Vocabulary Lesson: Medicare Part D

By Jane Farrell

We’re in the midst of the Medicare enrollment period, and the terms involved can prove overwhelming and confusion, especially if you’re applying for the first time. Here, from the SeniorHealth division of the National Institutes of Health, is a list of terms relating to Medicare prescription drug plans (Part D).

Co-insurance

This is an amount a person may be required to pay for services after paying any plan deductibles. In Original Medicare (Part A and Part B), 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 prescription drug plans have a temporary limit on what they cover for prescription drugs. This limit is called the “coverage gap” (also known as the “donut hole”). The coverage gap starts after you and your plan have spent a certain amount of money for covered drugs. All Medicare drug plans are different, so call your plan if you have questions about how the coverage gap will work for you.

You won’t need to pay out of pocket for all costs while you are in the coverage gap. Once you are in the coverage gap, your plan will cover a percentage of the cost of generic drugs. You will also get a percentage manufacturer-paid discount on covered brand-name drugs. Although you will only pay a percentage of the price for that brand-name drug, the entire price will count as out-of-pocket spending, which will help you get out of the coverage gap. There will be increasing savings for you in the coverage gap each year until 2020, when you will pay approximately 25% for both covered generic and brand-name drugs when in the gap.

If you have extremely high drug costs and pay the limit (or pay through the coverage gap), all Medicare drug plans provide “catastrophic” coverage. Catastrophic coverage means that once you pay a certain amount out-of-pocket for drug costs in a calendar year, the plan will cover almost all your drug costs above that amount.

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.

For more information, visit www.medicare.gov.