NCPA - National Center for Policy Analysis

Prescription Drugs: A New Entitlement?

March 8, 1999

If proposals to offer prescription drug coverage to seniors on Medicare are adopted, competition in health care will suffer, analysts warn. An overwhelming majority of retirees already have prescription drug benefits, and extending those benefits to everyone in Medicare would cost another $20 billion to $40 billion a year -- at a time when lawmakers are desperately trying to shore up the system's finances.

According to a recent study in the journal "Health Affairs":

  • Ninety-five percent of Medicare HMOs provided enrollees with a prescription drug benefit in 1995.
  • Eighty-four percent of seniors with employer-sponsored health insurance supplemental insurance had drug coverage.
  • Eighty-eight percent of low-income seniors who received Medicaid coverage in addition to Medicare had prescription drug coverage.
  • Seniors spend an average of only $600 a year on prescription drugs in 1995.

Only 35 percent of seniors were without prescription drug coverage then.

Analysts say that competition encourages employers to offer drug coverage in their health plans -- as well as drug coverage after retirement.

Competition is also what leads health plans to offer a Medicare drug benefit to attract seniors and to negotiate the lowest price for the drugs.

Source: Merrill Matthews (National Center for Policy Analysis), "Making Prescription Drugs a Right," Investor's Business Daily, March 8, 1999.


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