NCPA - National Center for Policy Analysis

Should Medicare Cover Prescription Drugs?

April 9, 1999

Democrats have proposed several bills to add a prescription drug benefit to Medicare, claiming many seniors have difficulty paying for medication. But analyst Robert M. Goldberg says only a small portion experience such problems, and there are less costly ways to help them -- without the drug price controls included in the proposals.

The projected cost for the new drug benefit is $40 billion a year. Also, the bills would require drug companies to give seniors the same "discounts" as managed care organizations like the Veterans Administration and Medicaid -- an indirect form of price controls.

The Families USA Foundation claims that 13 percent of seniors are forced to choose between buying food and medicine.

  • But less than 2 percent of seniors had difficulty getting needed prescription drugs, according to the National Health Interview Survey of 1994.
  • Furthermore, the average seniors spends $500 a year on prescription drugs -- which is about 2 percent of the average senior's income of $25,000 a year, and less than they spend on restaurants ($1,160), home furnishing ($1,032) or health insurance ($1,494), according to the Consumer Expenditure Survey.
  • And even the poorest seniors report spending less on drugs than on dining out.

Nearly three-quarters of seniors already have some drug benefits through Medicare Health Maintenance Organizations, private health plans, Medicaid or state-run programs. And in 1997, almost 60 percent of Medicare beneficiaries with incomes below the federal poverty threshold (about 1.5 million seniors) were eligible for Medicaid -- which provides medications -- but not enrolled in the program.

Instead of a costly universal benefit, says Goldberg, Medicare should give vouchers to seniors in poorest health, adjusted for income and severity of illness, to buy care that includes drug benefits.

Source: Robert M. Goldberg (Ethics and Public Policy Center), "An Unnecessary Prescription," Weekly Standard, March 22, 1999.


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