Financial Outlook Poses Challenges for Sustaining Program and Adding Drug Coverage

GAO-02-643T: Published: Apr 17, 2002. Publicly Released: Apr 17, 2002.

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The lack of outpatient prescription drug coverage may leave Medicare's most vulnerable beneficiaries with high out-of-pocket costs. Recent estimates suggest that, at any given time, more than a third of Medicare beneficiaries lack prescription drug coverage. The rest have some coverage through various sources--most commonly employer-sponsored health plans. Recent evidence indicates that this coverage is beginning to erode. The short- and long-term cost pressures facing Medicare will require substantial financing and programmatic reforms to put future Medicare on a sustainable footing. In the absence of a drug benefit, many Medicare beneficiaries obtain coverage through health plans, public programs, and the Medigap insurance market. The price, availability, and level of such coverage varies widely, leaving substantial gaps and exposure to high out-of-pocket costs for thousands. Despite pressures to adopt a prescription drug benefit, the rapidly rising cost of current obligations argues for careful deliberation and extreme caution in expanding benefits. GAO's long-term simulations show that the aging of the baby boomers and rising per capita health care spending will, absent meaningful reform, lead to massive fiscal challenges in future years.

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