Drug Coverage

Prescription drugs play an increasing role in modern medicine. Their importance is indicated by their ability to improve health and quality of life and to replace surgery or invasive procedures. However, 23% of Americans under 65 and 31% of Medicare beneficiaries had no prescription drug coverage in 1996, and many others had inadequate coverage. Drug coverage varies in extent of coverage, participant contribution, and how benefits are obtained. The sources of coverage include employer sponsored (including union plans and worker's compensation), private/nongroup coverage, Medicaid, Medicare, and other federal or state programs.

Employer-sponsored health benefits are the single largest source of drug coverage, with managed care plans responsible for covering 89% of workers. Medicare does not cover outpatient prescription drugs, so supplemental coverage is commonly obtained through retiree health benefits, private Medigap policies, or Medicare + Choice plans. A Medigap policy is supplemental to Medicare and is offered by private insurers that include varied prescription drug coverage. Plans differ in deductible, percentage of drug costs covered, and maximum plan payment. Medicare + Choice plans are usually HMOs that receive a fixed monthly payment from Medicare to provide Medicare-covered services including drug coverage. Low-income Medicare enrollees may also qualify for Medicaid. Medicaid drug coverage is optional under federal law; however, all states provide this benefit for families and children enrolled. Federal and state programs include the Department of Veterans' Affairs (VA) and the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Uninsured patients can receive certain drugs at no cost through indigent patient programs offered by drug manufacturers.