A Medicare prescription drug benefit: focusing on coverage and cost.

Introduction P harmaceuticals are a critical element of modern medical treatment, yet the traditional Medicare benefits package does not include coverage of outpatient prescription drugs. This omission is significant because the 38.1 million people who comprise the Medicare population are disproportionately likely to use drugs.The elderly represent 14 percent of the U.S. population but account for more than one-third of total prescription drug expenditures. Almost all Medicare beneficiaries use pharmaceuticals on a regular basis and on average had 22 prescriptions filled in 1998. Beneficiaries’ reliance on prescription drugs is jeopardized by the high and rising cost of drugs.This rise in spending has been attributed to a number of factors, including higher utilization, drug price inflation, the proliferation of new and more expensive drugs, and the increase in direct-to-consumer marketing by drug manufacturers. Most Medicare beneficiaries (approximately 75 percent) obtain assistance with the cost of outpatient prescription drugs, but more than one-fourth (10.2 million) lack any source of prescription drug coverage. Of those with drug coverage in 1998, approximately 20 percent were covered for only part of the year. Many of those with supplemental drug coverage have it as part of their retiree benefits package. Some have enrolled in Medicare+Choice managed care plans that include a prescription drug benefit. Others purchase a Medigap policy that includes drug coverage. Eligible beneficiaries can obtain state-based coverage through Medicaid (since every state currently opts to provide prescription drug benefits) or state drug assistance programs. Other public sources for those who are eligible The Commonwealth Fund is a private foundation supporting independent research on health and social issues.