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Glossary of Drug Plan Terms
Brand-name: A drug that is produced and sold by an innovator pharmaceutical manufacturer who is responsible for the drug research and development.
Co-payment: What a beneficiary pays out of pocket for each prescription drug.
Coverage gap: Medicare’s basic drug plan benefit has a gap in coverage. You pay, in most cases, a deductible $250. Then you pay the next $500, either as co-payments or as a percentage of each prescription. If your prescriptions cost you and the plan more than $2,250, your coverage stops. You pay all of the next $2,850 – the coverage gap. After you spend a total of $3,600 – the $250 deductible plus $500 plus $2,850 – you then pay 5 percent of each prescription or up to $5, whichever is greater. This excludes any required monthly premium, even during the coverage gap. Individual plans may shrink the gap, reduce the deductible, or, under some conditions, increase the gap.
Deductible: Amount you pay for prescriptions before the plan coverage begins.
Formulary: The list of drugs a plan covers, both generic as well as brand products.
Generics: A drug that has the same active ingredient that the brand name drug has and when it is rated bioequivalent by the US Food and Drug Administration is therapeutically equivalent to the brand product at a substantial cost savings.
HMO: A health maintenance organization that provides medical coverage and generally restricts members to certain doctors, hospitals and other healthcare providers who are part of the provider network. Medicare reimburses the plan for each Medicare beneficiary it enrolls.
Nonpreferred: Refers to drugs that are more expensive or not favored by the plans formulary committee and therefore are not on a preferred status on the plan formulary.
Preferred: Drugs on the formulary list that the plans prefer members use. The drugs usually cost the plans less to purchase as a result of pharmaceutical manufacturer competition, generic status of the drug, or other financial arrangements that have been made between the drugs manufacturer and the plan which make that drug more favorable than another in the same class to have on formulary.
PPO: A preferred provider organization offers medical coverage, charging members less if they use certain doctors and other healthcare professionals who are part of the plan’s provider network. Medicare reimburses the plan for each Medicare member it enrolls. Members can go to providers outside the network but are charged more if they do so.
Prior authorization: The Medicare drug plan must give you or your doctor approval to use/prescribe certain drugs before the plan will pay for them.
Quantity limit: The plans formulary limits the amount of medication that the pharmacy dispenses for your prescription.
Specialty: Expensive, often injectable drugs, used for cancer treatment, treatment of mental illness and other disease states. These drugs are often not covered by the plan in the same way preferred drugs are assessed large copays or co-insurance charges to the beneficiary.
Step therapy: The plan requires that a beneficiary
Private fee-for-service: This type of organization decides how much health care providers are paid for specific services, instead of the set reimbursement from Medicare. The plan also determines how much each member pays.
