The so-called “doughnut hole” is real for many seniors who enroll in Medicare Part D coverage, leaving them struggling to pay for prescription drugs at the end of the year, a new report indicates.

For others who enrolled after being uninsured, use of prescription medications increased from 3% to 37% and out-of-pocket spending dropped between 37% and 58%, according to researchers at Brigham and Women’s Hospital, Harvard Medical School and Adheris.

In evaluating prescriptions filled for 114,776 patients at three large pharmacy chains, the researchers found that 11.7% reached the coverage gap by December 2006, roughly a year after implementation of Medicare Part D coverage. Of that group, 196 reached a catastrophic coverage level.

Must pay all costs

A beneficiary who reaches his or her initial coverage limit falls into the “doughnut hole” or coverage gap and becomes responsible for the total costs of all medications. This amount is reached by taking into consideration the full cost of the drugs, not just the beneficiary’s out-of-pocket cost-sharing. For example, if a drug costs $150 and the beneficiary’s co-payment is $40, the full $150 counts toward the initial coverage limit, according to federal authorities.

The supplemental coverage is marketed to seniors between November and December each year.

This story originally appeared in the April 2009 print edition of Insurance & Financial Advisor.