Glossary of Terms for Medicare Part D

Here are important terms to know when learning about Medicare Part D. Lets start with the big one, What is Medicare Part D?

Medicare Part D - The new Medicare prescription drug program available to all Medicare beneficiaries beginning January 1, 2006.

Now that you have the first one down, here are other terms in alphabetical order.

Assets - For financial help with a Part D Plan's costs, the government counts cash or any property that can be turned into cash within 20 days. This includes checking and savings accounts, certificates of deposits, IRAs and 401(k)s, stocks, bonds, and similar items. It does not include your primary home or certain property related to burial expenses.

Benefit - Another name for coverage.

Brand name drugs - Prescription drugs that are sold under a trade-marked brand name. Generally these will cost more than generic drugs.

Center for Medicare and Medicaid Services (CMS) - The federal agency in charge of the new Medicare Part D implementation. Their website is at www.medicare.gov and it is the most credible site for Medicare Part D information. (It is also one of the most convoluted sites, and is definitely slanted towards encouraging enrollment, so you should seek additional information.)

Creditable Coverage - Another insurance plan that provides a drug benefit that is “actuarially equivalent” to the Part D benefit, is considered "creditable coverage." In that case, the policy holder may choose not to enroll in a Part D plan without having to pay a late penalty for delayed enrollment if he or she decides later to enroll in Part D. If the coverage is found not to be creditable coverage, then an individual will be penalized for delayed Part D enrollment.

Deductible - The initial amount you must pay out-of-pocket each calendar year before Medicare begins to contribute its percentage (under the standard or basic Part D). The initial deductible is $250/year but there are other "gaps in coverage" too that require additional out-of-pocket payments from Part D Plan participants.

Dis-enroll - To end your coverage in a health plan or Medicare Part D plan.

Donut hole - Another name for the gap in coverage in a Part D plan, where you pay all of your expenses for eligible drugs until you have spent $2,850.

Federal Poverty Level -

Formulary - No, a formulary is not something that your grandchildren study in algebra! This formulary is a list of prescription drugs along with their formulas, uses, dosages and methods of preparation. In some Medicare Part D plans, doctors must order or use only drugs listed on the plan’s formulary. Sometimes drugs listed on the formulary are called "eligible drugs" for that plan. Some people call a formulary a "preferred drug list" (PDL) or a "select drug list."

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

Late enrollment fee -

Medicaid -

Medicare - The federal health insurance program for people age 65 and older, and for individuals with disabilities. There is Medicare Part A, Part B, Part C and now, Part D. Only 22 more letters to go!

Medicare Advantage plans - Medicare Advantage is an expanded set of options for the delivery of health care under Medicare. While all Medicare beneficiaries can receive their benefits through the original fee-for-service program, beneficiaries entitled to Medicare Part A and enrolled in Part B can choose to participate in a Medicare Advantage plan instead. Organizations that seek to contract as Medicare Advantage plans must meet specific organizational, financial, and other requirements. These types of plans were formerly known as Medicare+Choice. There are two primary types of Medicare Advantage plans, as follows:

• Coordinated-Care plans, which include health maintenance organizations (HMOs), managed-care plans (MCOs), provider-sponsored organizations (PSOs), preferred-provider organizations (PPOs) and other certified coordinated-care plans and entities that meet the standards set forth in the law.
• Private, unrestricted fee-for-service plans, which allow beneficiaries to select certain private providers. For those providers who agree to accept the plan's payment terms and conditions, this option does not place the providers at risk, nor does it vary payment rates based on utilization.

These Medicare Advantage plans are required to provide at least the current Medicare benefit package, excluding hospice services. Plans may offer additional covered services and are required to do so (or return excess payments) if plan costs are lower than the Medicare payments received by the plan.

Beginning in 2006, a new regional Medicare Advantage plan program will be established to allow regional coordinated-care plans to participate in the Medicare Advantage program.

Medicare supplement policy -

Medigap - See Medicare supplement policy. 

Out-of-pocket limit - The annual amount you can be required to spend on prescription drugs, through a deductible and co-payments. This amount is $3600 in a standard Medicare Part D Plan. This is different than a "deducible" (see above).

Penalties - Eligible individuals who do not enroll in Part D and who do not maintain coverage equal to Medicare Part D for 63 days will face a 1% premium penalty if they later decide to enroll in Medicare Part D.

Premium - The money you pay to have an insurance plan. In a Part D plan, this is paid monthly.

Providers - The private companies or nonprofit organizations that sell and administer the various Medicare Part D Plans offered to consumers. Remember, Medicare does not sell Part D Drug Plans, so you are not dealing directly with the federal government.

Rx - A symbol that mean "prescription drugs."

State Pharmaceutical Assistance Program - There are 39 states that currently have established or authorized some type of program to provide pharmaceutical coverage or assistance, primarily to low-income elderly or persons with disabilities who do not qualify for Medicaid. Most programs utilize state funds to subsidize a portion of the costs, usually for a defined population that meets enrollment criteria, but an increasing number use discounts or bulk purchasing approaches. Many of these programs will be replaced by Medicare Part D, effective January 1, 2006.