Medicare Drug Benefit Glossary

A Medicare Drug Benefit Glossary

Actuarial equivalence - to have drug coverage considered to be at least as good as another plan. This drug coverage is computed in dollar amounts. In this case, the current plan must be at least actuarially equivalent to the standard Part D plan. If this is true, then no penalties will apply for enrollment at a later date.

Appeals -a person may appeal any denial of coverage. The appeal usually goes first to the plan. If the client is still dissatisfied, an outside body can look at the denial. The outside body is an independent review entity (IRE) contracted by Medicare.

As good as - used to compare the cost of a drug insurance plan to the Medicare Prescription Drug Coverage insurance. If the other drug insurance is as good as the Medicare Prescription Drug Coverage insurance, and you choose to stay with that insurance, there will be no penalty if you decide at some time in the future to enroll in the Medicare Prescription Drug Plan.

Assets - used to determine if a person is eligible for Low Income Subsidy. Assets used include bank accounts, stock accounts, real estate, homes and cars. A primary residence and one car are not included. Assets of both spouses, if married and living in the same household, will be added together to determine eligibility for extra help. The same is true in determining the value of income.

Auto-enrollment - the process in which one is enrolled in a Medicare Prescription Drug Plan (PDP) without having to fill out paperwork. The auto enrollment will happen for those already on Medicare and Medicaid (full benefit, dual eligibles) beginning in fall 2005.

CMS - the Centers for Medicare & Medicaid Services - the agency responsible for administering the Medicare program, including Parts A, B, C, and D.

Catastrophic coverage - coverage for prescription drug expenses that are considered very high and unusual. At this level, the most help is provided. In a standard plan an individual will only have to pay 5% of the drug cost above $5,100 (or less, depending on income).

Cost Sharing - the person with Medicare pays part of the drug cost. This may include the deductible, a fixed amount of drug cost paid before the insurance company begins to pay; the copay a percent of drug cost; and the coverage gap or "donut" a portion of drug's cost where the insurance company does not pay.

Co-insurance - the amount paid by the patient each time a covered drug is purchased, when the drug cost is more than the deductible. The co-insurance may be different for one drug than for another. There can be one value for a generic drug, one for a preferred drug, and one for a non-preferred drug. The co-insurance may also vary throughout the year, from 0 to 100 percent.

Copay - the amount paid by the patient each time a covered drug is purchased, when the drug cost is more than the deductible. There can be one value for a generic drug, one for a preferred drug, and one for a non-preferred drug. For example, a subsidy eligible individual who has a very low-income will pay no more than $3 to the pharmacy for each brand name prescription filled at the pharmacy, and $1 for each generic drug, regardless of the cost of the drug.

Coverage determination - a decision made by a Medicare Prescription Drug Plan that your prescription counts towards the patient's total drug cost, regardless of how much the plan actually pays for the drug.

Coverage Gap - the gap in coverage when the enrollee has to pay 100% of the discounted price. It is the period after an enrollee's drug spending exceeds the initial coverage limit and before the enrollee's out-of-pocket expenses reach the TrOOP limit. This is referred to as the donut hole or coverage gap.

Covered Drug, or Covered Part D drug - these are prescription drugs that are on the plan's formulary and obtained at a network pharmacy or under a special circumstance.

Creditable coverage - this is the language used by CMS that a plan has comparable coverage (actuarial equivalent) to Part D plans. Some plans offering creditable coverage may be through an employer, TriCare, or a union.

Deductible - the amount of spending on covered drugs by the individual that is required before the Part D Plan pays insurance benefits. For standard coverage, an enrollee pays a $250 deductible before the plan begins to pay for prescriptions. Payments for non-covered drugs do not count.

Donut hole - the gap in coverage when the enrollee has to pay 100% of the discounted price. It is the period after an enrollee's drug spending exceeds the initial coverage limit and before the enrollee's out-of-pocket expenses reach the TrOOP limit. This is referred to as the donut hole or coverage gap.

Dose restrictions - the formulary may limit the number of doses available on a particular drug even if the prescription calls for more doses. A formulary with dose restrictions limits the number of tablets (or other dosage forms) that may be dispensed by a pharmacy to a beneficiary during a specific amount of time (typically per month).

Dual-eligible - also duals - individuals who are eligible for Medicare, and for full benefits under Medicaid. Approximately six and a half million Americans are dual eligible. In the past, Medicaid paid for drugs for this population. Dual eligibles will now receive most of their prescriptions from a Part D Plan. Their premium and deductible will be fully subsidized and their co-payments will be zero or nominal ($3 for brand/$1 for generics).

Enhanced alternative coverage - see also supplemental benefit - coverage that provides both the standard prescription drug coverage plus supplemental benefits.

Enrollment period - or initial enrollment period - This is a seven-month period which begins three months before the month an individual first meets the eligibility requirements for Medicare and ends three months after that first month of eligibility. The initial enrollment period for those individuals who are already eligible for Medicare as of November 15, 2005, is from November 15, 2005, until May 15, 2006.

Exceptions process - also exception, appeals, rights of Part D enrollees - This is a process to request coverage of drugs not on a plan's formulary. This can be done if a physician determines the drugs that are available are not as effective, harmful, or both. In the first step, the beneficiary may request an exception.If the plan does not grant an exception, the individual may appeal.

Fail first - a policy that requires trial and failure on one drug (usually less expensive) before approval to use a more costly drug can be obtained.

Facilitated enrollment - process to enroll beneficiaries automatically that qualify for a low-income subsidy, but are not on Medicaid. This process is different from auto-enrollment, which is being used for Medicaid recipients. In facilitated enrollment, individuals will be given the entire initial enrollment period to voluntarily apply for the subsidy and then choose and enroll in a plan. During this period, they will receive a variety of targeted materials from the Social Security Administration and other agencies to encourage their application and enrollment. However, if they have not enrolled by May 15, 2006, they will be enrolled automatically.

Formulary - a list of covered drugs available through the Part D plan. A Part D plan's formulary must include at least 2 drugs in each therapeutic category and class. Money spent on medicines "on formulary" count towards TrOOP; money spent on "non-formulary" drugs do not count towards TrOOP. A beneficiary's doctor or health professional may be able to help the beneficiary obtain an exception if a medicine they need is not "on formulary". If the exception is approved, the patient's share of that drug's cost would then count towards TrOOP.

FPL - Federal Poverty Level, (officially: the HHS Federal Poverty Guidelines.) The level set by the federal government, which states how much money, an individual or families of varying sizes need to live a basic existence. Many federal and state programs use the FPL to determine eligibility for programs. The Census Bureau publishes the federal poverty statistics, including the FPL, annually. For 2005, the federal poverty level (100% FPL) is: $9,570/single; $12,830/couple for the 48 continuous states (HI and AK have different FPL figures).

Full Subsidy - see also low-income subsidy, partial subsidy - the full subsidy pays for the entire premium and deductible for recipients, and nearly all of the cost-sharing. The beneficiary pays a co-payment of $3 per brand and $1 per generic prescription until their total drug spending has reached $5,100. To qualify for a full subsidy low-income, beneficiaries need to be below 135% FPL.

Generic substitution - dispensing of a generic drug in place of a brand name drug. Generic drugs must contain the same active ingredients as the brand name drugs.

Income - for purposes of determining eligibility for programs, income includes earned wages, earnings from self-employment, royalties, annuity payments, pension payments, disability benefit payments, veterans compensation and pension, workmen's compensation payments, old age survivor and disability insurance benefit payments (including Social Security payments), unemployment insurance payments, prizes, support and alimony payments, inheritances, and earned rents or dividends. If married and living in the same household, the income of the individual and that of the spouse will be added together in determining whether a beneficiary is a subsidy-eligible individual. The same is true of determining the value of assets.

Initial coverage limit - The set amount where sharing of covered drug costs ends. In standard coverage, it is the level of total prescription costs at which 25% of the coinsurance ends. After that, the beneficiary is required to pay 100% of the cost of Part D covered drugs, up to the TrOOP limit. The initial coverage limit for 2006 is $2,250 in total drug spending. This includes the $250 deductible where the beneficiary paid 100% of the costs, and an additional $2000 worth of drugs, where the beneficiary only paid 25% of the costs.

Late enrollment penalty - a penalty paid by an individual. The penalty is in the form of a 1%-per-month higher premium. The premium is cumulative; that is, for each month not enrolled, the individual can expect to pay an additional 1%. At the end of one year, this would result in an additional 12% on the premium. That penalty will be in effect for the life of the Medicare person. CMS may determine after 2006, whether a different amount should be applied rather than the 1%.

Low-income Subsidy - LIS - see also full subsidy, partial subsidy - financial assistance that lowers the premiums and co-payments for beneficiaries with income below 150% of the FPL and limited assets. The greatest assistance is targeted to those with the lowest income and resources (full subsidy).

MA-PD (Medicare Advantage Prescription Drug Plan) - a private managed care plan established under Medicare Part C (formerly known as Medicare + Choice) that will also provide standard Part D drug coverage or its actuarial equivalent beginning January 1, 2006.

Medicare Health Plans - new name for Medicare Advantage Plans (HMOs, PPOs and Private Fee-For-Service) and Medicare Cost plans.

Medicare Savings Programs - Medicaid programs that provide premium and cost-sharing assistance to Medicare beneficiaries with low-incomes and resources. These programs are for those who do not qualify for Medicaid. Individuals enrolled in these programs - QMB, SLMB, QI - will be automatically deemed eligible for the low-income subsidy.

Medigap - plans that provide wrap-around insurance coverage for Medicare Parts A and B. These plans often pay the deductibles and co-payments. They also pay for services not covered by those programs. Plans H, I, & J help pay for prescription drugs. Less than 10% of beneficiaries today have those types of plans. Starting in 2006, plans will not be permitted to issue new policies that include drug coverage or supplement Part D.

MMA - Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (PubL No 108-173). This Act created Part D.

Negotiated prices -are prices for covered drugs that: (1) are available to the patient at the network pharmacy; (2) reflect any costs savings that the plan has chosen to pass through to the beneficiary.

Network Pharmacy - a licensed pharmacy that is under contract to a plan to provide covered drugs at negotiated prices to the plans' enrollees.

Non-interference - a two-part provision in the MMA. The first bars the Secretary of Health and Human Services from interfering with the negotiations between drug manufacturers and drug plans. The second bars the Secretary from requiring a particular formulary or price structure for a covered Part D drug. The CBO (Congressional Budget Office) has stated that striking this provision would have a negligible affect on federal spending.

Non-Preferred drug -a drug that a plan discourages access to. This is typically done by requiring a larger co-pay.

Original Medicare - also called "fee-for-service Medicare" - the doctor or hospital is not in network or out of network as is a Medicare Advantage plan. If you have original Medicare in 2006 and want drug coverage from Medicare you will need to enroll in a stand-alone Medicare Prescription Drug Plan.

Out-of-Network Pharmacy - a licensed pharmacy that is not under contract with a Part D sponsor to provide negotiated prices to Part D plan enrollees.

Out-of-Pocket Payments (OOPs) - this is an official name to help people see how much of their drug cost they will have to pay including the deductible, coinsurance, copay, and the cost of prescriptions during the donut hole. However, not included in this official designation of out-of-pocket payments are the other OOPs, such as the amount individual's pay for non-covered drugs.

PAP -Patient Assistance Program - programs that provide free or reduced price medicines to qualifying patients with limited income and resources. Charitable foundations typically administer these.

Part D - Medicare Part D, under the Social Security Act, provides a voluntary prescription drug benefit. In general, Medicare Part A covers hospital services, Part B covers physician services, and Part C covers comprehensive managed care program.

Part D Eligible Individual -an individual who is entitled to Medicare Part A and/or enrolled in Medicare Part B.

Plan or Sponsor - any private insurance company that is certified by Medicare to provide Medicare prescription drug coverage. It can be a stand-alone Prescription Drug Plan (PDP) that one chooses along with traditional Medicare. It could also be a Medicare Health Plan that offers Part D coverage (MA-PD).

Part D Regulations - the statute, rules, regulations, and CMS policies applicable to Part D plans, including MMA and 42 CFR Parts 400, 403, 411, 417, 422 and 423.

Partial Subsidy - see also low-income subsidy, full subsidy- recipients pay a lower premium, deductible and copay.

PBM (Pharmacy Benefit Manager) - a company that manages the delivery of pharmacy services to a plans members.

Preferred drug - a drug that a plan encourages physicians and patients to choose. This drug is typically included on a formulary and requires lower cost-sharing than that of a non-preferred drug.

Prescription Drug Plan - also PDP - a plan that offers the outpatient prescription drug benefit to beneficiaries who choose to remain in the original Medicare program.

Premium - also monthly beneficiary premium - the amount a beneficiary may pay monthly for Medicare Prescription Drug coverage.

Prior Authorization - a requirement that a physician must obtain prior approval from the plan for a medication to be paid for by the plan.

QMB - Qualified Medicare Beneficiary - a program that provides for premium and/or cost-sharing assistance to Medicare beneficiaries, paid for by Medicaid.

Re-determination - see Appeals.

Rights of Enrollees - generally, enrollees have the right to have a grievance heard, the right to a timely coverage determination (expedited under certain circumstances), the right to an appeal, which includes coverage re-determination (expedited under certain conditions), and review by an independent review entity contracted by Medicare.

Same as - a term used to describe if another drug insurance program has the same or better drug cost to the beneficiary than a Medicare Prescription Drug plan.

SLMB - Specified Low-Income Beneficiary - a program that provides for premium and/or cost-sharing assistance to Medicare beneficiaries, paid for by Medicaid.

Sponsor - a non-governmental entity approved by Medicare to offer a Prescription Drug Plan.

State Pharmaceutical Assistance Program - also SPAP - a state-operated program (other than Medicaid) that provides Medicare beneficiaries with financial assistance to purchase prescription drugs in selected states. After 2006, SPAPs can provide assistance to enrollees with their premiums, deductibles and coinsurance , under a Part D Plan.

Standard coverage - also standard prescription drug coverage - the basic type of PDP to be used for comparison purposes. In 2006, standard coverage will have a $250 deductible, 25% coinsurance on the next $2000 worth of drugs, and catastrophic coverage after the TrOOP limit. Each Medicare Prescription Drug plan must offer standard coverage so potential enrollees can comparison shop between different sponsors' plans and their supplemental benefits options with greater ease.

Step therapy - requires a patient to try one drug before having access to another; that is, a non-preferred drug may be used only after the preferred drug has been used and has not been effective.

Subsidy Eligible Individual - a Medicare beneficiary enrolled in a Medicare Prescription Drug plan who qualifies for one of several levels of Low-income Subsidy assistance.

Supplemental benefits -benefits that are additional to the basic, standard prescription drug coverage including a reduced or eliminated deductible, reduced cosharing percentage or co-pay, coverage for some or all of the donut hole, or a different formulary.

Therapeutic Substitution - refers to a plan's request that the patient's physician prescribes an alternate, preferred drug in the same category or class.

Tiered cost-sharing - also tiered formulary, tiered co-pay - a formulary that has different levels of cost sharing or co-pay for different drugs that could be used to treat the same disease or condition. These tiers typically include generic drugs, preferred drugs brand-name drugs, and non-preferred drugs.

True Out-of-Pocket Spending - also TrOOP limit. The amount a beneficiary must pay on covered drugs to reach catastrophic coverage. An individual's payment of the deductible, coinsurance and/or co-payments, and drug costs in the donut hole count towards TrOOP. For 2006, the TrOOP limit is $3,600. The Part D premium does not count towards TrOOP.