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the medicare drug plan
6 Key Facts

1. Anyone on Medicare can get coverage regardless of income or health.

2. You are not obligated to enroll, but there may be consequences if you don't sign up when you are first eligible to do so.

3. To get Medicare drug coverage, you must select one approved private drug plan among many offering different choices. There is no single government plan.

4. Is your income limited? If you qualify for a part of the program known as "Extra Help." you'll pay very little for your medications.

5. Are your drug costs very high? You'll pay no more than 5 percent of the cost of each prescription after you've spent a certain amount of money out-of-pocket in any one year.

6. Do you have better drug coverage already? You probably won't need Medicare's Part D coverage. But it's wise to check.

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Medicare Prescription Drug Coverage Guide

Medicare Part D Glossary

Defining Part D's words, phrases and jargon

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Medicare Part D is full of jargon that you may come across in dealing with your drug plan. Here are the meanings of words and phrases commonly used in Part D, arranged alphabetically. Words in italics within definitions indicate that they’re explained elsewhere in the glossary.

Annual open enrollment period: Seven weeks from Oct. 15 through Dec. 7 each year when you can switch to another Part D plan for the following year, or join the program for the first time in certain circumstances. (Also called annual election period.)

Annual Notice of Change: The letter your Part D plan must send you in September every year to explain specifically how its costs and benefits will change for the following year.

Appeals process: Five successive levels of appeal that allow Part D enrollees to challenge plan decisions they don’t agree with. An enrollee can argue his or her case through one or more of these levels, beginning after a plan has denied the enrollee’s exception request for coverage or payment.

Brand-name drugs: Medications protected by patents that grant their makers exclusive marketing rights for several years, during which time prices remain high. When patents expire, other manufacturers are allowed to sell generic copies at lower prices.

Catastrophic coverage: The level of coverage when Medicare covers almost all your costs after you’ve passed through the coverage gap and spent a certain amount out of pocket in a year.

Coinsurance: A percentage (for example, 25 percent) of the cost of a drug that you pay as your share of each prescription.

Copayment: A set amount (for example, $25) that you pay as your share of each prescription.

Coverage: The amount your plan pays toward your drug costs.

Coverage gap (doughnut hole): The gap between initial and catastrophic coverage, a period in which you used to be required to pay 100 percent of your prescription costs if you have no additional drug coverage. However, from 2011 onward a provision of the 2010 Affordable Care Act began to narrow the coverage gap. In 2013 you will receive discounts of 52.5 percent on your brand-name drugs in the gap and a 28 percent discount for generic drugs. Over time these discounts will grow larger until, by 2020 you’ll pay no more than 25 percent of the cost of any drugs in the gap. You fall into the gap if and when your total drug costs rise above a certain amount in the year.

Coverage restrictions: Your plan requires you to ask its permission before it will cover certain drugs. Restrictions include prior authorization, quantity limits, and step therapy.

Creditable coverage: Drug coverage offered by others that is considered at least as good as standard Medicare coverage. If you have creditable drug coverage (for example, from an employer or union plan, or veterans or military retiree benefits) you do not need to join Part D, but it’s wise to check that your coverage is creditable.

Deductible: The amount you pay each year before coverage kicks in.

Doughnut hole: See Coverage gap.

Exception (or coverage determination) request: A request you can make to your plan, asking it to cover a needed drug that is not on the plan’s formulary or is subject to coverage restrictions. To be successful in winning an exception, you need your doctor’s support to explain why the prescribed drug is necessary for your medical condition. If your request is denied, you can pursue it through the appeals process. The exceptions and appeals process can also be used for payment issues—for example, if your plan doesn’t refund money due to you on time.

Extra Help: A special program within Part D that provides low costs and continuous coverage to people with limited incomes who qualify.

Formulary (preferred drug list): The drugs that a Part D plan covers.

Full price of drugs: The price that a Part D plan has negotiated with the manufacturers. This discounted price is usually less than you’d pay retail outside your plan. It’s the amount you pay if you’re in the deductible or coverage gap, unless you have extra coverage.

Generics: Drugs that have the same medical effect as brand-name drugs but usually cost less.

Higher-income Part D premium:  A surcharge that you pay on top of your Part D plan’s regular premium if your modified adjusted gross income (MAGI) on your income tax returns is above $85,000 (for a single person) or $170,000 (for a married couple filing joint returns)

Initial coverage: The amount your plan pays after the deductible (if any) has been met and prior to the coverage gap.

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