2024 Medicare Glossary

Prescription Drug Plan Terms and What They Mean

A – D | E – H | I – L | M – P | Q – T | U – Z

Annual Election Period (AEP):

The annual election period for Medicare coverage is October 15, through December 07, for coverage beginning January 1.


Any of the procedures that deal with the review of adverse coverage determinations made by the Part D plan sponsor on the benefits under a Part D plan the enrollee believes he or she is entitled to receive. The Evidence of Coverage (EOC) Chapter 7, tells you how to make an appeal.

Automatic Bank Withdrawal:

An option for paying your monthly premium by giving permission for the plan to automatically withdraw money from your bank account. It can take up to three months for the automatic payment to be in effect. Until then, you must keep paying your premiums each month to avoid being disenrolled from the plan.

Brand-Name Drug:

A drug that has a trade name and is protected by a patent (can be produced and sold only by the company holding the patent). When the patent protection for the brand-name drug expires, FDA approved generic versions with the same active-ingredient formula can be sold by other manufacturers.

Catastrophic Coverage:

A name for the step of a Part D plan in which the plan pays nearly all of your drug expenses until the end of the year once your yearly out-of-pocket drug costs reach $8,000. During this payment stage, the plan pays the full cost for your covered Part D drugs. You pay nothing.

Centers for Medicare & Medicaid Services (CMS):

Formerly known as the Health Care Financing Administration (HCFA), CMS is the federal agency that administers the Medicare, Medicaid and several other health-related programs. CMS sets standards for Part D insurance plans.


Cost-sharing, where costs are split on a percentage basis. For example, a Blue MedicareRx plan might pay 80 percent and you would pay 20 percent.


Cost-sharing where you pay a pre-determined, flat amount for each prescription. In a Blue MedicareRx plan, for example, you might pay $15 for each prescription you receive and the plan would pay the remaining cost of the drug.


Cost-sharing occurs when members pay for a portion of health care costs not covered by the plan. The "out-of-pocket" payment varies by drug, and also depends on whether or not the member chooses to use a pharmacy that is contracted with the plan's network.

Cost-Sharing Tier:

Drugs on the formulary belong to a cost-sharing tier. Typically, the higher the Tier number, the higher your share of the cost of the drug will be.

Coverage Determination (or Coverage Decisions):

The decision the Plan makes about the prescription drug benefits you are entitled to get under the plan, and the amount that you are required to pay for a drug. The Evidence of Coverage (EOC), Chapter 7, tells you how you can ask for a coverage determination.

Covered Drugs:

A Part D drug that is included in a Part D plan’s formulary, or “Drug List”, and is covered by the plan.

Customer Care:

The team within our plan that can answer your questions regarding enrollment, benefits and other questions you may have as a member.

Coverage Gap (Donut Hole):

The period in your Blue MedicareRx plan after your payments for the year plus the plan’s payments total $5,030. You receive a discount on brand name drugs and you pay 25% of the cost of generic drugs. You stay in this stage until your “out-of-pocket costs” reach a total of $8,000. This amount and rules for counting costs toward this amount have been set by Medicare.

Coverage Gap Discount:

The Medicare Coverage Gap Discount Program (Discount Program) makes manufacturer discounts available to eligible Medicare beneficiaries receiving applicable, covered Part D drugs, while in the coverage gap. In order to participate in the Discount Program, manufacturers must sign an agreement with CMS to provide the discount on all of its applicable drugs (i.e. prescription drugs approved or licensed under new drug applications or biologic license applications).

Creditable Prescription Drug Coverage:

The actuarial value of the coverage equals or exceeds the actuarial value of defined standard prescription drug coverage as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS actuarial guidelines.


The amount you must pay before our plan begins to pay its share of your covered drugs. Depending on your plan, you will either have no deductible or a $545 annual deductible on drugs in the following tiers (Tier 3 Preferred Brand, Tier 4 Non-Preferred Drug & Tier 5 Specialty Tier).

Disenroll or Disenrollment:

The process of ending your membership in our Plan. Disenrollment can be voluntary (your own choice) or involuntary (not your own choice).

Dispensing Fee:

Pharmacists receive a dispensing fee for filling your prescription(s). This fee covers services such as: talking about your treatment with you, maintaining and checking your medication record, and providing drug information to your doctors.

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