OBJECTIVE: To describe existing prescription drug insurance coverage for older Americans, to describe out-of-pocket payment levels per prescription associated with service benefit prescription drug plans used by older persons, and to examine the association of prescription drug coverage types with the reported use of prescription drugs by older persons. PATIENTS AND METHODS: Data were obtained from a national survey of 1570 community-dwelling older persons (≥65 y) conducted in June 1998. A 2-part utilization model was estimated using logistic regression and ordinary least-squares regression. RESULTS: Data from 310 respondents were used for analysis. Overall, 66.1% of respondents reported having prescription drug insurance coverage. A majority (76.6%) of respondents having private drug coverage reported having a service benefit plan (requiring copayment or coinsurance amount to be paid for each prescription). The median copayment per brand name and generic prescription for persons reporting having coverage by service benefit plans was $10 and $5, respectively. CONCLUSIONS: Overall, a majority of older persons reported paying relatively small amounts out-of-pocket per prescription during 1998. Among persons who reported having drug insurance coverage, there were no statistically significant differences in the reported number of drugs used daily, regardless of out-of-pocket payment amount per prescription. Patient need and level of past drug use were significantly associated with both the likelihood of using any prescription drugs and the level of use among users. More research is needed to examine differences in drug expenditures and characteristics of drugs used across prescription drug insurance types for older persons.