The Case for a Medicare Drug Coverage Benefit: A Critical Review of the Empirical Evidence

The lack of an outpatient prescription drug benefit under Medicare has become a conspicuous omission in the face of accelerated growth in prescription drug expenditures and increased availability of highly effective medications. This article provides a critical review of the empirical evidence on the effect of drug coverage on the use of prescription drugs, health care outcomes, and health care costs among Medicare beneficiaries. The existing literature provides considerable evidence that drug coverage is associated with greater use of all drugs and clinically essential medications and that not all forms of coverage provide the same protection. Longitudinal evidence from elderly and disabled persons in Medicaid indicates that restricting coverage has serious adverse health outcomes for sick and low-income beneficiaries that actually lead to increased health care costs.