Issues Related to Possible Coverage of Outpatient Prescription Drugs Under Medicare

Gao ID: T-HRD-87-15 June 2, 1987

In response to a congressional request, GAO discussed issues related to the establishment of outpatient prescription drug coverage under Medicare. GAO noted that the Health Care Financing Administration (HCFA) has had substantial experience with financing outpatient drugs under the Medicaid Program. GAO would support the method of determining reasonable drug prices that HCFA uses under Medicaid; however, states have tended to use average wholesale prices, which HCFA believes exceed pharmacies' actual costs by 15 to 18 percent. GAO believes that existing laws, combined with adequate auditing and investigative activities, should control potential program fraud and abuse. GAO also believes that Congress should consider: (1) whether Medicare or Medicaid would be primarily responsible for paying for drugs for individuals eligible for both programs; (2) how to determine the allowable costs of prescriptions purchased before beneficiaries meet a drug deductible; and (3) whether pharmacies would have to accept assignment as a condition of participating in the program.

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