In response to intensified calls to add a drug benefit to the Medicare program, members of both major political parties have recently proposed drug benefit plans. Although prescription drugs now play a larger and more expensive role in health care, Medicare does not cover most outpatient prescription drugs, and, according to the U.S. Health Care Financing Administration, 31% of Medicare beneficiaries lacked supplemental drug coverage in 1996. As a result, according to the Congressional Budget Office, beneficiaries without drug coverage spent 40% less on pharmaceuticals in 1996 than beneficiaries with coverage, but their out-of-pocket spending was almost double (see graph). 

Concerns have been raised that support for a prescription drug plan for Medicare beneficiaries could be problematic for providers by presenting lawmakers with a choice to provide either drug benefits or relief from onerous cuts contained in the Balanced Budget Act of 1997 (BBA). But others believe the unexpectedly large savings achieved through the BBA and an increasing Federal budget surplus will allow action on both issues. Responding to a May 15 article in The New York Times, American Hospital Association President Dick Davidson wrote that this is not an either-or situation: "With a historic budget surplus, we believe there are ample resources for prescription drugs and other services." GNYHA strongly agrees.