We examine the effect of gaining prescription drug insurance, as a result of Medicare Part D, on use of prescription drugs and other medical services for a nationally representative sample of Medicare beneficiaries. Given the heightened importance of prescription drugs for those with chronic illness, we provide separate estimates for elderly in poorer health. We find that Medicare Part D significantly reduced socioeconomic and geographic disparities in prescription drug insurance among the elderly. Gaining prescription drug insurance through Medicare Part D was associated with a 30 percent increase in the number of annual prescriptions and a 40 percent increase in expenditures on prescription drugs for both the general population of the elderly and the elderly in poorer health. We find little evidence that prescription drug insurance was strongly associated with the use of outpatient and inpatient services, although our investigation of these associations was limited by a lack of statistical power.