Previous estimates of Medicare beneficiaries' total and out-of-pocket spending on outpatient prescription drugs have largely been based on data from the 1995 Medicare Current Beneficiary Survey and have focused on how expenditures vary among beneficiaries with different demographic characteristics. This paper reports the results of an analysis of prescription claims from 1998 for more than 375,000 elderly persons whose prescription benefit was managed by Merck-Medco Managed Care. In addition to examining how total and out-of-pocket drug spending in a well-insured population varies by age and sex, we report how total and condition-specific drug spending varies for elderly persons with ten common chronic diseases. Our results illustrate the highly skewed nature of prescription drug spending, even among those with drug coverage, and underscore the particularly high cost burden that pharmaceuticals place on elderly people with chronic diseases.
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