Pricey prescription drugs are driving a new surge in health-care costs, say observers, but most Americans are not affected because their employer insurance plans typically cover drugs. However, for many of the elderly, the impact is severe because Medicare does not cover prescription drug costs.

• About 19 million elderly people in the U.S. -- roughly half the population age 65 and older -- have little or no drug coverage, according to the Congressional Budget Office.

• Although the elderly make up 12 percent of the population, they consume almost 35 percent of all prescription drugs, and one in five elderly people takes at least five prescription drugs a day.

• About 2.2 million seniors shell out more than $100 a month for medication.

Excluding insurance premiums, drugs account for 34 percent of older people's total health-care bill, says the American Association of Retired Persons (AARP).

The poorest of the elderly get some help from Medicaid. In the past four years, Medicaid costs have grown by 6 percent a year, while the cost of drug benefits rose at more than twice that rate, according to the federal Health Care Financing Administration.

Moreover, while Health Maintenance Organizations and insurance programs with drug benefits are able to negotiate lower drug prices with pharmaceutical companies, some observers say those who pay for drugs themselves are charged higher prices. The industry denies such "cost-shifting" occurs.

Source: Lucette Lagnado, "Drug Costs Can Leave Elderly a Grim Choice: Pills or Other Needs," Wall Street Journal, November 17, 1998.