Medical Expenditure Panel Survey Agency for Healthcare 

Research and Quality

STATISTICAL BRIEF #125 

May 2006 

Outpatient Prescribed Medicine

Expenses by Source of Payment and 

Insurance Status for the Medicare and 

Non-Medicare Populations, 2003 

Highlights 

 Outpatient prescription drug 

expenses for the U.S. community population totaled $177.7 

billion in 2003, with expenses 

for the Medicare population 

accounting for 42.4 percent 

($75.3 billion) and expenses for 

the non-Medicare population 

accounting for 57.6 percent 

($102.4 billion). 

 Out-of-pocket payments 

accounted for about half (51.0 

percent) of all prescription 

medicine expenses for 

Medicare beneficiaries but 

accounted for only two-fifths 

(40.4 percent) of prescription 

medicine expenses for the nonMedicare population. 

 In 2003, Medicare beneficiaries 

who did not have supplemental 

health insurance paid for threequarters of their prescribed 

drug expenses out of pocket. 

 For those with a prescribed 

drug expense, the average 

prescription drug expense per 

Medicare beneficiary ($1,971)

was more than twice as large 

as the average expense per 

person in the non-Medicare

population ($688). 

 The average out-of-pocket 

expense for Medicare beneficiaries with a prescription drug 

expense was highest for those 

people with no coverage other

than Medicare ($1,353). 

 In 2003, for Medicare beneficiaries with a prescription drug

expense, the average total drug

expense was not significantly

different between those with

Medicare only and those with

Medicare and any private 

insurance. 

Marie N. Stagnitti, MPA 

Introduction 

This Statistical Brief presents 2003 data from the Household 

Component of the Medical Expenditure Panel Survey (MEPS-HC) 

for the Medicare and non-Medicare subpopulations in the U.S. 

civilian noninstitutionalized (community) population on prescribed

medicine expenditures, by sources of payment and insurance 

status. Only prescribed medicine purchases in an outpatient setting

are included in the estimates. Over-the-counter medicines are 

excluded from the estimates. All differences discussed in the text 

are statistically significant at the 0.05 level. 

Findings

In 2003, outpatient prescription drug expenses totaled $177.7 

billion, with total prescription drug expenses for the Medicare 

population at $75.3 billion and total prescription drug spending by 

the non-Medicare population at $102.4 billion (figure 1). 

In 2003, out-of-pocket payments accounted for about half (51.0 

percent) of total prescription medicine expenses for Medicare beneficiaries and for two-fifths (40.4 percent) of total prescription medicine expenses for the non-Medicare population. The 21.1 percent of

prescription expenses paid by private insurance for Medicare 

beneficiaries was less than half of the 46.3 percent paid by private 

insurance for the non-Medicare population. In addition, the 28.0 

percent paid by public insurance and other sources was over twice 

as large for Medicare beneficiaries as the 13.3 percent paid for the 

non-Medicare population by public and other sources. (figure 2) 

In 2003, Medicare beneficiaries who did not have supplemental 

health insurance paid for three-quarters of their prescribed drug

expenses out of pocket (74.8 percent). The out-of-pocket percentage was smaller for Medicare beneficiaries with any private 

insurance (47.6 percent) and for Medicare beneficiaries with public

insurance only (30.6 percent). Medicare beneficiaries with additional

public insurance only had the lowest out-of-pocket percentage. 

(figure 3) 
In the non-Medicare population, uninsured people paid 87.8 percent of their prescribed drug expenses 

out of pocket in 2003. The out-of-pocket percentage was smaller for people with any private insurance 

(38.9 percent) or public insurance only (29.5 percent). The out-of-pocket percentage for those with public 

insurance only was smaller than those with any private insurance. (figure 3) 

In 2003, for those with a prescribed drug expense, the average annual drug expense per Medicare 

beneficiary was more than double the average annual expense for the non-Medicare population ($1,971 

versus $688). (figure 4) 

In 2003, the average annual prescription medicine expense for Medicare beneficiaries with an expense 

was higher for those people with public insurance only coverage in addition to Medicare ($2,604) than 

those with no coverage other than Medicare ($1,809) and those with Medicare coverage and any private 

insurance ($1,875). There was no significant difference in the average annual prescription drug expense 

when comparing Medicare beneficiaries with only Medicare and those beneficiaries with Medicare and 

any private insurance. (figure 5) 

The average annual out-of-pocket expense for Medicare beneficiaries with a prescription drug expense 

was highest for those people with no coverage other than Medicare ($1,353) compared with those with 

Medicare and any private insurance ($892) and those with Medicare and public only insurance ($796) in 

2003. There was no significant difference in the average annual out-of-pocket expense between those 

with Medicare and any private and those with Medicare and public only. (figure 5) 

In the non-Medicare population in 2003, for those with an expense, the uninsured had the lowest average 

annual total expense ($488) but the highest average annual out-of-pocket expense ($428) when 

compared with those with public insurance only ($768 and $226, respectively) and those with any private 

insurance ($697 and $271, respectively). Moreover, those with any private insurance had a higher 

average annual out-of-pocket expense than those with public insurance only; however, there was no 

significant difference when comparing total average annual expense for these two groups. (figure 5) 

Definitions 

Population 

– Medicare beneficiary/non-Medicare population: People are considered Medicare beneficiaries if they 

ever report being covered by Medicare while in the survey. This classification also includes a very small 

number of persons age 65 and older who did not report Medicare coverage. All others are considered 

members of the non-Medicare population. 

Source of payment 

– Out-of-pocket: This category includes payments by user or family. 

– Private insurance: Private insurance includes payments made by major medical insurance plans 

covering hospital and medical care (excluding payments from Medicare, Medicaid, and other public 

sources). Payments from Medigap plans for Medicare beneficiaries, TRICARE and other private are 

included. Payments from plans that provide coverage for a single service only, such as dental or vision 

coverage, are not included. 

– Public insurance: Public insurance includes Medicare; Medicaid; Department of Veterans Affairs 

(excluding TRICARE); other Federal sources (Indian Health Service, military treatment facilities, and 

other care provided by the Federal Government); various State and local sources (community and 

neighborhood clinics, State and local health departments, and State programs other than Medicaid); 

Medicaid payments reported for persons who were not enrolled in the Medicaid program at any time 

during the year; and other public sources of payment. 

– Other: This category includes Workers’ Compensation; unclassified sources (automobile, homeowner’s, 

or liability insurance and other miscellaneous or unknown sources); and any type of private insurance 

payments reported for people without private health insurance coverage during the year. 
Health insurance status 

Individuals under age 65 were classified into the following three insurance categories: 

– Any private health insurance: Individuals with insurance that provides coverage for hospital and 

physician care at any time during the year, other than Medicare, Medicaid, or other public 

hospital/physician coverage, are classified as having private insurance. Medigap coverage is included 

in this category. Persons with TRICARE are also included. Insurance that provides coverage for a 

single service only, such as dental or vision, is not included. 

– Public coverage only: Individuals are considered to have public coverage only if they met both of the 

following criteria: 1) They were not covered by private insurance at any time during the year. 2) They 

were covered by one of the following public programs at any point during the year: Medicare, Medicaid, 

or other public hospital/physician coverage. 

– Uninsured: The uninsured are defined as persons not covered by Medicare, TRICARE, Medicaid, other 

public hospital/physician programs, or private hospital/physician insurance at any time during 2003. 

Individuals covered only by noncomprehensive State-specific programs (e.g., Maryland Kidney Disease 

Program, Colorado Child Health Plan) or private single-service plans (e.g., coverage for dental or vision 

care only, coverage for accidents or specific diseases) are not considered to be insured. 

Individuals age 65 and older were classified into the following three insurance categories: 

– Medicare and private insurance: This category includes persons classified as Medicare beneficiaries 

and covered by Medicare and a supplementary private policy. 

– Medicare and other public insurance: This category includes persons classified as Medicare 

beneficiaries who met both of the following criteria: 1) They were not covered by private insurance at 

any point during the year. 2) They were covered by one of the following public programs at any point 

during the year: Medicaid, other public hospital/physician coverage. 

– Medicare only: This category includes persons classified as Medicare beneficiaries but not classified as 

Medicare and private insurance or as Medicare and other public insurance. This group includes 

persons who were enrolled in Medicare HMOs and persons who had Medicare fee-for-service coverage 

only.

About MEPS-HC 

MEPS-HC is a nationally representative longitudinal survey that collects detailed information on health 

care utilization and expenditures, health insurance, and health status, as well as a wide variety of social, 

demographic, and economic characteristics for the civilian noninstitutionalized population. It is cosponsored by the Agency for Healthcare Research and Quality and the National Center for Health Statistics. 

For more information about MEPS, call the MEPS information coordinator at AHRQ (301-427-1656) or 

visit the MEPS Web site at http://www.meps.ahrq.gov/. 

References 

For a detailed description of the MEPS-HC survey design, sample design, and methods used to minimize 

sources of nonsampling error, see the following publications: 

Cohen, J. Design and Methods of the Medical Expenditure Panel Survey Household Component. MEPS 

Methodology Report No. 1. AHCPR Pub. No. 97-0026. Rockville, Md.: Agency for Health Care Policy and 

Research, 1997.

Cohen, S. Sample Design of the 1996 Medical Expenditure Panel Survey Household Component. MEPS 

Methodology Report No. 2. AHCPR Pub. No. 97-0027. Rockville, Md.: Agency for Health Care Policy and 

Research, 1997.
Cohen, S. Design Strategies and Innovations in the Medical Expenditure Panel Survey. Medical Care,

July 2003: 41(7) Supplement: III-5–III-12. 

Suggested Citation 

Stagnitti, M. N. Outpatient Prescribed Medicine Expenses by Source of Payment and Insurance Status for 

the Medicare and Non-Medicare Populations, 2003. Statistical Brief 125. May 2006. Agency for 

Healthcare Research and Quality, Rockville, Md. http://www.meps.ahrq.gov/papers/st125/stat125 

∗ ∗ ∗

AHRQ welcomes questions and comments from readers of this publication who are interested in 

obtaining more information about access, cost, use, financing, and quality of health care in the United 

States. We also invite you to tell us how you are using this Statistical Brief and other MEPS data and 

tools and to share suggestions on how MEPS products might be enhanced to further meet your needs. 

Please e-mail us at mepspd@ahrq.gov or send a letter to the address below: 

Steven B. Cohen, PhD, Director 

Center for Financing, Access, and Cost Trends 

Agency for Healthcare Research and Quality 

540 Gaither Road 

Rockville, MD 20850 
Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2003

102.4

177.7

75.3

$0

$50

$100

$150

$200

Total population Medicare

population

Non-Medicare

population

Figure 1. Total outpatient prescribed medicine expenses for 

the Medicare and non-Medicare populations, 2003

Dollars in billions

Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2003

Figure 2. Outpatient prescribed medicine expenses 

by source of payment for the Medicare and non-Medicare 

populations, percentage and total dollars, 2003

40.4

51.0

46.3

21.1

13.3

28.0

0%

20%

40%

60%

Medicare Non-Medicare

38.4 41.4

47.4

15.8

13.6

21.1

$0

$30

$60

$90

$120

Medicare Non-Medicare

Percent Dollars in billions

102.4

75.3

%

Out of pocket

Private 

Public and other
Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2003

Figure 3. Outpatient prescribed medicine out-of-pocket 

percentage by insurance status for the Medicare

and non-Medicare populations, 2003

74.8

47.6

30.6

0%

20%

40%

60%

80%

100%

M edicare

M edicare o nly

M edicare + any private

M edicare + public o nly

38.9

29.5

87.8

0%

20%

40%

60%

80%

100%

N o n-M edicare

A ny private

P ublic o nly

Uninsured

Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2003

1,971

688

$0

$500

$1,000

$1,500

$2,000

Medicare Non-Medicare

Figure 4. Average annual outpatient prescription medicine

expense for those with an expense in the Medicare 

and non-Medicare populations, 2003
Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2003

796 892

1,353

1,808

983

456

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Medicare only Medicare + any

private

Medicare + public

only

428 271 226

426 542 60

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Any private Public only Uninsured

Figure 5. Average annual outpatient prescription medicine expense 

for those with an expense in the Medicare and non-Medicare 

populations by insurance status, 2003

Medicare Non-Medicare

1,809 1,875

2,604

697 768

488

T hird -p arty

spending

Out-of-pocket

spending