[Accessibility Information]

Related BLS programs | Related articles

March  2003, Vol. 126, No.3

Health care and prescription drug spending by seniors

Jessie X. Fan, Deanna L. Sharpe, and Goog-Soog Hong

Out-of-pocket spending on prescription drugs increased 411 percent between 1970 and 1997, based on nominal aggregate figures from the Health Care Financing Administration.¹ With the exception of health insurance premium payments, prescription drug expenses represent the single largest component of out-of-pocket spending on health care (17 percent of the total health care dollar, on average). Prescription drug expenses account for as much as those spent on physician care, vision care services, and medical supplies combined.² Many seniors, especially those with low income and those with multiple health problems, often must make a difficult choice between health care and other consumption needs.³ According to the American Enterprise Institute, more than 10 percent of seniors spend up to $5,000 annually on prescription drugs and nearly one-fourth of Medicare beneficiaries are living on less than $600 per month.⁴

Although Medicare provides basic medical coverage for virtually all of the Nation’s seniors who are aged 65 and older and for those under age 65 with certain severe disabilities, it does not provide coverage for prescription drugs. Consequently, seniors often turn to other insurance sources to defray costs of prescription drugs and other medical expenses. About 1 in 10 seniors have assets and income low enough to qualify for Medicaid.⁵ To cover expenses that Medicare does not cover, nearly 3 in 4 seniors purchase additional insurance through their former employer or through private purchase.⁶ Still, about one-third of Medicare beneficiaries do not have coverage for prescription drugs and, among those who do, coverage is often inadequate relative to expenses.⁷ Further, prescription drug coverage is becoming increasingly expensive to obtain, as both public and private insurers have shifted costs to the ultimate consumer in the form of higher premiums, deductibles, and co-payments and as some insurance providers have cut-back or eliminated coverage for prescription drugs.⁸

This excerpt is from an article published in the March 2003 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

Read abstract  Download full article in PDF (61K)

Footnotes
1 National Health Expenditure Projections 1998–2008 (Health Care Financing Administration (HCFA). January 2000) on the Internet at: www.hcfa.gov/stats/NHE/-Proj/.

2 M. J. Gibson, N. Brangan, D. Gross, and C. Caplan, How much are Medicare beneficiaries paying out-of-pocket for prescription drugs? (Washington, DC, AARP Public Policy Institute, September 1999) on the Internet at: http://research.aarp.org/health 9914_how_much_1.html.

3 B. Jackson, " Paying for prescription drugs worries Medicare recipients," Mar. 16, 1999, on the Internet at: www.cnn.com/ALLPOLITICS/stories/1999/03/16/jackson.prescriptions/; Gibson and others, How much are Medicare beneficiaries paying? 1999.

4 "Should Medicare’s basic benefits include prescription drugs?" (American Enterprise Institute, Jan. 4, 1999), on the Internet at: www.aei.org/ra/rahelms.htm.

5 J. Rogowski, L. A. Lillard, and R. Kington, "The financial burden of prescription drug use among elderly person," The Gerontologist, 1978, vol. 37 no. 4, pp. 475–82.

6 J. C. Goodman and M. Matthews, Jr., "Simple solutions for elderly prescription drugs," Brief Analysis no. 300 (Dallas, TX, National Center for Policy Analysis, July 2, 1999).

7 Gibson and others, How much are Medicare beneficiaries paying? 1999.

8 National Health Expenditure Projections 1998–2008, January 2000.

Related BLS programs

Consumer Expenditures Survey

Related Monthly Labor Review articles

Prescription drug prices for the elderly.—Sep. 1998.
Effects of health insurance on consumer spending, The.—Mar. 1995.