oliver, 2004) Despite this new focus on prescription drug coverage during the Bush era
of the early 2000s one important aspect that still remained was the coverage gap or doughnut
hole that so many Medicare recipients fear. The coverage gap refers to a gap in coverage after a
certain dollar amount has been paid out by the drug plan which can vary based on the type of
plan chosen by the patient and the after this point the patient must pay more out of pocket costs
until the other side of the gap is met by the patient which will be met with the plan picking up the
prescription costs yet again. (Medicare Part D Donut Hole – Medicare Coverage Gap, 2015) The
prescription coverage lifecycle as it could be called begins with the patient first meeting their
deductible which for Medicare members is often a great deal smaller in dollar amount compared
to those who have private insurance. After meeting the deductible a patient will enjoy small
copays until the prescription drug plan pays out a given dollar amount the patient moves out of
the coinsurance period and into the coverage gap or doughnut hole. The coverage gap period
includes the patient paying a higher amount for their prescriptions depending on whether a drug
is generic or brand name which attributes to a given percentage paid by the patient and the drug
plan paying the rest. This combination of the patient and the drug plan paying will help to meet
the amount of out of pocket expenses which will then help transition into the next stage which is

4. 3Neeck
what many insurance plans call “Catastrophic Coverage.” (Medicare Part D Donut Hole –
Medicare Coverage Gap, 2015) The final stage is the other side of the coverage gap after the out
of pocket expenses have been met by the patient which for example could be around $4,000 then
the drug plan will then pick up the remaining amount and the patient will only be responsible for
small copay amounts until coverage plans restart at the beginning of January when deductibles
must be met again. (Medicare Part D Donut Hole – Medicare Coverage Gap, 2015)
The closing of the doughnut hole is one of the many new reforms outlined in the
Medicare section of the Affordable Care Act. The closing of the doughnut hole will hope to save
as the plan suggests an individual of average of $1,052 dollars last year alone and more savings
are expected for the future. (Rinde, 2014) The doughnut hole is the gap in coverage between
$2,850-$4,550 and this is the gap that with the reform will eventually close over time. This
coverage gap although fixed does not affect each Medicare user equally, those who are
prescribed not only many prescription drugs, but many which are brand name or just simply
more expensive than others tend to hit the doughnut gap earlier than say those individuals who
take less medication or prescribed more generic drugs for their condition(s). The time in which
the doughnut hole is reached as compared to others is a separate issue altogether, but what has
been found in studies directed by the Kaiser Family Foundation is that in 2009 of all Medicare
enrollees, it was found that 19 percent of those reached the doughnut gap and of those 19 percent
only 3 percent had the income to make it to the other side of the coverage gap. (Rinde, 2014)
One manner in which the government has suggested in which to close the gap is through
discounts offered by the pharmaceutical companies roughly 50 percent of drug costs, specifically
brand name drugs. Each year thereafter part D drug coverage of Medicare will continue to
gradually more and more of the prescription costs as time progresses. Some Medicare plans may

5. 4Neeck
cover more if the Medicare patients pay higher premiums each month, but again this can only
serve patients who have more disposable income to spend on healthcare. One of the current
issues surrounding the closing of the Medicare gap is that many Medicare Enrollees feel that
closing the gap by 2020 is simply too far away. For many of the more senior patients 10 years
seems very impractical as these individuals need assistance now, and the guarantee that an 80
year old patient will live another 10 years to see the closing of the gap can for some be an
unrealistic expectation. (Rinde, 2014) In order to help Medicare enrollees to pay for the
medications there are new programs in place that are classified as “The Medicare Extra Help
Program.” This program helps provide economic assistance to those who are also enrolled in
Medicaid or those who receive supplemental income. (Rinde, 2014) However, these restrictions
can and do leave many individuals who are on the edge of assistance for these programs not
being able to pay for their medications and often will forgo them rather than placing themselves
in medical debt. (Rinde, 2014) Adding to some of the controversy or challenges of the closing of
the Medicare gap is the greater emphasis on patients taken a greater role in the future of their
healthcare. This notion is not a negative aspect, but it could be quite challenging for many
individuals who have been used to having others plan their healthcare future for them. The
changes being made to Medicare as the result of the reform specifically the closing the doughnut
hole now encourages or some would say force patients to evaluate their plans more closely
during open enrollment to better weigh which plan will best suit their medical and
pharmaceutical needs. (Williams, 2014) This idea can be quite challenging for older individuals
as this may seem like a daunting as they may not be as adapt with using technology as many of
the application processes are online or they may not even understand their healthcare needs so
despite the coverage gap closing there are still a number of individuals who will still pay a

6. 5Neeck
significant amount of out of pocket expenses due an uneducated or under educated choice of
their prescription drug plan. The variety of plans has been established to satisfy the goal of
creating a competitive and transparent experience for picking healthcare plans which may work
those who have an in-depth knowledge of healthcare and the healthcare system, but for the
average individual may seem overwhelming when the only two factors they want to know is how
much is their premium going to be and how much will they have to pay for their medications.
These two desires can be expounded upon further by urging patients to meet with their primary
care physicians or pharmacists and review current medications and possible substitutes that may
work better for them or find cheaper alternatives to help reduce out of pocket expenses, but again
these services are offered but few patients take advantage of this program and be seen as added
challenge to the closing of the coverage gap if patients are not willing to participate in their
healthcare choices and therefore will not benefit as much as others despite this reform.
(Williams, 2014)
Stakeholders in healthcare constituent as a number of different groups from physicals to
patients to politicians to insurance companies and pharmaceutical companies all of which a play
an intimate role in the world of healthcare, each of these stakeholders can fundamentally change
to outcome of healthcare and the current reform is no exception. Signing in the healthcare reform
was a political feat in itself and one of the stakeholders that will play a role in the survival of the
coverage gap law will remain in place is the U.S. Supreme Court who are currently deciding
whether or not the new reform is legal under the U.S. Constitution and might pose as threat for
many Medicare enrollees who are looking forward to more affordable prescription coverage.
(Cafasso, 2011) Patients are one of the most important stakeholders to take into consideration
who can greatly influence policies by clamoring for more affordable healthcare and in response

7. 6Neeck
the closing of the coverage gap whereas the same policy those patients feel as stakeholders have
been taken into consideration and somewhat satisfied while physicians do not. Many physicians
that as a stakeholder in the healthcare system they were grossly over looked and felt many of the
reforms such as the coverage gap were as they feel not satisfactory changes. The closing of the
coverage gap works well for patients as most patients want more cost effective ways to pay for
healthcare however, some physicians view this reform as a challenge to some of the medications
prescribed and therefore leading patients to ask for cheaper alternatives for some medications
when the physicians feel that from a biological or chemical standpoint may be a better fit their
patient than a cheaper alternative. (Cafasso, 2011) One stakeholder that may not seem so obvious
in the new push for policies such as the one suggested for closing the coverage gap are insurance
companies. Insurance companies may not seem as an obvious beneficiary of this reform, but
contrary to this manner of thinking creating an environment for more affordable drug coverage
ensures that many more Medicare enrollees will chose to add on Part D prescription drug
coverage which means adding many more members to insurance plans. This surge in those
applying for prescription coverage has meant that insurance companies are rewarded with
millions and billions of dollars in profit amounts for these types of insurance as prescription
coverage Medicare is not mandatory and previously many choose not to have part D coverage in
order to cut their monthly premiums, but now due to increased competitiveness amongst
insurance companies has a created a beneficial relationship between patients and insurance
companies satisfying both stakeholders’ needs.
Developing and implementing new reforms on such a large scale as the current healthcare
reform which impacts a large number of individuals can be hard to create, manage, and adapt to
changes and as such it is important to consider current policy options and tradeoffs for when

8. 7Neeck
considering a new created policy such as the closing of the coverage of prescription coverage
gap. Some of the policy options include managed competition and health plan standardization.
Managed competition through the new reform and can be applied to creating competition for
finding the best prescription drug program until completion of the coverage gap policy in 2020
and White explains this policy option of competition as “competition among health insurers can
be healthy or unhealthy, depending on the marketplace structure and the rules of the road.
Healthy competition consists of insurer efforts to increase value for policyholders by producing
better health outcomes at lower total cost. Unhealthy competition consists of insurer efforts to
avoid insuring sicker people, to confuse policyholders or to avoid paying legitimate claims.”
(White, 2011) This policy option can help to either cement or do away with the policy in
question, closing coverage gap, and therefore in theory encourage a healthy environment of
competition which will benefit both insurance companies and patients alike. Trade-offs however,
work a bit differently than policy options as trade-offs may not appear until after policies are put
into place. When considering trade-offs for a policy such as closing the coverage gap there are
two positives that can be found from this standardization of cost sharing and coverage gap policy
and that results in intensifying price competition on various levels not just on the basis of
premiums and reduce health based selections which avoids certain insurance companies ending
up with more unhealthier patients than others. (White, 2011) Creating competition and a balance
of those that are healthy and unhealthy insurance members can help ensure lower costs for all
and in conjunction with the closing of the coverage gap encourage more members to apply for
prescription drug coverage and insurance companies to have larger formularies to cover more
drugs. However, there are some negatives of this trade off which results in insurance companies
to not innovate and create new plans and other innovations such as “An example of an innovative

9. 8Neeck
approach that has received positive attention is value-based insurance design, in which patient
cost-sharing is selectively reduced for services with proven clinical value.” (White, 2011) Since
there is a perceived sufficient amount of competition therein lies the negative aspect of this
policy of coverage gap closure as once this closure is complete there will no longer be need to
adapt, innovate, and change healthcare delivery from an insurance perspective to patients which
could be a cause for concern in the next decade.
The policies created through the healthcare reform are not perfect policies and each and
every one could benefit from various recommendations and in regards to the closing of the
coverage gap one recommendation that would benefit this policy and Medicare enrollees most
would be the shortening of the amount of time it would take to close the gap. Currently the
projected time frame to close the gap is a ten year plan with eventual completion by 2020. This
amount of time is too long for most individuals who need more affordable drug coverage now,
but feasibly it would difficult to make such a drastic change for health insurance companies and
pharmaceutical companies alike. The policy plan should be five years in order for the gap to
close instead of ten years in order for patients to benefit sooner and it would allow for
pharmaceutical companies to realize where profits will generate of from and reduce the
uncertainty of how the closure will affect them and therefore allow these companies to then
refocusing their efforts on research for more beneficial drugs that patients can purchase and
benefit from as well. This recommendation for this particular policy not only would affect the
policy itself, but it can also affect recommendations for other policies as well such as the federal
government and the state as well and the roles in which these entities would play in this policy.
A recommendation for the federal government regarding this type of policy would be tighter
regulations on the pharmaceutical industries such as creating price caps for various drugs such as

10. 9Neeck
brand name drugs and to offset potential loss that some companies may feel might occur due to
price cap is to be awarded an allowance if you will to help with research and/or other costs
inquired by from day to day operations. At the state level, it should be recommended to
encourage gifted students and university to develop more courses for healthcare administration
as well as creating more jobs to handle the closing of the Medicare gap either through insurance
positions, HR departments, and elderly care homes to help explain in further detail different
plans to patients.
The closing of the Medicare coverage gap will many implications including health,
economic, political, and so on and it is important to understand how each of these will play a part
or be affected by this new healthcare policy in the coming years. The closing of the doughnut
hole will have a significant implication on the overall health population of senior citizens as
more affordable drugs will allow them to continue taking their medication and live longer and
healthier lives. (Sipkoff, 2009) Economically then many patients will also benefit from the new
healthcare policy by allowing Medicare beneficiaries to save $6.1 billion on medications alone to
date from the initial start to the closing of the gap which can translate to a patient’s ability to
afford their medication and spend their extra money in other areas and further stimulate the
economy. (Sjoerdsma, 2013) Like the healthcare reform itself there are many political
implications surrounding this new healthcare policy such as many politicians finding fault with
the policy simply because they are of a different political party. However, on a more serious
political issue is the premiums associated with Medicare which are usually based off of income
and as the Democrats argue should be the same price for prescription coverage as Medicare is a
universal type coverage system and therefore all Medicare enrollees should pay the same price
which means that the closing of the coverage gap may affect more so than others simply based

11. 10Neeck
on their income level. (Glyn, 2013) The future of the health care policy regarding the closing of
the Medicare gap is uncertain, but what can be witnessed now by healthcare organizations is an
increase in Medicare patient acceptance rates as more affordable healthcare for seniors is now
available and therefore many more patients are seeking treatment either through preventive care
or by the management of chronic diseases. Other healthcare organizations that will face some
implications due to this new law are pharmacies, which will see a rise in Medicare claims being
submitted on a daily basis as many enrollees will now be able to afford prescription coverage and
their prescriptions. Keeping all these implications in mind it is important as future leaders in
healthcare to always remember the core values when conducting oneself in various healthcare
settings. One important core value that must remember constantly is the core value of
community. Community is essentially what healthcare is, keeping a community healthy and
viable so that all members can benefit from equal treatment and access. Closing the Medicare
gap will allow the core value of community to thrive as it will allow more individuals to equal
access which previously had been denied by either economic or political issues. Adding to the
core value of community is the Saint Leo core value of excellence. Excellence is achieving the
highest standards on a day to day basis and healthcare is a field in which excellence is the most
fundamental aspect and is the only accepted form of care that is allowed to be given to patients.
The closing of the Medicare gap was created in order to continue providing the core value of
excellence through better care delivery and better care management.
There are many different health policy issues that have been created out of the healthcare
reform and one such policy that has become a significant topic is the closing of the Medicare
gap. Healthcare in the United States has faced many battles along the way and it wasn’t until the
1960s when progress was made in order to create a program of affordable healthcare for seniors

12. 11Neeck
which had been lacking for many years and would not see prescription drug coverage until later.
The Medicare gap is a part of the prescription drug coverage that explains the gap in coverage in
which a patient must pay a certain percentage out of pocket before the insurance will resume
covering the member. This gap has forced many to forgo their prescriptions or landed many into
debt. Some of the challenges will see enrollees taking larger roles in decision making for their
healthcare as more insurance will compete in the Medicare market to gain new members. Many
stakeholders will be affected by this new change such as physicians, patients, and pharmaceutical
companies, but the full extent is yet to be known. There will always be recommendations to help
better any type of policy and this policy is of no exception. Shortening the amount of time the
full closure of the gap is complete is just one suggestion as there will be many implications on
various sectors such as politics, economics, and healthcare organizations. The future of the
closing of the Medicare gap looks to be promising as the population ages and the desire to save
money on healthcare are universal desires, there is no doubt that this policy will survive the next
election is way, shape, or form and the goal of affordable healthcare will at least in part be
realized.

13. 12Neeck
Works Cited
Anderson,S.(2015, March 4). A brief History of Medicarein America. RetrievedfromMedicare
Resources:http://www.medicareresources.org/basic-medicare-information/brief-history-of-
medicare/
Cafasso,E. (2011). How health-reformstakeholderswill be affectedbyrecentchanges. PublicRelations
Societyof America.
Glyn,N.(2013, November26). Why Obamacare’sClosing theDonut-HoleIsn’tAllIt’sCracked Up to Be.
RetrievedfromNationalReview: http://www.nationalreview.com/corner/364950/why-
obamacares-closing-donut-hole-isnt-all-its-cracked-be-noah-glyn
MedicarePart D DonutHole – Medicare CoverageGap.(2015, April 13). RetrievedfromEHealth
Medicare:http://www.ehealthmedicare.com/medicare-part-d-prescription/donut-hole/
Oliver,T.(2004). A Political Historyof Medicare andPrescriptionDrugCoverage. TheMilbankQuarterly.
Rinde,M. (2014, February14). ObamacareSlowly ButSurely Closes‘DonutHole’ Gap in Medicare
Coverage.Retrievedfrom NJSpotlight:
http://www.njspotlight.com/stories/14/02/13/obamacare-slowly-but-surely-closes-donut-hole-
gap/
Sipkoff,M.(2009). EverybodyWantsto Close the DoughnutHole. Managed Care.Retrievedfrom
Managed Care.
Sjoerdsma,D.(2013, March 22). Three Years in, AffordableCareAct ContinuesClosing the‘DonutHole’.
RetrievedfromThe Medicare NewasGroup:
http://www.medicarenewsgroup.com/context/understanding-medicare-blog/understanding-
medicare-blog/2013/03/22/three-years-in-affordable-care-act-continues-closing-the-donut-
hole-
White,C.(2011, November1). Promoting Healthy Competition in Health InsuranceExchanges:Options
and Trade-offs.RetrievedfromNational Institute forHealthcare Reform:
http://www.nihcr.org/Healthy_Competition
Williams,J.(2014, October15). How to Make theBest of theMedicare 'DonutHole'. RetrievedfromU.S.
NewsandWorldReport:http://health.usnews.com/health-
news/medicare/articles/2014/10/15/how-to-make-the-best-of-the-medicare-donut-hole