USEFUL DEFINITIONS

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Benchmark Plan
A prescription drug plan with a monthly premium at or below the low income premium subsidy amount. (For dual eligibles with low income, the premiums for these are completely covered by Extra Help.)

Co-insurance
In medical insurance, the insured person and the insurer share the covered procedures under a policy in a specified ratio. For example, the insurer may pay 80% of a procedure´s cost and the insured must pay the remaining 20%. Co-insurance is the share paid by the individual.

Co-pay
A predetermined amount of money that an individual who is covered or insured by a health program or insurance plan pays to access treatments and services, including medications.

Deemed Eligibles
Medicaid or Medicare Savings program recipients who have passed the income and resource tests and are already receiving benefits from Medicaid or the Medicare Savings program. These recipients do not need to apply for Part D separately. They must enroll in a Part D plan, but are automatically eligible for Part D and the low income subsidy.

Dual Eligibles
Dual eligibles are individuals who are in receipt of medical coverage from both Medicare and Medicaid.

Exceptions Process
A course of action that allows patients to challenge the placement of a drug on a higher-cost tier or the exclusion of a particular drug from their formulary. Under the Prescription Drug Benefit, an exceptions process must be incorporated into both stand-alone prescription drug plans (PDP) and those that are part of a Medicare Advantage plan (MA-PD). Enrollees are able to request that a formulary drug be provided at a lower tier for cost-sharing (thereby reducing the patient's co-pay) or that a non-formulary drug be provided by the plan. Because exceptions requests are coverage determinations, the plan must act within the time frame for standard coverage determinations (within 72 hours) or expedited coverage determinations (within 24 hours).

Formulary
List of prescription drugs covered by a particular drug benefit plan. Formularies are based on evaluations of efficacy, safety, and cost-effectiveness of drugs. Patients pay varying co-pays for drugs that are on formulary. For drugs that are not on formulary, patients must pay the entire cost of the drug. Formularies vary between drug plans and differ in the breadth of drugs covered and costs of co-pay and premiums. Most formularies cover at least one drug in each drug class, and encourage generic substitution. Also known as a preferred drug list.

Formulation Substitution and Therapeutic Equivalency
As patients and prescription benefit plans seek to lower their healthcare costs, they may substitute a less expensive therapeutically equivalent drug for a more costly drug. This is known as formulation substitution. Formulation substitution can include switching from a brand-name drug to a generic drug, switching from one generic drug to another generic drug, or (rather uncommonly) switching from a generic drug to a brand-name drug.

In most states, formulation substitution is allowed and encouraged, provided that the replacement formulation is deemed to be "therapeutically equivalent" to the innovator formulation by the Food and Drug Administration (FDA). The FDA publishes a list of drug products and equivalents entitled Approved Drug Products with Therapeutic Equivalence Evaluations; this is commonly referred to as the "Orange Book." The FDA's designation of "therapeutic equivalence" indicates that the generic formulation is bioequivalent to the innovator formulation. This means that drug products are considered to be therapeutic equivalents only if they have identical active ingredients and if they can be expected to have the same clinical effect and safety profile when administered to patients under the conditions specified in the labeling.

Generic Drugs
A drug which is exactly the same as a brand name drug and which may be manufactured and marketed after the brand name drug's patent expires (approximately 9-10 years after the brand-name drug entered the market). Generic drugs cost significantly less than brand name drugs, and are identical in terms of efficacy, safety, side effect profile, and dosing. Important exceptions to this may include drugs such as immunosuppressants or drugs with a "narrow therapeutic index" such as anti-arrhythmics. "Narrow therapeutic index" refers to drugs that have a high rate of side effects at commonly administered dosages. Also known as a "generic equivalent."

Generic Substitution
Substituting a generic drug for an identical brand-name drug that has lost its patent protection. Generic substitution lowers drug costs for both consumers and prescription benefit managers while providing equal efficacy, safety, side effect profile and dosing, with a few important exceptions. (For more information on exceptions to generic substitution see therapeutic equivalency.)

Medicare Advantage Plan
(Formerly Medicare + Choice) Medicare plans (HMOs) that a person with Medicare can join.

Medicare Advantage Prescription Drug Plan
A Medicare drug plan offered through a Medicare Advantage plan (such as an HMO) that offers Medicare prescription drug coverage.

Medicare Part D
The Medicare Modernization Act (MMA) of 2003 added prescription drug benefits for Medicare beneficiaries. Part D consists of a two-step process of application for Part D benefits (except auto-enrollment for dual eligibles) and enrollment in a Medicare approved drug plan.

Medicare Savings Programs (MSP)
A Medicaid program that pays some of the costs not covered by Medicare for Medicare beneficiaries with incomes under 135% of the federal poverty level (FPL). More information on the Medicare savings program can be found by clicking www.nyhealth.gov/health_care/
program/update/savingsprogram/medicaresavingsprogram.htm.

Part D Eligible Individual
A part D eligible individual is an individual who is entitled to or enrolled in Medicare benefits under Part A and/or Part B.

PDP Region
A PDP Region is a prescription drug plan region as determined by CMS. (New York State is a PDP Region).

Premium
A periodic payment by the insured to the health insurance company or prescription benefit manager in exchange for insurance coverage. The amount of the premium varies depending on health plan or drug formulary.

Prescription Benefit Managers (PBMs)
Prescription Benefit Managers are firms that contract with health plans or plan sponsors (such as employers) and specialize in claims processing and administrative functions involved with operating a prescription drug program. PBMs negotiate with pharmaceutical companies and prescription drug wholesalers to obtain a discount on bulk orders of prescription drugs. PBMs may also attempt to influence doctors' prescribing behavior or patients' drug utilization by manipulating the cost of certain prescription drugs to influence the use of alternative and comparable drug therapies.

Prescription Drug Plan (PDP)
A private insurance plan that offers coverage for prescription drug under Medicare, also known as a Medicare prescription drug plan.

Tiered Formularies
List of preferred prescription drugs in which different drugs have different co-pays. Each drug is assigned to a specific 'tier' within the formulary. The most cost-effective drugs, often generic drugs, belong to the most preferred tier and typically have the lowest co-pay, whereas the least cost effective drugs belong to the least preferred tier and have the highest co-pay. Tiered formularies encourage consumers to be cost-conscious in choosing their medications, and reward consumers for choosing generic medications by requiring a lower co-pay. Tiered formularies may also provide some level of coverage for prescriptions that might not otherwise be covered. (To access drugs that are on tiers other than the preferred tier may include the exceptions process).

 

*Information from the NYS Department of Health, Definitions for Medicare/Medicaid Dual Eligibles and Medicare Part D Information. Retrieved August 25, 2006, from NYS Department of Health Web site: www.health.state.ny.us/health_care
/medicaid/program/medicaid_transition/definitions.htm.