Medical Expenditure Panel Survey Agency for Healthcare 

Research and Quality

STATISTICAL BRIEF #138 

September 2006 

Population Characteristics of Medicare 

Beneficiaries in the U.S. Civilian 

Noninstitutionalized Population, by 

Level of Annual Prescribed Medicines 

Expenses, 2003 

Highlights 

 In 2003, 9.5 percent of the 

Medicare population had $0 

prescribed drug expenses (Rx 

Category 1), 61.6 percent had 

expenses of $1-$2,083 (Rx 

Category 2), 20.5 percent had 

expenses of $2,084-$4,723 (Rx 

Category 3), and 8.4 percent had 

expenses greater than or equal 

to $4,724. 

 Medicare beneficiaries under 

age 65 accounted for a greater

proportion of those in Rx Category 4 (26.9 percent) than those 

in Rx Category 3 (13.7 percent) 

or Rx Category 2 (10.3 percent).

 For Medicare beneficiaries, 

there were no significant 

differences in the distribution of 

white non-Hispanics, black nonHispanics, and Hispanics in Rx

Category 2 (80.5, 9.3, and 6.4

percent, respectively), Rx

Category 3 (82.6, 9.7, and 5.5

percent, respectively), or Rx

Category 4 in 2003 (80.9, 11.0,

and 4.6 percent, respectively).

 The proportion of Medicare

beneficiaries in excellent, very

good, and good health decreased as the categories for 

total drug expenses increased

from Rx Category 2 to Rx

Category 3 to Rx Category 4 

(75.6 to 62.0 to 43.5 percent, 

respectively).

 Poor Medicare beneficiaries 

accounted for a greater proportion of those in Rx Category 4 

(18.9 percent) than those in Rx

Category 3 or Rx Category 2 

(13.2 and 12.5 percent, respectively). 

 Medicare beneficiaries in the 

West made up a higher proportion in Rx Category 2 (22.6 percent) than in Rx Category 3 and 

Rx Category 4 (15.5 and 13.4 

percent, respectively).

Marie N. Stagnitti, MPA 

Introduction 

Using data for the U.S. civilian noninstitutionalized (community) 

population from the 2003 Household Component of the Medical 

Expenditure Panel Survey (MEPS-HC), this Statistical Brief compares the population characteristics of Medicare beneficiaries having

different levels of annual outpatient prescribed drug expenses. 

Starting January 1, 2006, a new Medicare prescription drug 

coverage (Medicare Part D) was made available to everyone with 

Medicare. Everyone with Medicare had the option to enroll in this

program and obtain coverage that may help lower their prescription

drug costs and help protect them against higher costs in the future.* 

The estimates in this brief are presented in terms of the expense 

categories in the standard Medicare Prescription Drug Benefit for 

this new Medicare Part D, which consists of a multitiered benefit with 

three drug cost and cost-sharing categories: 

– 1st tier: Prescribed medicines expenses less than or equal to 

$2,250; after a $250 deductible Medicare pays 75 percent and the 

beneficiary pays 25 percent of drug costs. 

– 2nd tier: Prescribed medicines expenses greater than $2,250 but 

less than or equal to $5,100; beneficiary pays 100 percent of drug 

costs.

– 3rd tier: Prescribed medicines expenses greater than $5,100; 

Medicare pays 95 percent and beneficiary pays 5 percent of drug 

costs.

In this brief, these 2006 expense categories have been deflated to 

2003 dollars, and drug expenses have been rounded to the nearest

whole dollar: 

– Rx Category 1: $0 prescribed medicines expenses 

– Rx Category 2: Prescribed medicines expenses of $1-$2,083 

– Rx Category 3: Prescribed medicines expenses of $2,084-$4,723 

– Rx Category 4: Prescribed medicines expenses greater than or

equal to $4,724 

 * CMS: Center for Medicare and Medicaid Services Web site. Medicare Program: 

General information on Prescription Drug Coverage. http://www.cms.hhs.gov/ 

MedicareGenInfo/
Only prescribed medicines purchases in an outpatient setting are included in the estimates presented in the 

brief. Over-the-counter medicines are excluded from these estimates as are prescription medicines 

administered in an inpatient setting or in a clinic or physician’s office. All differences discussed in the text 

are statistically significant at the 0.05 level. 

Findings 

In 2003, there were 41.9 million Medicare beneficiaries in the U.S. civilian noninstitutionalized population. 

Of that number, 9.5 percent had no prescribed drug expense (Rx Category 1), and 61.6 percent had annual 

prescribed drug expenses between $1 and $2,083 (Rx Category 2). The percentage of Medicare 

beneficiaries having drug expenses between $2,084 and $4,723 (Rx Category 3) was 20.5 percent, and the 

percentage having drug expenses of $4,724 and higher (Rx Category 4) was 8.4 percent. (figure 1) 

During 2003, Medicare beneficiaries under age 65 accounted for a greater proportion of those in Rx 

Category 4 (26.9 percent) when compared with those in Rx Category 3 and Rx Category 2 (13.7 versus 

10.3 percent, respectively). In addition, Medicare beneficiaries under age 65 accounted for a greater 

proportion of those in Rx Category 3 than those in Rx Category 2 (13.7 percent versus 10.3 percent). 

(figure 2) 

There were no significant differences in the distribution of white non-Hispanics, black non-Hispanics, and 

Hispanics when comparing Rx Category 4 (80.9, 11.0, and 4.6 percent, respectively), Rx Category 3 (82.6, 

9.7, and 5.5 percent, respectively) and Rx Category 2 (80.5, 9.3, and 6.4 percent, respectively) for 

Medicare beneficiaries in 2003. (figure 3) 

For Medicare beneficiaries in 2003, females accounted for a higher proportion in Rx Category 4 (62.1 

percent) than in Rx Category 2 (56.1 percent), while males accounted for a higher proportion in Rx 

Category 2 (44.0 percent) than in Rx Category 4 (37.9 percent). (figure 4) 

A higher proportion of Medicare beneficiaries in Rx Category 4 were beneficiaries with additional public 

insurance (27.2 percent) than the proportion in Rx Category 3 (16.6 percent) and the proportion in Rx 

Category 2 (13.9 percent) in 2003. In addition, there was a lower proportion of beneficiaries in Rx Category 

4 with Medicare and private coverage (48.2 percent) than in Rx Category 3 (58.3 percent) and Rx Category 

2 (57.3 percent). There was no significant difference in the proportion of Medicare beneficiaries in any of 

the Rx categories when looking at those with Medicare only. (figure 5) 

In 2003, for Medicare beneficiaries, the proportion of those in excellent, very good, and good health 

decreased (75.6 percent to 62.0 percent to 43.5 percent) as the categories for total drug expenses 

increased from Rx Category 2 to Category 3 to Rx Category 4; and, conversely, the proportion of those in 

fair and poor health increased (24.4 percent to 38.0 percent to 56.5 percent) as the categories for total drug 

expenses rose from Rx Category 2 to Rx Category 3 to Rx Category 4. (figure 6) 

During 2003, a higher proportion of Medicare beneficiaries in Rx Category 2 (59.2 percent) than in Rx 

Category 4 (51.1 percent) were in the middle/high income group. Poor Medicare beneficiaries accounted for 

a greater proportion of those in Rx Category 4 (18.9 percent) than those in Rx Category 3 or Rx Category 2 

(13.2 and 12.5 percent, respectively). (figure 7) 

For Medicare beneficiaries in 2003, the West made up a higher proportion in Rx Category 2 (22.6 percent) 

than in Rx Category 3 (15.5 percent) and Rx Category 4 (13.4 percent). The South represented a larger 

proportion of Rx Category 3 (44.7 percent) than Rx Category 2 (35.5 percent). Medicare beneficiaries in the 

Midwest accounted for a greater proportion of those in Rx Category 4 (28.4 percent) than those in Rx 

Category 2 (19.8 percent), and Medicare beneficiaries in the Northeast accounted for a greater proportion 

of those in Rx Category 2 (22.1 percent) than those in Rx Category 3 (16.4 percent). (figure 8) 

Definitions 

Medicare population 

People are considered Medicare beneficiaries if they ever report being covered by Medicare while in the 

survey. 
Prescribed drug expenses 

The estimates in this brief are presented in terms of the expense categories in the standard Medicare 

Prescription Drug Benefit for this new Medicare Part D, which consists of a multitiered benefit with three 

drug cost and cost-sharing categories: 

– 1st tier: Prescribed medicines expenses less than or equal to $2,250; after a $250 deductible Medicare 

pays 75 percent and the beneficiary pays 25 percent of drug costs. 

– 2nd tier: Prescribed medicines expenses greater than $2,250 but less than or equal to $5,100; beneficiary 

pays 100 percent of drug costs. 

– 3rd tier: Prescribed medicines expenses greater than $5,100; Medicare pays 95 percent and beneficiary 

pays 5 percent of drug costs. 

In this brief, these 2006 expense categories have been deflated to 2003 dollars, and drug expenses have 

been rounded to the nearest whole dollar: 

– Rx Category 1: $0 prescribed medicines expenses 

– Rx Category 2: Prescribed medicines expenses from $1-$2,083 

– Rx Category 3: Prescribed medicines expenses from $2,084-$4,723 

– Rx Category 4: Prescribed medicines expenses greater than or equal to $4,724 

Age 

Age is the last available age for the sampled person. For most persons, this was their age at the end of the 

year. 

Racial and ethnic classifications 

Classification by race and ethnicity was based on information reported for each family member. 

Respondents were asked if each family member's race was best described as American Indian, Alaska 

Native, Asian or Pacific Islander, black, white, or other. They also were asked if each family member's main 

national origin or ancestry was Puerto Rican; Cuban; Mexican, Mexicano, Mexican American, or Chicano; 

other Latin American; or other Spanish. All persons whose main national origin or ancestry was reported in 

one of these Hispanic groups, regardless of racial background, were classified as Hispanic. Since the 

Hispanic grouping can include black Hispanic, white Hispanic, Asian and Pacific Islanders Hispanic, and 

other Hispanic, the race categories of black, white, Asian and Pacific Islanders, and other do not include 

Hispanic. Beginning in 2002, MEPS respondents were allowed to report multiple races, and these persons 

were included in the other non-Hispanic category. As a result, there was a slight increase in the percentage 

of persons classified in this category in 2002 compared with prior years. 

Health insurance status 

Respondents were asked about health insurance coverage for themselves and all household members at 

each round of interviewing. The insurance variables reflect supplemental coverage, in addition to Medicare, 

that beneficiaries had for hospital and physician services. Persons categorized as having supplemental 

insurance coverage may or may not have coverage for prescription drugs. The insurance categories are 

mutually exclusive and hierarchical. Persons with more than one type of supplemental coverage were 

placed into an insurance category in the following order. 

– 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, and 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. 

Perceived health status 

During each round of interviewing, the household respondent was asked to rate the health of each person 

in the family according to the following categories: excellent, very good, good, fair, or poor. For this report, 

the response categories “excellent,” “very good,” and “good” were collapsed, as were “fair” and “poor.” 

Health status was missing for approximately 1 percent of beneficiaries. 

Poverty status 

Each year, persons were classified according to their family’s income in terms of poverty status. In this 

report, poverty status is the ratio of the family’s income to the Federal poverty thresholds, which control for 
the size of the family and the age of the head of the family. The following classification of poverty status 

was used: 

– Poor: Persons in families with income less than 100 percent of the poverty line, including those who 

reported negative income. 

– Near poor/low income: Persons in families with income of 100 percent of the poverty line through 200 

percent of the poverty line. 

– Middle income/high income: Persons in families with income over 200 percent of the poverty line. 

Region 

Each MEPS sample person was classified as living in one of the following four regions as defined by the 

U.S. Census Bureau: 

– Northeast: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New 

Jersey, and Pennsylvania. 

– Midwest: Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, North Dakota, South 

Dakota, Nebraska, and Kansas. 

– South: Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, 

Georgia, Florida, Kentucky, Tennessee, Alabama, Mississippi, Arkansas, Louisiana, Oklahoma, and 

Texas. 

– West: Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada, Washington, Oregon, 

California, Alaska, and Hawaii. 

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 (301-427-1406) or visit 

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

References 

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 Healthcare 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. Population Characteristics of Medicare Beneficiaries in the U.S. Civilian Noninstitutionalized 

Population, by Level of Annual Prescribed Medicines Expenses, 2003. Statistical Brief #138. September 

2006. Agency for Healthcare Research and Quality, Rockville, MD. http://www.meps.ahrq.gov/papers/ 

st138/stat138.pdf 

∗ ∗ ∗

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.

Figure 1. Medicare population in the U.S. civilian noninstitutionalized 

population annual prescribed drug expenditures, 2003

61.6

20.5

9.5 8.4

0

20

40

60

80

100

 Rx Category 1: 

$0 Expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

Percent

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

Figure 2. Medicare population by annual prescribed drug

expenditures and age, 2003

10.3 13.7

26.9

76.6

89.7 86.3

73.1

23.4

0%

20%

40%

60%

80%

100%

 Rx Category 1: 

$0 expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

Age 64 and under Age 65 and older

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

Figure 3. Medicare population by annual prescribed drug

expenditures and race/ethnicity, 2003

66.1

80.5 82.6 80.9

16.5

9.3 9.7 11.0 12.2 6.4 5.5 4.6

5.2 3.9 2.2 3.4

0%

20%

40%

60%

80%

100%

 Rx Category 1: 

$0 Expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

White non-Hispanic Black non-Hispanic Hispanic Other non-Hispanic

Percent

Note: Percentages may not add to 100 because of rounding.

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

Figure 4. Medicare population by annual prescribed

drug expenditures and sex, 2003

57.3

44.0 43.4 37.9

42.7

56.1 56.6 62.1

0%

20%

40%

60%

80%

100%

 Rx Category 1: 

$0 Expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

Male Female

Percent

Note: Percentages may not add to 100 because of rounding.
Source: Center for Financing, Access, and Cost Trends, AHRQ, Household Component of the Medical Expenditure Panel Survey, 2003.

Figure 5. Medicare population by annual prescribed drug

expenditures and insurance status, 2003

39.7

57.3 58.3

48.2

23.0

13.9 16.6 27.2

37.4 28.8 25.0 24.7

0%

20%

40%

60%

80%

100%

 Rx Category 1: 

$0 Expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

Medicare and private Medicare and public Medicare only

Percent

Note: Percentages may not add to 100 because of rounding.

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

Figure 6. Medicare population by annual prescribed drug

expenditures and health status, 2003

89.1

75.6

62.0

43.5

10.9

24.4

38.0

56.5

0%

20%

40%

60%

80%

100%

 Rx Category 1: 

$0 Expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

Excellent/very good/good Fair/poor

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

Figure 7. Medicare population by annual prescribed drug

expenditures and poverty status, 2003

12.5 13.2 18.9

29.7

28.3 29.1

30.0

50.3 59.2 57.7 51.1

20.1

0%

20%

40%

60%

80%

100%

 Rx Category 1: 

$0 Expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

Poor Near poor/low income Middle income/high income

Percent

Note: Percentages may not add to 100 because of rounding.

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

Figure 8. Medicare population by annual prescribed drug

expenditures and region, 2003

22.1 16.4 20.2

26.3 19.8 23.4

28.4

36.5 35.5 44.7

38.0

20.6 22.6 15.5 13.4

16.6

0%

20%

40%

60%

80%

100%

 Rx Category 1: 

$0 Expenses

 Rx Category 2: 

Expenses $1-$2,083

 Rx Category 3: 

Expenses $2,084-

$4,723

 Rx Category 4: 

Expenses greater

than or equal to

$4,724 

Northeast Midwest South West

Percent