OBJECTIVE: Inappropriate prescribing can cause significant adverse events for all age groups. It is perhaps most challenging and costly when it happens to vulnerable population groups in general and the elderly in particular. Some studies explored the high prevalence and demographic variables as risk factors of inappropriate prescribing in the elderly. This study extends to examine the impact of insurance type on inappropriate drug use by the elderly. METHOD: Inappropriate geriatric medications were defined by well accepted explicit criteria. Logistic models were employed to estimate the likelihood functions using the 1996 Medical Expenditure Panel Survey (MEPS), based on a national representative sample of the non-institutionalized populations. Complex survey sample design was adjusted in modeling. RESULTS: When grouping all types of insurance together, a dichotomous insurance variable captured no difference in the likelihood of inappropriate medication use between the insured and the uninsured groups. After distinguishing the insurance type, it was found that the elderly with fee-for-service (FFS) coverage were more likely to use inappropriate prescriptions (OR=1.73, 95% CI: 1.27-2.34), compared to those without coverage. This effect was reduced but remained significant after controlling for the total number of prescriptions (OR=1.39, 95% CI: 1.01-1.90). In contrast, people with HMO type of coverage were indifferent with the uninsured. Moreover, as expected, the most predictive variable of inappropriate prescriptions is the total number of medication use, followed by worse health conditions and women. CONCLUSION: When analyzing insurance impact on drug utilization, distinguishing insurance type seemed to be important. This study suggested a higher risk with FFS model for inappropriate medication use compared to the uninsured and others, the first evidence of its kind based on a national database. While this finding offers some interesting implications for insurance policies, further research is warranted to discern the reasons for the observed adverse impact of FFS coverage.