Medicare Prescription Drug Plan Glossary | Medicare D Glossary Terms

Administration on Aging – The Older Americans Act of 1965 established the AOA, which is an agency of the U.S. Department of Health and Human Services. Its mission is to develop a comprehensive coordinated and cost-effective system of long-term care that helps elderly individuals to maintain their dignity in their homes and communities.

Advocate – A person who gives you support or protects your rights.

AEP or Annual Election Period – The annual period from November 15th until December 31 when a Medicare beneficiary can enroll into a Medicare Part D plan or re-enroll into their existing plan or change into another Medicare Part D plan.

Annual Notice of Change – This is a notice provided by the insurance company that explains which benefits have changed and how they have changed for the upcoming plan year. It is a notice required by the Centers for Medicare to make sure you know these changes to your coverage.

Appeal – An appeal is a special kind of complaint you can make if the plan declines to cover prescription drugs you want or refuses to pay for drugs you’ve already received. You can also appeal if your plan decides to stop covering drugs you’re currently receiving coverage on. There is a specific process you and your prescription drug plan must use when you appeal one of its decisions.

Assets – Property you own that the government may review when you apply for drug assistance. For help with the costs of a Medicare prescription drug plan, the government counts cash or any property that can be turned into cash within 20 days. This includes checking and savings accounts, certificates of deposit, IRAs and 401k plans, stocks, bonds and similar items. It does not include your primary home, or certain property related to burial expenses.

Authorized Representative – The person you designate to assist or handle affairs related to your health care services. This may be someone you designate as a Power of Attorney, a family member, friend, caregiver, or it may be an advocate you assign to assist with an exception or appeal or grievance.

Beneficiary – The person, person or entity designated to receive benefits from an insurance company.

Benefit – Another name for coverage, for example, in a Medicare Part D plan, prescription drug costs that are paid for by your insurance plan are your benefits, or coverage.

Benefit Period – A Benefit period begins the first day you stay in a hospital or skilled nursing facility and ends when you have been out of the hospital or skilled nursing facility for 60 days in a row. If you go into the facility after one benefit period has ended, a new benefit period begins. There is no limit to the number of benefit periods you can have.

Brand Name Drugs – Pharmaceutical companies hold patents on the drugs they develop for a certain amount of time, these drugs are sold under a trademarked brand name.

CMS or Centers for Medicare and Medicaid Services – The federal agency overseeing both the Medicare and Medicaid programs. They were made responsible for carrying out the legislation that put the Part D Insurance plans into existence and overseeing how all of the plans conduct business.

Cancellation – Termination of a policy before its normal expiration date.

Caregiver – A person who helps care for someone who is ill, disabled or added. Some caregivers are relatives or friends who volunteer their help. Some people provide caregiving services for a fee.

Catastrophic Coverage – The Last portion of coverage in a Part d plan in which the plan pays almost the entire drug expense for the remainder of the calendar year. The portion that the beneficiary pays during this step is a very small amount of the drug expenses, approximately 5%.

Catastrophic Limit – The catastrophic limit is the highest amount of money you’ll have to pay out of your own pocket in a year for certain covered prescription drug charges.

Certificate of Insurance – The printed description of the benefits and coverage provisions forming the contract between the carrier and the customer.

Chronic Condition – Prolonged conditions or illness, such as heart disease, asthma, or diabetes.

Claim – A request by a beneficiary to the insurance company for the insurance company to pay for services obtained from a health care professional.

Coinsurance – The portion of cost belonging to the beneficiary after costs are split on a percentage basis. In a 20/80 plan, the beneficiary would pay 20%.

Copayment or copay – When the beneficiary pays a pre-determined flat amount for each service. A doctor’s visit copay is often 10 or 15 dollars.

COBRA – A Federal law that gives the right to pay for continued group health care coverage for a specified period if the person loses coverage because of reduced work hours or leaving or loss of a job.

Coordination of Benefits – This occurs when the insured is covered under more than one plan, for example, under a group plan at work, and as a family member on a spouse’s plan. The benefits from the plans are coordinated so as to limit the total benefits from all plans. Usually the benefits from all plans will not exceed 100% of the covered medical expenses.

Cost Sharing – The way in which insurance plans share their costs. Examples of cost sharing are coinsurance and co-payments.

Coverage – The benefits package received from an individual insurance plan. Under Part D, prescription drug costs paid by the insurer are the benefits package, also known as coverage.

Coverage Gap – The gap in your coverage that spans between ordinary drug coverage and catastrophic drug coverage is called the coverage gap. In this gap, the Medicare beneficiary pays 100% of their prescription costs. According to the federal government, about 88% of Medicare beneficiaries who enrolled in a Medicare Part D plan do not have Donut Hole coverage. The standard or model Part D coverage begins with a deductible of $275 followed by a co-pay of 25% on the next $2,235 (you pay $558.75). Upon reaching the total medication costs of $2,510 (with $833.75 out of pocket), coverage ceases and the beneficiary is 100% responsible for all costs during the “donut hole”, until a new spending tier, an additional $3,216.25 out of pocket is reached and coverage kicks in again at the Catastrophic level.

Creditable Coverage – A plan other than a Part D plan that offers Prescription drug coverage and which meets certain Medicare standards.

Deductible – The amount that the beneficiary must pay first, before coverage from the plan makes any of the payments. In Part D this is usually the first $275.00 of eligible drug expenses for the year.

Disability Benefit – A feature of some policies for the waiver of premium if the policyholder becomes permanently or totally disabled.

Disenrollment – When you disenroll, you stop your coverage. Your plan can choose to disenroll you under certain circumstances.

Donut Hole – See Coverage Gap

Dual Eligibles – People eligible for both Medicare and Medicaid.

Effective Date – The date your insurance is to actually begin. You are not covered until the policies effective date.

Eligibility for Medicare Prescription Drug Program – You are eligible for the Part D program if you are eligible for Medicare benefits under Part A and/or Part B and live in the service area of the plan.

Enrollment Period – The period during which individuals may enroll for an insurance policy. For Medicare Part D, there are different enrollment periods, the IEP or initial enrollment period, the AEP or annual enrollment period and the OEP, open enrollment period and the SEP, or special enrollment period.

Exclusions – Items not covered by an insurance policy.

Food and Drug Administration – The FDA oversees approval and regulation of all prescription drugs, both brand name and generic. It oversees the safety, efficacy and quality of products.

Free Examination Period – This is also known as a “free-look”. It is the time period after an insurance policy is delivered during which you can decide to keep it or not keep it.

Formulary – A list of prescription drugs that are covered by a particular Part D Plan.

Generic Drugs – Prescription drugs that have the same active ingredient formula as a brand name drug. Generic drugs usually cost less than a fraction of the brand name counterpart. They are regulated by the FDA to be as safe and effective as the brand name drug.

Grievance – A grievance is a complaint about the way your drug plan is providing services.

Group Insurance – coverage through an employer or other entity that covers all individuals in the group.

Guaranteed Renewable – An agreement by an insurance company to insure a person for as long as the premiums are paid.

HMO – A Health Maintenance Organization that is contracted with CMS and provides access to a network of doctors and hospitals that coordinate your care.

Health Insurance Portability & Accountability Act – A law passed in 1996, HIPAA is also called the “Kassebaum-Kennedy” law. It expands your health care coverage if you have lost your job and protects you and your family from discrimination based on past or present health conditions.

Health Savings Account – An account held in trust for the account holder. The employer or employee makes annual tax-free contributions to the account that must be maintained in conjunction with a high deductible health insurance policy.

IEP or Initial Enrollment Period – For persons who are just turning 65 or just becoming eligible for Medicare, the IEP is a seven month period that extends 3 months before the month when a person reaches 65, plus the month where the person turns 65, plus the 3 months after the person turns 65.

In-Network – Providers or health care facilities which are part of a health plan’s network of providers with which it has negotiated a discount. Insured individuals usually pay less when using an in-network provider.

Lapsed Policy – A policy that has terminated because of failure to pay the premium.

Penalty or Late Enrollment Fee – In an attempt to encourage as many eligible people as possible to enroll in a Part D drug plan before the first enrollment period ended in May 2006, or to enroll as soon as they become eligible for Medicare, Congress created a late enrollment fee. This fee is equal to about one percent of the Medicare Part D premium for each month’s delay in enrolling. This is an unlimited percentage, lasting as long as you are enrolled in a Part D drug plan.

Long Term Care Policy – Insurance policies that cover specified services for a specific period of time. Covered services often include nursing care, home health care and custodial care.

Low Income Assistance – LIS or limited income subsidy helps people whose incomes are limited. For the Medicare Drug Program, if your income level is below 135% of the federal poverty level and your assets are also limited, you will pay no monthly premium, no deductible and have not gap in coverage.

MA or MAPD – Medicare Advantage Plans and MA’s with Prescription Drug Coverage are private plans that provide doctor and hospital service in place of Medicare and Medicare pays these private companies to manage the health care instead of paying for the beneficiary claims directly.

Mail Service Pharmacies – These are pharmacies used by many plans as a cost-saving measure and a convenient alternative to retail pharmacies. Members typically order their drugs by phone, fax or email. Most prescription orders are filled and received by members in 2 to 4 days.

Managed Care – A medical delivery system that attempts to manage the quality and cost of medical services that an individual receives. Most managed care systems offer HMOs and PPOs that they are encouraged to use for their health care services.

Medicaid – A federal medical assistance program that covers certain individuals and families meeting low income guidelines. Medicaid is jointly funded by the federal and state governments to assist the states in providing long term care assistance to people who meet eligibility criteria.

Medicare Advantage Plans – health plans offered by private Insurance companies that contract with Medicare to provide health coverage. Depending on where the beneficiary lives, Medicare Advantage Plans may be available both with or without Part D plans.

Medicare Prescription Drug, Improvement and Modernization Act of 2003 – This is a federal law that brought the most dramatic changes to the Medicare program since it began in 1965. These changes include more affordable health care, drug coverage to all people with Medicare, expanded health plan options, improved health care access for rural Americans and preventative care services, such as flu shots and mammograms.

Medicare Supplements – Medicare Supplements or MediGap Plans provide additional coverage to your Original Medicare plans A and B. For instance, Medicare supplements will pay the 20% of doctor and hospital costs that is not covered by the 80% coverage with Original Medicare. You will need a stand alone Part D plan for prescriptions to accompany your Medicare Supplement.

Network – The doctors, hospitals, and pharmacies having contracts with an insurance plan to provide care to the plan’s members. It is necessary to use your Part D drug plan’s network of pharmacies to save money on your drugs.

Non-Formulary Drugs – Drugs that are not on a Part D drug plan’s list of covered medications.

Non Preferred Brand Name Drugs – A non-preferred brand name drug is a prescription medication that is covered by a drug plan, but will cost a member more than a preferred drug.

OEP or Open Enrollment Period – Running from January 1 until March 31, Medicare Beneficiaries can make additional choices regarding Medicare Advantage plans. Medicare beneficiaries who have both Medicare A and Medicare B and who have enrolled in a Part D plan can switch to a Medicare Advantage plan. Please note however, in the OEP you may not move to another stand alone PDP or drug plan. Beneficiaries who already have a MA-PD can switch to another MA-PD or they can switch back to Traditional Medicare and a stand alone PDP. If a Beneficiary is in a MA plan without PDP, they are not able to switch to a MA- PD.

Original Medicare – The term “Original Medicare” is often used to describe your normal Medicare A & B benefits. If you have Medicare Part A and/or Part B coverage you can purchase a Part D drug plan. You can also purchase a Medicare Supplement to cover a portion of the costs not covered by Original Medicare or you can enroll in a Medicare Advantage Plan with or without a drug plan included.

Out-Of-Pocket Costs – The amounts the beneficiary pays as their share of drug costs in a Part D plan. Deductibles, co-insurance, and the amounts paid during the donut hole make up the total out of pocket costs. When a beneficiary out of pocket costs exceeds $4,050, they are eligible for the catastrophic coverage step or 95% coverage for the rest of the calendar year.

Outpatient Services – Services that do not take place in an in-patient hospital. They may be provided in clinics or provider offices, ambulatory surgical centers, hospices, home health services and so forth.

PCP - A primary care physician you choose from a plan network to provide your routine and preventive care. HMOs require you to select a PCP, while PPOs don’t. However, if you select a PCP with your PPO plan, you’ll have lower co-pay for office visits.

PDP - Stand – alone Medicare Part D Prescription Drug Plans (PDPs) provide reduced-cost prescription drug coverage to Medicare recipients. Medicare Part D plans work together with Medicare Part A and Part B, as well as Medicare Supplements and Medicare Advantage (MA) plans that do not provide prescription drug coverage. Annual Enrollment periods for PDPs run from Nov. 15 through Dec. 31, with January 1 as the plan starting date.

PPO - A Preferred Provider Organization that provides access to a network of doctors and hospitals that co-ordinate your care. This allows you to get more benefits than the Original Medicare Plan and many Medicare supplement plans. PPOs also allow you to use any doctor or hospital outside of the network for a higher co-pay or co-insurance.

Part D (Medicare Part D) - Part D is the new prescription drug program that became available to all Medicare beneficiaries on January 1, 2006. The Medicare Part D prescription drug program is insurance offered by the federal government and sold through private companies that helps pay for prescription drugs.

Penalties - Medicare beneficiaries without creditable coverage who were eligible but waited until after May 15, 2006, may pay the standard plus a one percent premium penalty of the base beneficiary premium per month – or twelve percent a year – and won’t be able to enroll until the next annual election period (November 15 through December 31). The higher premium will stay with them for as long as they are enrolled in the program. People who turn 65 between the annual enrollment periods can join a Medicare prescription drug plan as soon as they sign up for Medicare. They can enroll at any time three months before or three months after their Medicare eligibility date without penalty. The effective date of prescription drug coverage will begin on their Medicare eligibility date. If they don’t join a plan within three months after their Medicare eligibility, don’t have creditable coverage and decide to join later, they’ll pay the same one percent penalty.

Pharmacy network - This is the group of pharmacies who have contracted with the PDP to save you money on prescriptions.

Policyholder - The person or party who owns an individual policy. This person may be the insured, a relative, the beneficiary, a corporation, or another person.

Portability - requires that workers with pre-existing medical conditions must receive credit for time in a previous health plan if they join an employer plan.

Pre-Certification - A requirement to notify the insurance company for it’s approval before you check into a hospital, have elective surgery, visit specialists, have testing done. Pre-certification does not guarantee the insurance company will pay the medical bills, also called pre-admission.

Pre-existing Condition - Particular health conditions that occurred prior to applying for insurance and for which you received medical advice, diagnosis, care or treatment. Policies can exclude coverage of any medical condition for a period of time.

Preferred Brand Drugs - Among brand drugs, these are the ones the plan prefers, so they are less costly. These brand drugs generally have lower co-pays than the non-preferred brand drugs.

Premium - The payment required annually, semi annually or monthly to be part of an insurance plan. In a Part D plan, this is usually a monthly fee.

Primary Care Provider - A health care professional (usually a physician) who is responsible for monitoring an individual’s overall health care needs. Typically, a PCP refers the individual to more specialized physicians for specialist care.

Prior Authorization or Prior Approval - Some benefit plans require you to receive authorization or approval before they will cover a particular prescription. The reasons vary and can include the medication itself, the quantity prescribed or the frequency of its administration. Prior authorization means that you or your doctor will need to get approval from the plan before you fill your prescriptions. If you don’t get approval, your drug may not be covered by the plan. Please note that prior authorizations can take up to 72 hours to process. Drugs with this condition are designated ‘PA’ in the formulary.

Provider - Doctors, hospitals radiation departments, pharmacies and others that provide medical health care service.

Quantity Limits - For some medications, the insurer may limit the number of tablets or units that you can receive per month. These guidelines are based on maximum dosages recommended by the FDA.

Reinstatement - Resumption of coverage under a policy that has lapsed because of nonpayment of the premium after the grace period has ended.

Risk - The chance of loss, the degree of probability of loss or the amount of possible loss to the insuring company. For an individual, risk represents such probabilities as the likelihood of surgical complications, medications’ side effects, exposure to infection, or the chance of suffering a medical problem because of a lifestyle or other choice.

RX - A symbol for “prescription drugs”.

SEP or “Special Election Period” - The time granted to Medicare beneficiaries who are allowed to change plans outside of normal AEP. Examples of people who are granted a SEP are: Medicaid recipients (dual-eligibles), Victims of Hurricane Katrina, or Medicare beneficiaries who are no longer part of a creditable prescription drug plan (such as when their individual plan no longer exists). When someone involuntary loses their existing benefits, they have a 60 day SEP during which they are able to enter into another Medicare Part D plan. Also, if someone moves out of the service area of their plan (for instance, moving to another state), they will have a 60 day SEP after the move during which they can enroll into a Medicare Part D plan. Related to this word are AEP, IEP, and OEP.

Short-term Disability - An injury or illness that keeps a person from working for a short time. The definition of short-term disability (and the time period over which coverage extends) differs among the insurance companies and employers. Short-term disability insurance coverage is designed to protect an individual’s full or partial wages during a time of injury or illness (that is not work related) that would prohibit the individual from working.

Short-term Medical - Temporary coverage for an individual for a short period of time, usually from 30 to 365 days.

Skilled Nursing Facility - A facility that provides inpatient care, rehabilitation services or other related health services. “Skilled nursing” does not include a convalescent home or custodial care.

State Pharmaceutical Assistance Programs (SPAP) - State pharmaceutical assistance programs help cover the prescription drug costs of elderly people with disabilities who don’t qualify for Medicaid. Currently, 39 states offer some type of program to provide prescription drug coverage or assistance. Most programs use state funds to subsidize a portion of the cost for people who qualify.

Step Therapy (step edits) - In some cases, you’re required to first try certain drugs to treat your medical condition before the plan will cover another drug for that condition. You and your doctor must work with the plan to endure coverage. These drugs are designated ‘ST’ in the formulary.

Stop Loss - The dollar amount of claims for eligible expenses at which point you’ve paid 100 percent of your out-of-pocket and the insurance begins to pay at 100%. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.

Tier - A formulary is often divided into tiers. Each tier represents a different level of cost-sharing for prescription drugs. As the tiers rise, members pay more for the listed drugs. For example, a tier-1 drug may cost you a $7.50 co-pay, and a tier-3 drug may cost you a $50.00 co-pay. United Health Rx plans have four tiers, and your cost-sharing amount depends on which tier your drug is listed under.

TrOOP-True-out-of-pocket – True out of pocket costs. Those costs that you pay for which you are not reimbursed.

Underwriting - The insurance company’s process for determining whom it will insure.

Usual, Customary & Reasonable - The dollar amount the insurance companies believe to be a fair price for the medical service/procedure in a specific geographic area. Companies have developed their own UCR, which often do not reflect the doctor’s actual bill. If the doctor’s charges are higher than the companies UCR, you generally have to pay the balance.

Waiting Period - This has two meanings: (1) the time period you must wait before you can get health insurance from a new employer, and (2) the time that must pass after becoming insured before the policy will begin to pay benefits for a pre-existing condition or specified illness.

Waiver - An amendment to a policy that excludes coverage for certain medical conditions.