Medicare Prescription Drug Coverage
Prescription Drug Coverage: Terms to Know
Here is a list of terms relating to Medicare prescription drug plans.
Co-insurance
This is an amount a person may be required to pay for services after paying any plan deductibles. In Original Medicare, this is a percentage (about 20%) of the Medicare-approved amount. A person has to pay this amount after paying the Part A and/or Part B deductible. In a Medicare Prescription Drug Plan, the co-insurance will vary depending on how much the person has spent.
Co-payment
In some Medicare health and prescription drug plans, this is an amount a person pays for each medical service, like a doctor's visit, or prescription. A co-payment is usually a set amount. For example, this could be $10 or $20 for a doctor's visit or prescription. Co-payments are also used for some hospital outpatient services in Original Medicare.
Coverage Gap, Catastrophic Coverage
Most Medicare drug plans have a coverage gap. This means that after the person and the plan have spent a certain amount of money for covered drugs, the person has to pay all costs for drugs while in the coverage gap. The person must also continue to pay the plan's monthly premium while in the coverage gap.
Effective January 1, 2011: if a person reaches the coverage gap, he or she may get a 50% discount on brand-name prescription drugs and a 7% discount for generic drugs at the time they buy them. There will be additional savings for people who reach the coverage gap each year thereafter until the gap is completely closed in 2020.
Once a person reaches the plan's out-of-pocket limit during the coverage gap, "catastrophic coverage" automatically kicks in. Catastrophic coverage assures that once a person has spent up to the plan's out-of-pocket limit for covered drugs, he or she will only pay a small co-insurance amount or a co-payment for the rest of the year.
Creditable Prescription Drug Coverage
This is prescription drug coverage (for example, from an employer or union) that is expected to pay, on average, at least as much as Medicare's standard prescription drug coverage.
Deductible
This is the amount a person must pay for health care or prescriptions before Original Medicare, the person's prescription drug plan, or other insurance begins to pay. For example, in Original Medicare, a person pays a new deductible for each benefit period for Part A and each year for Part B. These amounts can change every year.
Drug List
A list of drugs covered by a plan. This list is also called a formulary.
Extra Help
A program to help people with limited income and resources pay prescription drug costs. Also called the "low-income subsidy."
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Penalty
An amount added to a person's monthly premium for Medicare Part B or a Medicare drug plan (Part D), if the person doesn't join when first eligible. He or she pays this higher amount as long as they have Medicare. There are some exceptions.
Premium
This is the periodic payment to Medicare, an insurance company, or a health care plan for health or prescription drug coverage.
Prior Authorization
Drug plans may have drugs that require prior authorization. Prior authorization means that the person and/or the doctor must contact the plan before certain prescriptions can be filled. The doctor may need to show that the drug is medically necessary for it to be covered. Plans do this to be sure these drugs are used correctly and only when medically necessary.
