Medicare Prescription Drug Plan Terminology (Part D)

Medicare Prescription Drug Plan (Part D)
A stand-alone drug plan that adds prescription drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans. These plans are offered by insurance companies and other private companies approved by Medicare. Medicare Advantage Plans may also offer prescription drug coverage that follows the same rules as Medicare Prescription Drug Plans.

Medicare Prescription Drug Coverage (Part D)
Optional benefits for prescription drugs available to all people with Medicare for an additional charge. This coverage is offered by insurance companies and other private companies approved by Medicare.

Drugs on a formulary are often organized into different drug “tiers,” or groups of different drug types. Your cost depends on which drug tier your drug is in.
For example, a plan may form tiers this way:

Tier 1 – Generic drugs.
Tier 2 – Preferred brand-name drugs.
Tier 3 – Non-preferred brand name drugs.

Contact the plan to learn more about its specific tier structure.

Special Enrollment Period
A set time when you can sign up for Medicare Part B if you didn’t take Medicare Part B during the Initial Enrollment Period, because your or your spouse were working and had group health plan coverage through the employer or union. You can sign up at anytime you are covered under the group plan based on current employment status. The last eight months of the Special Enrollment Period starts the month after the employment ends or the group health coverage ends, whichever comes first.

Initial Coverage Limit
Once you have met your yearly deductible, and until you reach the plan’s out-of-pocket maximum, you pay a copayment (a set amount you pay) or coinsurance (a percentage of the total cost) for each covered drug.

Coverage Determination (Part D)
The first decision made by your Medicare drug plan (not the pharmacy) about your drug benefits, including the following:

  • Whether a particular drug is covered
  • Whether you’ve met all the requirements for getting a requested drug
  • How much you’re required to pay for a drug
  • Whether to make an exception to a plan rule when you request it

If the drug plan doesn’t give you a prompt decision and you can show that the delay would affect your health, the plan’s failure to act is considered to be a coverage determination. If you disagree with the coverage determination, the next step is an appeal.

Coverage Gap (Medicare Prescription Drug Coverage)
A period of time in which you pay higher cost sharing for prescription drugs until you spend enough to qualify for catastrophic coverage. The coverage gap (also called the “donut hole”) starts when you and your plan have paid a set dollar amount for prescription drugs during that year.

Creditable Prescription Drug Coverage
Prescription drug coverage (for example, from an employer or union) that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. People who have this kind of coverage when they become eligible for Medicare can generally keep that coverage without paying a penalty, if they decide to enroll in Medicare prescription drug coverage later.

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. The Food and Drug Administration (FDA) rates these drugs to be as safe and effective as brand-name drugs.

A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits.

Network Pharmacies
Medicare drug plans have contracts with a number of pharmacies that are part of the plan’s “network.” If you don’t go to a network pharmacy, your plan may not cover your prescription. Along with retail pharmacies, your plan’s network may include preferred pharmacies, a mail-order program, and a 60- or 90-day retail pharmacy program.

Non-Preferred Pharmacy
A network pharmacy that offers covered drugs to plan members at higher out-of-pocket costs than what the member would pay at a preferred network pharmacy.

Step Therapy
In some cases, plans require you to first try one drug to treat your medical condition before they will cover another drug for that condition. For example, if Drug A and Drug B both treat your medical condition, a plan may require your doctor to prescribe Drug A first. If Drug A doesn’t work for you, then the plan will cover Drug B. If a drug has step therapy restrictions, you will need to work with the plan and your doctor to get an exception.