Objectives. This study examined the impact of drug coverage generosity on older persons' prescription events (fills) and expenditures. Methods. A cross-sectional study was conducted of 6237 older persons from the 1995 Medicare Current Beneficiary Survey. Dependent variables were per capita prescription events and expenditures. Independent variables were insurance type and drug coverage generosity. Control variables included sociodemographic and health status factors. Results. Regardless of insurance type, per capita prescription events increased as drug coverage generosity improved and then decreased at the most generous level. Per capita prescription expenditures increased as generosity improved; with generous prescription coverage, prescription expenditures were approximately 3 times those with Medicare only. Conclusions. Even when factors that affect drug use and insurance selection are controlled, prescription coverage generosity influences prescription use.