A Medicare prescription drug benefit.

Abstract

Even though almost two-thirds of Medicare beneficiaries have some coverage for outpatient prescription drugs, pharmaceuticals are a major part of their out-of-pocket expenses and threaten the financial security of growing numbers of beneficiaries. Because pharmaceuticals are an integral part of modern health care, some have proposed adding a drug benefit to Medicare. Such proposals pose difficult questions of design, cost, and administration. A drug benefit could add between 7 and 13 percent per year to Medicare costs over the next decade. If such a benefit were added to Medicare, policymakers would have to decide who should bear these costs and whether subsidies should be provided to help lower income beneficiaries pay the portion of the costs borne by participants.