Glossary of Common Medicare Terms

It sometimes seems as though Medicare has its own language. On this page, we define terms commonly used by Medicare.

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

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Accept assignment

If a provider (physician, supplier, pharmacy, etc.) accepts assignment, it means they agree to accept the Medicare-approved amount for the service or item. That means the provider cannot then bill you for anything beyond your Medicare coinsurance or deductible.

Advance Beneficiary Notice of Noncoverage (ABN)

Your provider should ask you to sign an Advance Beneficiary Notice of Noncoverage before supplying a service or item they believe Medicare will not cover. If you sign an ABN and Medicare denies the claim, you most likely have to pay for it. However, if the provider did not provide an ABN before supplying the service or item, you may not have to pay.

Advance directive

A written, legal document that describes your wishes in the event you become unable to make your wishes known. Common examples include a medical power of attorney and a living will.

Annual Enrollment Period (AEP)

Sometimes referred to as Open Enrollment, the AEP is your yearly opportunity to make changes to your Medicare coverage. It begins on October 15 and lasts through December 7. You may sign up for a Medicare Advantage (MA) plan, switch back to Original Medicare, or choose a Medicare Part D plan. Changes made during annual enrollment take effect on January 1 of the following year.

Assignment

An agreement between a doctor or other provider and Medicare. The provider agrees to accept Medicare's approved cost for the service and Medicare agrees to pay claims for covered services.

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Balance Billing

If a Medicare Private Fee-for-Service Plan’s provider (doctor or hospital) charges you more than the plan’s payment amount for services, this is called balance billing. This overcharge cannot be more than 15% of the amount approved by Medicare and may be less, depending on your state. In order to balance bill, the provider must have a written contract with the Medicare Private-Fee-for-Service Plan OR have met certain company conditions to ensure a contract.

Benefit period

The Medicare Part A benefit period begins the day a hospital or skilled nursing facility admits you as an inpatient. The benefit period ends when you go 60 days in a row without receiving inpatient care. Unlike Part B, which has an annual deductible, you must pay the Part A deductible for each benefit period. There may be multiple benefit periods in a single year.

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Catastrophic Coverage

If you enter and leave the Donut Hole in a single calendar year, you enter what Medicare calls catastrophic coverage. During this stage, you pay a relatively small co-payment or co-insurance for covered prescriptions. Your Part D plan pays the rest. The out-of-pocket amount to enter the catastrophic coverage stage changes every year.

Centers for Medicare and Medicaid Services (CMS)

CMS is a federal agency within the U.S. Department of Health and Human Services. The program works to help lower costs and improve healthcare for tens of millions of Americans. CMS helps beneficiaries of Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and the Health Insurance Marketplace.

Claim

If you submit a request for payment to Medicare or other insurance provider, this is known as a claim.

Clinical breast exam

This in-office exam given by your doctor or healthcare provider includes visual and manual observation of your breasts. It is not a mammogram. Typically, women receive a clinical breast exam once a year during their annual pelvic exam and Pap test.

Co-insurance

An out-of-pocket amount Medicare beneficiaries usually pay for covered services. Typically, co-insurance is a percent of Medicare-approved amount. For example, most covered Part B services have a 20 percent co-insurance charge.

Co-payment

Unlike co-insurance, co-payments are usually a set dollar amount for covered services or items. For example, you may have a $15 co-pay for visits to your primary care physician if you have a Medicare Advantage plan.

Coordination of Benefits

If you have health insurance in addition to Medicare, coordination of benefits determines which plan pays first. Numerous factors determine who pays first, including whether your secondary insurance is via a civilian employer or the military.

Cost sharing

Refers to numerous methods Medicare employs to share costs with beneficiaries, including co-insurance, co-pays, deductibles, and premiums.

Coverage determination (Part D)

If you have a question about your prescription drug benefits, the coverage determination is your plan's first decision. It includes information about whether a particular drug is covered, if you meet the requirements for a requested drug, and your out-of-pocket costs. Part D plans must return prompt coverage determination decisions – within 24 hours for an expedited request and 72 hours for a standard request. If you disagree with the coverage determination, filing an appeal is the next step.

Coverage Gap

Commonly known as the donut hole, you enter the Part D coverage gap when you and your plan spend a specific amount. You remain in the coverage gap until your out-of-pocket spending meets predetermined limits. The amounts to enter and leave the coverage gap change every year.

Creditable prescription drug coverage

If you have prescription drug coverage through a provider other than Medicare, the benefits must be at least as good as those offered by Medicare. If it does not pay about the same amount that Medicare pays, it is not creditable. You may have to pay a penalty for late Part D enrollment.

Critical access hospital (CAH)

Small healthcare facility in rural areas that provides limited outpatient and inpatient services.

Custodial care

Assistance with personal care activities, characterized as those you could normally do yourself. May include bathing, dressing, and some medically-related activities, such as administering medications. Custodial care is not covered by Medicare.

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Deductible

This is a fixed amount that you must pay out-of-pocket before Original Medicare or your Medicare plan pays.

Donut hole

Also known as the Part D coverage gap, you enter the donut hole when you and your plan spend a specific amount. You remain in the gap until your out-of-pocket spending meets predetermined limits. The amounts to enter and leave the donut hole change every year. See coverage gap.

Drug list

Medicare Part D plans provide a list of covered prescriptions. Also known as a drug formulary, if your prescription is not listed here, it is not covered by your Part D plan.

Dual Eligible

If you qualify for both Medicare and Medicaid, you are what is known as dual eligible. If you have full Medicaid, you receive prescription drug coverage via Medicare Part D and qualify for Extra Help. Medicaid should cover your remaining costs after Medicare pays.

Durable medical equipment (DME)

Your doctor may prescribe certain medical equipment for you to use at home. Common examples include a hospital bed, wheelchair, and an oxygen tank.

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End-Stage Renal Disease (ESRD)

This is the final stage of chronic kidney disease: permanent kidney failure. To survive, patients require either dialysis or a kidney transplant. If you have ESRD, you qualify for Medicare – even if you haven't turned 65 yet.

Exception

If your Part D plan doesn't cover a prescription, you may submit a request asking for an exception. You may also ask for a tiering exception if your prescription is not on one of the preferred tiers. Requests should include supporting documentation from the prescribing doctor.

Excess charge

Under Original Medicare, you may see a doctor who does not accept Medicare, or only accepts assignment on certain services. In this case, the provider may charge more than the Medicare-approved amount for the service. The amount over the Medicare-approved cost is the excess charge.

Extra Help Back to top

If you meet certain income and resource requirements, you may qualify for assistance paying some Medicare costs. May include premiums, deductibles, co-insurance, and other cost sharing items.

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FFS (Fee for Service)

A payment model for healthcare that pays each service separately. Medicare's payment method used to follow the FFS model. Changes came about when it was determined some providers felt incentivized to provide unnecessary treatments, leading to a question of quantity versus quality as regards healthcare.

Formulary

Medicare Part D plans include a list of prescription drugs covered by the plan. Before choosing a prescription drug plan, always review the plan's formulary to ensure it covers your medications.

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Grievance

If you have a complaint about the care provided by your Medicare plan – including your prescription drug coverage – this is known as a grievance. Examples include negative interactions with staff or difficulty contacting someone at your plan. Please note that complaints about coverage decisions require filing an appeal, not a grievance.

Group health plan

This is typically the type of health plan provided by an employer, union, or other employee organization.

Guaranteed issue rights

Also known as Medigap protections, this encompasses certain periods where insurance companies must sell you a Medigap policy, regardless of your medical history. In addition, guaranteed issue rights protect you from being charged a higher premium based on pre-existing conditions.

Guaranteed renewable policy

This is a type of insurance policy that cannot be terminated unless you fail to meet requirements. Specifically, as long as you pay your premiums, do not attempt to defraud the insurance company, and do not make untrue statements, your Medigap policy is guaranteed renewable.

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Health insurance marketplace

A federally operated service designed to help U.S. citizens find affordable health insurance. Most states use the Marketplace (www.healthcare.gov), although a few states manage their own.

Health maintenance organization

Commonly referred to as an HMO, this is a type of Medicare Advantage plan. It requires plan members to use a network of providers for covered services, including doctors, nurses, labs, and more. Typically, HMOs require members choose a primary care physician (PCP) from the network. He or she coordinates the patient's care among specialists.

Healthcare provider

Any organization or person licensed to provide healthcare. Common examples include doctors, nurses, clinics, laboratories, and hospitals.

Home health agency

Organizations that provide healthcare in the patient's home.

Home healthcare

Healthcare services that patients receive in their home that are ordered, planned, and monitored by the patient's physician. Medicare covers limited home healthcare services.

Hospice

Sometimes called end-of-life care, hospice care may be prescribed for terminally ill patients choosing to end treatment and receive palliative care. Hospice care supports both the patient and his or her family, friends, and caregivers.

Hospital insurance

Medicare Part A covers inpatient care received at either a hospital or skilled nursing facility.

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In-network provider

Any healthcare provider – including doctors, nurses, hospitals, and pharmacies – contracted with your health insurance plan. Most HMOs only cover care received in-network. Some plans, such as PPOs, cover out-of-network care at a higher out-of-pocket cost to the beneficiary.

Independent reviewer

If you appeal your Medicare plan's coverage or payment decision, Medicare may contract an organization, known as an independent reviewer, to review your case. The reviewer is not connected to your Medicare plan.

Initial Enrollment Period

This is the seven-month period when you first become eligible for Medicare. Commonly known as your IEP, it begins three months before your 65th birthday and ends three months after the month of your birthday. So, if you turn 65 in April, your IEP begins January 1 and extends through July 31.

Inpatient services

Care and services you receive after being admitted to either a hospital or skilled nursing facility. Examples include surgery, medical treatments, therapeutic services, and room and board.

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Late enrollment penalty

If you delay enrollment in Medicare Part B or Part D and do not qualify for a special enrollment period, you may have a late enrollment penalty. The amount varies according to how long you delayed enrollment. You must pay the late enrollment penalty for as long as you have Medicare coverage.

The Part B late enrollment penalty is 10 percent of your monthly premium for every full 12-month period you could have signed up for Part B but did not. So, 10 percent for one full year, 20 percent for two full years, and so on.

Part D's penalty varies according the base beneficiary premium, which is based on the national average. You pay 1 percent of this amount for every 30 days that you delayed enrollment in a Part D plan. This penalty is added to your Part D premium.

Lifetime reserve days

Under Original Medicare (Parts A and B), you have 60 lifetime reserve days. You dip into this bank any time you spend more than 90 days in the hospital. During lifetime reserve days, Medicare pays all covered hospital costs except for your daily co-insurance.

Limiting charge

If you receive covered services from a provider who does not accept assignment, he or she may only charge 15 percent above the Medicare-approved amount for said services. This does not apply to medical supplies or equipment.

Living will

A type of advance directive, this legal document delineates the types of treatments you approve in the event you are unable to advocate for yourself, such as if you are unconscious.

Long-term care

May include a variety of services, both medical and non-medical, for patients unable to perform these functions themselves. Treatment may be received in the home, in a nursing home, assisted living facility, or within their community. Like most health insurances, Medicare does not cover most long-term care services.

Long-term care hospital

Intended for patients requiring acute care for an extended period (average: over 25 days). Typically, patients transfer to a long-term care hospital from either an intensive or critical care center. Common services include respiratory therapy, pain management, comprehensive rehabilitation, and treatment for head trauma.

Low-income subsidy

Commonly referred to as Extra Help within Medicare Part D. The program helps eligible beneficiaries pay for their prescription drugs. Eligibility requirements include income and resource limits.

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Maximum out-of-pocket limit

Unlike Original Medicare, Medicare Advantage plans have an annual maximum out-of-pocket limit. Once you reach this limit, you don't have to pay anything for covered services for the rest of the year. This limit usually changes from year to year. It also varies according to the plan and insurance provider you choose.

Medicaid

State-run health insurance for citizens who meet their state's income and resource requirements. Medicare recipients who also qualify for Medicaid are described as having dual eligibility.

Medicaid-approved provider

Any healthcare provider (doctor, hospital, etc.) that Medicaid approves after an inspection conducted by the appropriate state agency.

Medical underwriting

Insurance company process that considers medical history and other risk factors to determine (1) whether to sell an insurance policy to an applicant and (2) how much to charge for that policy.

Medically necessary care

Any services or supplies that meet accepted medical standards and are required to diagnose and/or treat a medical condition.

Medicare

A federally run health insurance program available to all American citizens aged 65 or older as well as those who meet certain medical requirements.

Medicare Advantage Plan

Also known as Medicare Part C, Medicare Advantage plans resemble the group insurance offered by many employers. There are a variety of Medicare Advantage plan types, but HMO and PPO plans are the most common. Private insurers offer these plans, which must provide the same coverage as Original Medicare. Most also offer additional services, particularly prescription drug coverage.

Medicare-approved amount

Healthcare providers and suppliers who accept assignment agree to accept this amount for covered services, even if the amount is less than they'd normally charge. Medicare pays its share of this amount (usually 80 percent) and you pay the remainder.

Medicare-certified provider

Healthcare providers that have been approved by Medicare to provide services. To become certified, the provider must first pass inspection by a state-level government agency.

Medicare Cost Plan

This is a type of Medicare health plan that is often described as a hybrid between Original Medicare and Medicare Advantage. Most states do not offer Medicare Cost Plans.

Medicare health plan

Private insurance companies contract with Medicare to sell health plans that provide the same benefits as Parts A and B. There are numerous types of Medicare health plans, including Medicare Advantage Plans, Medicare Cost Plans, and Programs of All-inclusive Care for the Elderly (PACE) plans.

Medicare Medical Savings Account (MSA) Plan

This is the combination of a bank account and a Medicare Advantage (MA) Plan with a high deductible. The funds deposited into the savings account are typically less than the MA deductible, which means most beneficiaries must pay out-of-pocket before coverage kicks in.

Medicare Part A

Also known as hospital insurance, Part A covers inpatient care received in a hospital, skilled nursing facility, some home healthcare, and hospice.

Medicare Part B

Commonly referred to as medical insurance, as it covers outpatient services commonly received in a doctor's office. In addition, Part B may cover ambulance services, durable medical equipment, and preventive screenings.

Medicare Preferred Provider Organization (PPO) Plan

This is a type of Medicare Advantage plan that utilizes a network of providers similar to an HMO. However, it allows you to see a provider outside the plan's network for a higher out-of-pocket cost (i.e. a $30 co-pay instead of $15).

Medicare Prescription Drug Plan (Part D)

Private insurance companies offer prescription drug coverage at an additional cost. You can add a Part D plan to Original Medicare as well as some Cost Plans, Private Fee-for-Service plans, and Medical Savings Account plans. If you have a Medicare Advantage plan that does not include prescription drug coverage, you can add a Part D plan.

Medicare Private Fee-for-Service (PFFS) Plan

This is a type of Medicare Advantage plan that allows you to go to the same providers you would if you had Original Medicare. Each plan varies according to how much it pays and how much you pay. Your out-of-pocket costs may be higher or lower than they would with Original Medicare.

Medicare savings program

This is a Medicaid program that helps beneficiaries with limited financial resources pay their Medicare expenses.

Medicare SELECT

This is a type of Medigap (Medicare Supplement Insurance) policy that includes a provider network.

Medicare Special Needs Plan (SNP)

A Medicare Advantage plan designed for a specific population, focused on either health conditions or personal factors, such as qualifying for Medicaid or living in a nursing home.

Medicare Summary Notice

A written communication you receive that details how much your provider billed Medicare for, what Medicare paid, and the remainder you owe for services.

Medicare Supplement Insurance (Medigap)

Policies sold by private insurance companies to help pay some of your out-of-pocket costs under Original Medicare. Also known as Medigap, coverage varies according to the plan you choose.

Medigap Open Enrollment Period

A 6-month period that begins the first month you are both aged 65 or older AND enrolled in Medicare Part B. During this period, you cannot be denied a Medigap policy or charged more for any reason.

Medigap policy

See Medicare Supplement Insurance.

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Network

The group of healthcare providers contracted with your health plan to provide services. Most HMOs won't cover services received outside the plan's network.

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Original Medicare

Includes Medicare Part A and Medicare Part B.

Out-of-network provider

Any doctor, hospital, clinic, or other healthcare provider that is not part of your plan's network.

Out-of-pocket costs

Healthcare costs you must pay on your own, either because Medicare does not cover the service or because it is your co-pay, co-insurance, premium, or deductible.

Out-of-pocket maximum

Medicare Advantage plans place a cap on how much you'll pay out-of-pocket in a calendar year. The amount varies by plan and provider.

Outpatient Services

Services you receive without being admitted to a hospital, skilled nursing facility, or similar healthcare environment.

Overall Star Rating

The combined score of 35 metrics under a healthcare plan and 12 metrics under a prescription drug plan. Customer service, price accuracy, quality of care, and more contribute to the plan's overall star rating.

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Pap test

A preventive screening used to detect cervical cancer.

Pelvic exam

A physical exam of a woman's external and internal pelvic area, including uterus, vagina, vulva, ovaries, and Fallopian tubes.

Penalty

If you fail to enroll in Medicare Part B or join a Part D plan when you first become eligible, you may have late fees attached to your monthly premium.

Point-of-service option

If you have an HMO, you may be able to receive services outside your plan for an additional cost.

Power of attorney

A legal document granting another person authority to make certain types of decisions on your behalf.

Pre-existing condition

Any health issue you had before joining a new plan.

Premium

Typically a monthly payment for a health or prescription drug plan.

Preventive services

Healthcare intended to prevent illness or detect it while in its early stage. Examples include Pap tests, mammograms, flu shots, and prostate exams.

Primary care doctor

The doctor you see for most standard heath issues. Typically, your primary care doctor coordinates care if you have chronic conditions or need to see a specialist.

Prior authorization

Some Medicare drug plans require beneficiaries receive approval from the plan before filling a prescription.

Programs of All-Inclusive Care for the Elderly (PACE)

Designed for older adults who require nursing home services but do not necessarily need to live in a nursing home.

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Referral

Written authority from your primary care physician (PCP) to visit a specialist or other medical provider. Most HMOs will not pay for care received from any provider but your PCP unless you have a referral.

Respite care

When a patient's primary caregiver needs a break or is otherwise unable to provide care, the patient may receive temporary care in a hospital, nursing home, or similar healthcare facility.

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Secondary Payer

If you have more than one form of medical insurance, this is the provider that pays second for any claims. Includes Medicare and Medicaid as well as private insurance.

Service Area

Many health insurance plans establish geographical limits where enrollees may receive healthcare services. Typically, this is based on where you live. If you move out of the plan's service area, you may have to find a new plan.

Skilled Nursing Care

Care that must be provided by a medical professional, such as a nurse or a doctor.

Skilled Nursing Facility

A medical facility with the staff and equipment necessary to provide skilled nursing care.

State Health Insurance Assistance Program (SHIP)

A federally funded state program that helps Medicare enrollees understand the program and benefits.

State Insurance Department

A state agency that governs all forms of private insurance for that state, including Medigap providers.

State medical assistance office

Also known as Medicaid, this government agency helps residents with limited income and resources receive healthcare.

State Pharmaceutical Assistance Program (SPAP)

A state-funded and run program that helps pay for prescription drugs. Eligibility is typically based on financial need but may also be available to those who meet certain age or medical restrictions.

Step therapy

Some Medicare Part D programs require enrollees to try preferred, low-cost drugs before the plan will pay for the medication prescribed by the patient's doctor.

Supplemental Security Income (SSI)

Social Security benefits paid monthly to people who qualify based on age, income, or disability. This is not the same as receiving Social Security retirement or disability benefits.

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Telemedicine

Healthcare services conducted over a distance, typically via smartphone or computer. May also include digital medical devices, such as glucose and blood pressure monitors, that transmit patient data to the provider.

Tiered formulary

Most prescription drug plans have a list of covered medications. Covered drugs are typically placed on levels, also known as tiers, with costs going up as the tiers do.

TTY

An abbreviation for teletypewriter, which helps those who have a disability that affects speech or hearing communicate over the phone.

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Urgent care

Medical treatment for non-life-threatening illness or injury that occurs outside your regular doctor's office. If you need urgent care when outside your plan's service area or network, your plan must pay for services.

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Last Updated 09/01/2019