Key terms to know about Medicare Part D
Navigating the ins and outs of Medicare can be a challenge if you’re not familiar with certain terms.
Medicare Part D, which helps pay for prescription drug costs, has its own terminology. You can purchase a stand-alone Medicare prescription drug plan, or opt for prescription drug coverage as part of a Medicare Advantage plan.
With Medicare Annual Enrollment running from Oct. 15 to Dec. 7, now is a good time for a refresher on some key terms to help inform your coverage decisions for 2025.
The coverage gap or “donut hole”
In prior years, most Part D plans had a coverage gap, also known as the “donut hole.” But for 2025 plans, the donut hole has gone away as part of the Inflation Reduction Act. There will be now three Medicare Part D prescription drug coverage stages:
- Deductible
- If your plan has a prescription drug deductible, you pay the full cost for your drugs until you reach the deductible amount. Then you move to the Initial Coverage stage.
- Initial coverage stage
- In this stage, you’ll pay your plan copays or coinsurance. The plan pays the rest. For 2025, once you and the plan have paid a combined total of $2,000, which includes any amount paid toward your deductible, you move to the Catastrophic Coverage stage.
- Catastrophic coverage stage
- Once you’re in this stage, you won’t pay anything for your Medicare covered Part D drugs for the rest of the plan year.
Drug deductible, copay and coinsurance
A drug deductible is the amount you pay out-of-pocket in a given plan year for covered prescription drugs before your plan begins to pay. The deductible can vary from plan to plan, with many Medicare Advantage Prescription Drug plans (MAPD) having a deductible for drugs on certain tiers.
Some plans charge a copay, which is a set amount (for example, $8) you may be required to pay as your share of the cost of a covered drug.
With coinsurance, you pay a set percentage (for example, 20%) as your share of the cost of the covered drug.
Together, deductibles, copays, and coinsurance are also known as “cost-share.” Like deductibles, copay and coinsurance amounts can vary from plan to plan, and a plan’s copay and/or coinsurance amounts may vary by drug tier.
Formulary
A formulary is a list of the prescription drugs covered by a Part D plan. When considering a plan that covers prescriptions, review the plan’s formulary to help make sure your drugs are covered.
Drug tiers
A Part D formulary is typically grouped into tiers. The number of tiers may vary from plan to plan. Generally, drugs in a lower tier will cost less than drugs in a higher tier. Lower tiers generally include preferred generic drugs and may have low to no cost-sharing.
Higher tiers generally include brand-name drugs and specialty drugs and tend to have higher cost-sharing. If you are taking a brand-name drug, talk to your provider to see if it can be replaced with a generic drug.
Preferred pharmacy
Some Part D plans have preferred pharmacies in their network that offer covered Part D drugs for lower out-of-pocket costs than what you might pay at a non-preferred or “standard” pharmacy. If you use a preferred pharmacy, you may save money on your covered prescriptions. Make sure the plan offers access to pharmacies that are convenient for you.
Mail order pharmacy
Some plans also have mail-order pharmacy benefits, and you may be able to get prescriptions delivered to your home for a lower cost share than purchasing from a retail location. You may also be able to save on prescription drug costs by ordering 3-month supplies.
Extra Help
Extra Help is a federal program that helps pay for some or most of the out-of-pocket costs of Part D coverage. It is also known as the Part D Low-Income Subsidy (LIS). If you meet certain income and resource requirements, you may be eligible for Extra Help.
Learn more
Now is a great time to start thinking about your health care and budget needs for the upcoming year. Whether you’ll be enrolling in Part D coverage for the first time, looking to change your coverage during Medicare’s Annual Enrollment Period, or helping a loved one make decisions, visit UHCMedicareHealthPlans.com to access resources to help you prepare and make confident choices.
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