OBJECTIVES: There is increasing concern that rising drug costs may make prescription drugs unaffordable to seniors and therefore a need for Medicare prescription benefits coverage. The objective of this study was to assess prescription drug use patterns and expenditure of diabetic Medicare beneficiaries with supplemental private insurance with and without prescription benefits. METHODS: The 1999 Medical Expenditure Panel Survey (MEPS) provided the data for the study. Medicare diabetics with supplemental private insurance coverage were identified, and those with and without prescription benefits separated into two groups. Descriptive statistics for the two groups were determined and t-test used to compare differences in age, education, income, number of diabetes related prescriptions, total drug and out of pocket drug expenditures related to diabetes, and number of comorbidities. RESULTS: A total of 453 Medicare diabetics were identified from a total of 24,618 MEPS respondents with 186 (39.4%) reporting supplemental private insurance. Of these, 103 (55.4%) reported drug coverage. Those with and without drug coverage did not differ significantly with respect to age but education was significantly different (p=0.04) with those having coverage being more educated. Income differed but did not reach statistical significance (p=0.053). The two cohorts did not differ significantly in terms of total number of diabetes-related prescriptions and both total and out of pocket expenditures. However, out of pocket cost for those without prescription coverage averaged about 76% of total drug expenditure while it averaged 53% for those with coverage. CONCLUSIONS: In the MEPS data, Medicare diabetics with supplemental private insurance coverage with and without prescription benefits did not differ in terms of diabetes related prescription use and expenditure. However, those with out drug coverage who had a lesser mean income ($15,670) incurred a higher percentage of out of pocket drug cost than those with coverage and who had a higher mean income ($19,199).