This study examined the prescription drug costs of Medicare beneficiaries participating in a Medicaid home- and community-based services (HCBS) program and discussed possible implications of providing a prescription drug benefit under Medicare. The study examined Medicaid pharmaceutical claims data using two random samples (n=766) of dually eligible Medicare beneficiaries in a HCBS program from four regions in Georgia. The average total monthly Medicaid prescription drug expenditure was determined. Annual prescription expenditures for this group averaged more than 1,500 dollars per person. Prescription drugs intended for the treatment of cancer and circulatory disorders combined to account for 61% of total program drug expenditures. Multivariate analysis found that drug expenditures were higher for those who died during the observation period, the young-old, Caucasians, and those who self-selected into the program. Higher drug expenditures for the self-selected group, even after frailty adjustments, suggest the presence of adverse selection. Medicare prescription drug benefit proposals that rely on voluntary enrollment may also experience adverse selection from frail, low-income beneficiaries.