Beginning in the mid 1970s states have been establishing and expanding programs that assist the elderly, disabled, and chronically ill to purchase and acquire pharmaceuticals. About half of the states have pharmaceutical assistance programs for low income seniors or people with disabilities who do not qualify for Medicaid. Though almost all Americans age 65 and older are enrolled in Medicare, the program does not pay for outpatient prescription drugs, and it is estimated that 35 percent of Medicare beneficiaries lack drug benefits.

• Cost-sharing by recipients is required, although it varies in approach (deductibles versus co-payment per prescription), and varies greatly in amount.
• The programs target people age 65 years and older, although half also offer coverage to people with disabilities under age 65.
• Most if not all prescription drugs are covered and some programs cover non-prescription drugs. A few states limit coverage to treatments for specific illness such as heart disease and diabetes.

• The annual cost per person ranges from approximately $115 per beneficiary per year to over $1,000 per person. The differences are explained primarily by the extent of the benefits offered, and the amount of cost-sharing required by the beneficiary. For example, in a state where the drugs covered are for a limited number of diseases, and the co-payments are significant, the cost to the state is less than if the program covers all prescription drugs and has minimal co-pays.
• The source of funding for the state programs varies from state general fund appropriations, to local foundation support, special revenue funds, excise taxes on tobacco products, sales tax on construction materials, the lottery, and casino revenues.
• The amount of cost-sharing required for beneficiaries is not consistent across state programs, and there are different eligibility requirements and levels of benefits. Two states, Illinois and Minnesota, have monthly deductible requirements, and several states, Iowa, Maryland, Massachusetts, New York, Pennsylvania and Washington have annual deductible or fee requirements. The remaining states require co-payment per prescription, but even those states use different methodologies to calculate co-pays. For instance, a few states calculate the co-pay as a percent of the retail prescription cost, but most states have a flat co-pay ranging from 25 cents, to $12. One state requires a co-pay of $5, or 25 percent of the cost of each prescription, which ever is greater. Another state uses the approach of charging the cost of the drug minus the Medicaid rebate amount.