Medicare Part D Prescription Drug Coverage - Glossary

Term

Definition

Annual Deductible

Tells you the amount you will have to pay first for your prescription drugs each year before your plan starts to pay.

Annual Enrollment Period

The period each year that you can enroll in or change to another drug plan to receive Medicare prescription drug coverage, typically November 15 to December 31 of each year.

Assets

The value of things you own, including real estate, bank accounts, stocks, bonds, mutual funds and cash.

Cobrand

Refers to the partner relationships established between Medicare prescription drug plans and other organizations. Some drug plans enter into agreements with other organizations to help market their drug plans. These relationships are between the drug plan and the partner organizations and are outside of the contract with Medicare.

Coinsurance

The share of the Medicare-approved amount that you have to pay after you pay the deductible for Part A and or Part B. In the Original Medicare Plan, the coinsurance payment is a percentage of the approved amount for the service (like 20%). Or, a part of a prescription's cost that you pay out of your pocket. The amount is a percentage of the price of the drug.

Copayment

In some Medicare health plans, the amount that you pay for each medical service, like a doctor's visit. A copayment is usually a set amount you pay for a service. For example, this could be $10 or $20 for a doctor's visit. Copayments are also used for some hospital outpatient services in the Original Medicare Plan. Or, a part of a prescription's cost that you pay out of your pocket. The amount is a fixed amount for each prescription.

Company Name

Name of company that contracts with Medicare to offer a Medicare Prescription Drug Plan.

Cost Sharing

The copayment and/or coinsurance amount range you will pay for each prescription. Plans can make changes in the list of prescription drugs they cover and their costs during the year. Call the plan to get all the details of prescription drug coverage, including the list of drugs the plan covers, so you understand any conditions or limits.

Coverage Gap

The stage in Medicare prescription drug coverage when you have to pay all of your own drug costs, while still paying monthly premiums. Also known as the "donut hole."

Creditable Coverage

Drug coverage offered by other plans, such as a current or former employer or union, that gives you coverage at least as good as the standard Medicare prescription drug coverage.

Deductible

The amount you must pay for health care, before Medicare begins to pay, either each benefit period for Part A, or each year for Part B. These deductible amounts can change every year.

Donut Hole

Another term for the Coverage Gap. (see above)

Formulary

A list of drugs that a Medicare drug plan covers is called a formulary. Formularies include generic drugs and brand-name drugs. Most prescription drugs used by people with Medicare will be on a plan's formulary. The formulary must include at least two drugs in categories and classes of most commonly prescribed drugs to people in Medicare.

Generic Drug

A prescription drug that has the same active-ingredient formula as a brand-name drug. Generic drugs usually cost less than brand-name drugs and are rated by the Food and Drug Administration (FDA) to be as safe and effective as brand-name drugs.

Income

Money you receive from Social Security, a job, retirement benefits, veterans' benefits, and other sources such as interest from investments.

Initial Enrollment Period

The initial enrollment period for those currently on Medicare is from November 15, 2005 to May 15, 2006. For those newly eligible for Medicare in or after March 2006, the initial enrollment period for Medicare prescription drug coverage is three months before and three months after the month they turn 65.

Late Enrollment Penalty

The extra amount you have to pay in premiums if you decide not to enroll in a Medicare prescription drug plan when you first become eligible. The penalty is 1% of the premium for each month you wait. This penalty amount will continue every month as long as you are in a Medicare prescription drug plan.

Medicaid

A joint Federal and State program that helps with medical costs for some people with low incomes and limited resources. Medicaid programs vary from state to state, but most health care costs are covered if you qualify for both Medicare and Medicaid.

Medicare Advantage

Another name for Medicare Part C.

Medicare + Choice

An earlier name for Medicare Part C.

Medicare Health Plans

A way to get Medicare coverage through a private health plan. Also known as Medicare Part C or Medicare Advantage.

Medicare Part A

The part of Medicare that primarily covers much of the cost of hospital care, home health, or a skilled nursing facility.

Medicare Part B

The part of Medicare that covers most of the cost of your doctor visits, outpatient care, and other services.

Medicare Part C

Also known as Medicare Health Plans (formally, "Medicare+Choice" and "Medicare Advantage"). These are Medicare-approved private insurance plans, including HMOs, PPOs, private fee-for-service plans, and medical saving accounts. These plans may or may not include prescription drug coverage.

Medicare Part D

Also known as Medicare prescription drug coverage. This is Medicare's new insurance coverage to help people in Medicare pay for their prescription drugs.

Medicare Managed Care Plan

A health plan option that is available in some areas of the country. In most managed care plans, you can only go to doctors, specialists, or hospitals on the plan's list. Plans must cover all Medicare Part A and Part B health care. Some managed care plans cover extras, like prescription drugs. Your costs may be lower than in the Original Medicare Plan.

Medicare Prescription Drug Coverage

Another name for Medicare Part D.

Medicare Savings Program

Medicaid programs to help people who are in Medicare (but do not qualify for full Medicaid benefits) pay some or all Medicare premiums and deductibles.

Medicare Supplemental Insurance

Another name for Medigap.

Medigap

A specific type of insurance policy that supplements the coverage you receive from Medicare. Individuals without retiree or union health benefits sometimes buy these to insure against costs not covered by Medicare.

Monthly Premium

Amount you pay each month for prescription drug coverage, when you join the plan.

Out-of-Pocket Spending

The amount of money that you pay for your covered drugs from your own money. If you have insurance coverage for drugs, this is the amount you pay yourself (not including the amount your prescription drug company or the plan pays).

Part A (Hospital Insurance)

Hospital insurance that pays for inpatient hospital stays, care in a skilled nursing facility, hospice care and some home health care.

Part B (Medical Insurance)

Medicare supplementary medical insurance that helps pay for doctors' services, outpatient hospital care, durable medical equipment, and some medical services that are not covered by Part A.

Plan Name

This is the name of the plan offered by the company that contracts with Medicare.

Preferred Drug List

Another word for "formulary."

Premium

The amount you pay each month to receive insurance coverage.

Prior Authorization

To be sure certain drugs are used correctly and only when truly necessary, plans may require a "prior authorization." This means you will need a prior approval from your plan before a particular drug will be covered. In many instances, your doctor or health care provider must first contact the plan and show there is a medically necessary reason why you must use that particular drug for it to be covered.

Qualified Medicare Beneficiary (QMB)

This is a Medicaid program for beneficiaries who need help in paying for Medicare services. The beneficiary must have Medicare Part A and limited income and resources. For those who qualify, the Medicaid program pays Medicare Part A and Part B premiums, and Medicare deductibles and coinsurance amounts for Medicare services.

Quantity Limitation

For safety and cost reasons, plans may limit the quantity of drugs that they cover over a certain period of time.

Specified Low - Income Medicare Beneficiary (SLMB)

A Medicaid program that pays for Medicare Part B premiums for individuals who have Medicare Part A, a low monthly income, and limited resources.

State Health Insurance Assistance Program (SHIP)

A state program that offers free one-on-one counseling and assistance to people with Medicare and their families. The name for this program may vary from state to state. See the State Health Insurance Assistance Program (SHIP) topic for comprehensive information.

State Pharmacy Assistance Program (SPAP)

A state-run program, separate from Medicaid, that provides drug coverage and may coordinate that coverage with Medicare prescription drug plans for maximum saving to eligible residents. See the State Pharmacy Assistance Program (SPAP) topic for comprehensive information.

Step Therapy

Step therapy is a type of prior authorization. With step therapy, in most cases, you must first try certain less expensive drugs that have been proven effective for most people with your condition. For instance, some plans may require you to first try a generic drug (if available), then a less expensive brand-name drug on their drug list, before you can get a similar, more expensive brand-name drug covered.

Tiers

To have lower costs, many plans place drugs into different "tiers." Each plan can form their tiers in different ways. Depending on the tier, your drug cost share will vary.

Total Drug Costs

The total amount paid for your medicines. It includes what you pay and also what Medicare pays.