Medicare Part D glossary

Medicare uses a lot of jargon — acronyms, specialized terms, and concepts that can be confusing if you're new to it. This glossary defines the terms you're most likely to encounter when learning about or shopping for Medicare Part D coverage.

A

Annual Enrollment Period (AEP)

The yearly enrollment window from October 15 to December 7 when anyone with Medicare can join, switch, or drop a Part D plan or Medicare Advantage plan. Coverage takes effect January 1.

Annual Notice of Change (ANOC)

A document your Part D or Medicare Advantage plan must send you each September describing how your plan will change for the upcoming year — including premium, deductible, copay, and formulary changes.

Assignment

When a doctor or supplier agrees to accept the Medicare-approved amount as full payment. Most providers accept assignment.

B

Beneficiary

A person who receives Medicare benefits.

Brand-name drug

A drug sold under a specific trademark name by the company that originally developed it. Brand-name drugs are usually more expensive than their generic equivalents.

C

Catastrophic coverage

The phase of Part D where you pay $0 for covered drugs after reaching the annual out-of-pocket cap ($2,100 in 2026).

Centers for Medicare & Medicaid Services (CMS)

The federal agency that administers Medicare, Medicaid, and the Children's Health Insurance Program.

Coinsurance

A percentage of a covered drug's cost that you pay after meeting your deductible. For example, 25% coinsurance on a $100 drug means you pay $25.

Copay (Copayment)

A flat dollar amount you pay for a covered drug. For example, $10 for a generic prescription.

Coverage determination

The first decision your Part D plan makes about whether to cover a drug, how much you'll pay, and any restrictions like prior authorization.

Coverage gap

The phase of Part D between the initial coverage limit and the catastrophic coverage threshold. Also called the donut hole. The Inflation Reduction Act eliminated the gap starting in 2025.

Creditable coverage

Drug coverage that is at least as good as standard Medicare Part D. Having creditable coverage protects you from late enrollment penalties.

D

Deductible

The amount you pay out of pocket for covered drugs before your Part D plan begins to pay. The maximum Part D deductible is $615 in 2026.

Donut hole

The informal name for the Part D coverage gap. Eliminated by the Inflation Reduction Act starting in 2025.

Dual eligible

A person who qualifies for both Medicare and Medicaid. Dual eligibles automatically qualify for full Extra Help (Low-Income Subsidy).

D-SNP

Dual Eligible Special Needs Plan. A type of Medicare Advantage plan designed for people with both Medicare and Medicaid.

E

Exception (formulary)

A request to your Part D plan to cover a drug that's not on its formulary, or to lower the cost of a drug that is on its formulary.

Extra Help

A federal program (also called the Low-Income Subsidy or LIS) that helps people with limited income and resources pay Part D premiums, deductibles, and copays.

F

Formulary

The list of drugs covered by a Part D plan. Plans organize formularies into tiers, with lower tiers having lower copays.

G

Generic drug

A drug with the same active ingredient as a brand-name drug, but typically much cheaper. Generics must meet the same FDA standards as brand-name drugs.

Grievance

A formal complaint about your Part D plan that doesn't involve a coverage decision — for example, complaints about customer service, pharmacy access, or plan procedures.

Guaranteed issue

Times when insurance companies must sell you a Medigap policy regardless of your health status. The Medigap Open Enrollment Period is the most common guaranteed-issue right.

I

Initial Enrollment Period (IEP)

The 7-month window around your 65th birthday when you can first enroll in Medicare. It begins 3 months before your birthday month and ends 3 months after.

IRMAA

Income-Related Monthly Adjustment Amount. A surcharge that high-income beneficiaries pay on top of standard Part B and Part D premiums. The 2026 threshold is $109,000 for individuals or $218,000 for couples.

L

LIS

Low-Income Subsidy. The official name for Extra Help.

M

M3P

Medicare Prescription Payment Plan. A voluntary program that lets you spread your annual out-of-pocket drug costs into monthly installments instead of paying large amounts at the pharmacy.

Mail-order pharmacy

A pharmacy that ships your prescriptions to your home, often offering 90-day supplies at lower cost than retail pharmacies.

Medicaid

A state and federal program that helps people with limited income and resources pay for medical care. Different from Medicare.

Medicare Advantage (Part C)

An alternative to Original Medicare offered by private insurance companies that bundles Part A, Part B, and usually Part D into one plan.

Medicare-approved amount

The amount Medicare determines is appropriate for a covered service or drug.

Medicare.gov

The official U.S. government website for Medicare information and the official Medicare Plan Finder tool.

Medicare Savings Program (MSP)

State-run programs that help pay Medicare Part A and Part B premiums, deductibles, copays, and coinsurance for people with limited income.

Medigap

Medicare Supplement Insurance. Private insurance that helps pay for costs Original Medicare doesn't cover, like deductibles and coinsurance. Medigap policies don't include drug coverage.

O

Open Enrollment Period (OEP)

The Medicare Advantage Open Enrollment Period from January 1 to March 31 when MA enrollees can switch to a different MA plan or return to Original Medicare with a Part D plan.

Original Medicare

Parts A and B of Medicare, administered directly by the federal government. Most people add a Part D plan and may add a Medigap policy.

Out-of-pocket cap

The maximum amount you pay for covered drugs in a calendar year. The Part D out-of-pocket cap is $2,100 in 2026.

P

Part A

Hospital Insurance. Covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health care. Most people get Part A premium-free.

Part B

Medical Insurance. Covers doctor visits, outpatient care, preventive services, and some home health care. The standard 2026 Part B premium is $202.90/month.

Part C

Medicare Advantage. See Medicare Advantage.

Part D

Prescription drug coverage. Available as a standalone plan or bundled with Medicare Advantage.

Pharmacy network

The pharmacies your Part D plan has contracted with. In-network pharmacies have lower copays. Some plans have preferred pharmacies with even lower copays.

Plan Finder

The official Medicare.gov tool that lets you compare Part D plans, Medicare Advantage plans, and Medigap policies in your area.

Preferred pharmacy

A pharmacy in your Part D plan's network that has the lowest copays. Plans designate certain pharmacies as preferred.

Premium

The monthly amount you pay for your Part D, Part B, or Medicare Advantage plan, regardless of whether you use any services.

Prior authorization

A requirement that your doctor get approval from your Part D plan before it will cover a specific drug.

Q

Quantity limits

A restriction on how much of a drug your Part D plan will cover at one time.

S

Special Enrollment Period (SEP)

A time outside the regular enrollment windows when you can join, switch, or drop a Part D or Medicare Advantage plan due to certain life events like moving or losing other coverage.

Step therapy

A requirement that you try a less expensive drug first before your Part D plan will cover a more expensive drug for the same condition.

SHIP

State Health Insurance Assistance Program. A free, unbiased counseling program available in every state to help with Medicare questions.

Standalone Part D plan

A Part D drug plan you add to Original Medicare. Different from Medicare Advantage plans that include drug coverage (called MA-PD).

T

Tier

A category in your Part D plan's formulary that determines your copay. Lower tiers (Tier 1, Tier 2) have lower copays. Higher tiers (Tier 4, Tier 5) have higher copays.

TTY

Teletypewriter. A device for people who are deaf or hard of hearing. Medicare's TTY number is 1-877-486-2048.

W

Wellness visit

A free annual preventive visit covered by Part B that includes health risk assessments and personalized prevention plans.