This study developed a new measure of medication affordability that examines out-of-pocket drug expenses relative to available household resources. The authors assessed the spending patterns of approximately 2.1 million poor households (< or =100% federal poverty level) of adults aged 51 and older by Medicaid status. The data were drawn from the 2000-2001 Health and Retirement Study. Household spending was categorized into three broad types: basic living, health care, and discretionary. Older (aged 51 or older) poor households without Medicaid allocated about 72% of their total resources ($17,421, SE $783) to basic living needs. In comparison, those with Medicaid had scarcer total resources ($12,498, SE $423) and allocated 85% to basic living needs. Medication costs consumed the largest proportion of health care expenses for both types of poor households (Medicaid: $463, SE $67; non-Medicaid: $970, SE $102). After paying for basic living needs and health care costs, these families had, on average, only $16 left each week. Poor families have very few resources available for anything beyond basic living needs, even when they have Medicaid coverage. There is no great reservoir of discretionary funds to pay for increases in cost-sharing under Medicaid and Medicare Part D.