OBJECTIVES: Eliminating the Medicare’s coverage gap is on health reform’s agenda. This study compares the implications of current House and Senate bills on closing the donut hole as well as use of generic drugs on three outcomes: 1) proportion of beneficiaries entering and going through the gap, 2) duration in the gap, and 3) total and out-of-pocket annual pharmacy spending. METHODS: 2007 pharmacy data of a random sample of beneficiaries enrolled in a Medicare-Advantage Part D plan were used to evaluate these outcomes under three proposals: 1) reducing the size of the donut hole by $500 (Senate bill); 2) reducing the size of the donut hole by $500 and a 50% discount for brand-names used in the donut hole (House bill); and 3) switching to generic drugs after several brand-names go off-patent by end-2011. RESULTS: Under 2007 Part D, 20% beneficiaries entered the gap and 3.5% entered the catastrophic period. People stayed in the gap for 132 days; their total pharmacy spending was $4561, with $2337 out-of-pocket and $2224 by Medicare. Under the Senate bill, 14% would enter and 3.5% would go through the gap. Those entering the gap would stay there for 120 days and their total pharmacy spending would be $5214, $2788 out-of-pocket and $2426 by Medicare. The House bill would save additional $791 among beneficiaries entering the gap. Several blockbusters including Lipitor, Zyprexa, Prevacid, Novasc, Aricept will go off-patents by end-2011. If patients switched to their generic counterparts, 17% would enter the gap and 1.8% would enter the catastrophic period. The average gap duration would be 128 days. People entering the gap would spend $4476 total, $2115 out-of-pocket and $2361 by Medicare. CONCLUSIONS: Reducing the gap size can delay entering the gap, but may not reduce beneficiaries’ out-of-pocket spending. A strategy combining it with generic use could be more effective.