Medicare Part D Glossary

Annual Enrollment Period (AEP) — October 15 to December 7 each year, when you can join, switch, or drop Medicare Advantage and Part D plans.

Catastrophic coverage — the final Part D phase: once your out-of-pocket spending reaches the annual threshold ($2,100 in 2026), you pay $0 for covered drugs the rest of the year.

Coinsurance — your share of a drug's cost as a percentage (for example, 25%) rather than a flat dollar amount.

Copay (copayment) — a fixed dollar amount you pay for a prescription (for example, $10 for a generic).

Creditable coverage — prescription drug coverage at least as good as standard Part D, often from an employer or union plan. Lets you delay Part D without penalty.

Deductible — what you pay out-of-pocket for covered drugs before your plan starts sharing costs (up to $615 in 2026).

Donut hole (coverage gap) — the old Part D phase where costs spiked mid-year. Eliminated in 2025.

Extra Help (Low-Income Subsidy) — federal assistance paying Part D premiums, deductibles, and copays for people with limited income and resources.

Formulary — your plan's list of covered drugs, organized into tiers that set your cost.

Initial Coverage Phase — the Part D phase after the deductible, where you and your plan share drug costs until out-of-pocket spending hits the annual threshold.

IRMAA — Income-Related Monthly Adjustment Amount: a surcharge added to Part B and Part D premiums for higher-income beneficiaries.

MAPD — Medicare Advantage Prescription Drug plan: a Medicare Advantage plan that includes drug coverage.

Medicare Prescription Payment Plan — optional program letting you spread Part D out-of-pocket costs into monthly payments across the year.

PDP — stand-alone Prescription Drug Plan, paired with Original Medicare.

Prior authorization — a requirement that your doctor get plan approval before a drug is covered.

Special Enrollment Period (SEP) — a window outside normal enrollment triggered by events like moving or losing other coverage.

Step therapy — a rule requiring you to try a lower-cost drug before the plan covers a more expensive alternative.

Tier — a pricing level in a formulary. Lower tiers (generics) cost less; higher tiers (specialty drugs) cost more.

TrOOP (True Out-of-Pocket) — the accumulated out-of-pocket spending that moves you through Part D phases toward catastrophic coverage.