The Vocabulary of Medicare Part D

If you are approaching Medicare eligibility, you may be bogged down with all the new vocabulary you are encountering. Part D is just one part of the Medicare arena, and yet it can seem confusing for newcomers. These basic terms should help you get started.

 Part D: Part D is the Medicare prescription drug coverage offered to anyone eligible for Medicare.

PDP: A PDP is a Prescription Drug Plan run by a private insurance company. The prescription drug coverage can be offered in a stand-alone plan for those beneficiaries with Original Medicare, or may be included in a Medicare Advantage (Part C) Plan.

MA-PD: The MA-PD is a Medicare Advantage Plan with prescription drug coverage.

Creditable Drug Coverage: Prescription drug coverage provided by an employer or group coverage plan that pays, on average, at least as much as Medicare’s standard prescription drug coverage. People who have this kind of coverage when they become eligible for Medicare can generally keep that coverage without paying a penalty, if they decide to enroll in Medicare prescription drug coverage later.

Premium: A premium is a monthly fee a beneficiary will pay for their Part D coverage.

Deductible: Part D plans may have a deductible, which is the amount you must pay each year for your prescriptions before your Medicare Prescription Drug Plan begins to pay its share of your covered drugs. After your deductible is paid, you may have to pay a copayment or coinsurance.

 Copayment: A copayment is a set amount paid for all drugs on a tier. For example, you may have to pay a $10 copayment for your prescription.

Coinsurance: Coinsurance is the percentage of the cost of the prescription drug you may have to pay.

Coverage Gap: A period of time in which you pay higher cost sharing for prescription drugs until you spend enough to qualify for catastrophic coverage. The coverage gap is also referred to as the “donut hole.” The Affordable Care Act is closing the “donut hole” over time, by providing discounts on brand-name drugs for those in the “donut hole” since 2011, and providing additional savings each year until the coverage gap is closed in 2020.[1]

Part D Late Enrollment Penalty: The late enrollment penalty is an amount added to your Medicare Part D premium if you did not enroll in a Part D plan when you were first eligible. You may owe a late enrollment penalty if, at any time after your initial enrollment period is over, there’s a period of 63 or more days in a row when you don’t have Part D or other creditable prescription drug coverage.

Formulary: A formulary is a list of prescription drugs covered by a prescription drug plan.


[1] The Affordable Care Act: A Stronger Medicare Program;