Medicare Glossary of Terms
Navigating your way through Medicare sometimes takes a village, and that village should include a translator. We offer this glossary of terms to help you find the Medicare definitions you need when acronyms and strange-sounding words get between you and your healthcare.
Browse common Medicare terms listed in alphabetical order:
A
Advance Beneficiary Notice of Noncoverage (ABN)
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When a healthcare provider or medical supplier believes that original Medicare will not cover a service or piece of equipment that you’ve recently gotten, they will send you this letter before they file any Medicare claim. It alerts you that you may have to pay some or all of these costs out of pocket. You don’t get an ABN for items or services that Medicare never covers, because there is no uncertainty — those expenses are definitely not allowed.
Advantage (see Medicare Advantage)
This is another name for Medicare Part C. Medicare Advantage plans are sold by private insurance companies to take the place of coverage by Medicare Parts A and B (original Medicare). There are six types of Medicare Advantage plans. They typically include benefits that original Medicare does not, such as prescription drugs and coverage for vision, dental, and hearing care.
Annual Notice of Change
If you are enrolled in a Medicare Advantage or Part D plan, you should receive this essential document — sometimes called an ANOC for short — from your plan by September 30. The insurance companies who sponsor the plans are required to send this letter ahead of Medicare’s open enrollment period to make enrollees aware of any changes that the plan will undergo in the upcoming plan year. You’ll want to review this information closely to ensure that your current plan will still meet your needs. If it won’t, you will have the opportunity to switch plans during the open enrollment period.
Appeal
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If you disagree with a coverage or payment decision made by your Medicare plan, you can file an appeal. You can appeal if your plan denies coverage for a healthcare service, supply, item, or prescription drug that you think you should be able to get (or already got). You can also file an appeal if your plan stops providing or paying for all or part of a service or item you still need, or if the plan denies your request to change the amount you must pay for that service or item.
Assignment
This is another way of saying that your doctor, healthcare provider, or supplier wants to work with Medicare and agrees to accept the Medicare-approved amount as full payment for covered services. Most providers accept assignment, and some are required by law to do so. Those who accept assignment have to submit claims directly to Medicare and can’t charge you for submitting a claim. If you want to get services from a provider who has opted out of Medicare, you may want to speak with a SHIP counselor before signing a private contract.
B
Benefit period
This is how Medicare Part A measures how enrollees use hospital and skilled nursing facility services. The benefit period begins the day a patient is admitted and ends when the patient has not received inpatient care for 60 consecutive days. Enrollees are responsible for paying the inpatient hospital deductible for each benefit period.
C
Catastrophic coverage phase
This is the last phase of drug coverage in Medicare Part D plans during a calendar year. It happens after you’ve spent through the donut hole. At this point, Medicare typically pays for 95% of the cost of your medication, and you pay either 5% coinsurance or copays of $3.95 for generic medication and $9.85 for brand-name drugs for the rest of 2022. The catastrophic phase can add up to be a lot of out-of-pocket money for people who need specialty medication.
Center for Medicare & Medicaid Services (CMS)
This governmental agency, part of the Department of Health and Human Services (HHS), administers both the Medicare and the Medicaid programs.
Coinsurance
The amount that you are responsible for paying for a service or medication. Most commonly, it will be a percentage of the full cost of the service or medication.
Copayment
Usually a fixed amount you are expected to pay at the time services are rendered or exchanged.
Coverage determination
With Part D plans, it’s how insurers decide to cover and pay for prescription medications. Considerations include whether or not the drug is covered under the plan’s formulary, whether you as the patient meet the requirements for getting the medication, and how much you will need to pay for the drug, among others.
Coverage gap
Commonly referred to as the “donut hole,” the coverage gap refers to the third phase of coverage under a Medicare Part D plan. In this phase, the patient is responsible for paying 25% of the cost of their brand-name or generic drugs until they reach the out-of-pocket maximum for the year, which is set at $7,050 in 2022. Once this amount is met, the patient will move into the fourth and final phase of drug coverage: the catastrophic coverage phase.
Creditable coverage
Prescription drug coverage that is as good or better than what Medicare considers its standard. When you join Medicare, you have to have creditable coverage within a certain timeframe, or you’ll face a Part D late enrollment penalty. If you have medication coverage from an employer, union, or other group health plan, you should get a Notice of Creditable Coverage every year that will tell you whether or not your coverage qualifies as creditable. Either way, hold onto the notice. You may need it.
D
Deductible
Similar to the deductibles you may be used to under commercial insurance plans, a deductible is the amount you must pay towards healthcare services before Medicare begins to assist in covering costs.
Deemed status notice
Medicare sends this letter to people whose low income qualifies them for Extra Help on Part D prescription drug coverage. It lets them know they’re getting the help without having to apply for it.
Donut hole
This is another term used to describe the coverage gap, or the third phase of drug coverage, in Medicare Part D plans. During this time, the patient is responsible for paying 25% of the cost of their brand-name and generic medications.
Dual eligible
People who qualify for both Medicare and Medicaid. People can get this status with either original Medicare or Medicare Part C. They will automatically be given Extra Help to help pay for their Part D drug coverage.
Durable medical equipment
Medically necessary equipment or items, such as hospital beds, iron lungs, oxygen equipment, seat-lift equipment, walkers, scooters, and wheelchairs. Medicare often covers these items when prescribed by a healthcare provider for use in a patient's home.
E
Elective surgery
Surgery that you choose to have, as opposed to emergency surgery that is done to save your life. With elective surgery, you can delay it or decide against it without risking immediate health consequences. Elective surgery is often, but isn’t always, considered medically necessary. Examples include hip and knee replacement surgery and cataract surgery.
Enrollment
The process of signing up for original Medicare, or a supplemental plan, through a private insurance company.
End-stage renal disease (ESRD)
Permanent kidney failure that requires a regular course of dialysis or a kidney transplant. Individuals with end-stage renal disease can qualify for Medicare and, starting in 2021, Medicare Advantage, even if they are younger than 65.
Evidence of Coverage
This document comes to you every fall from the insurance company that runs your Medicare Advantage or Part D plan. It lists the plan’s benefits and prices for the upcoming year. You receive it before open enrollment so you can look it over and decide whether you want to switch plans.
Extra Help
Also known as the Low Income Subsidy (LIS), this is a program that aims to help Medicare enrollees with low income pay for the costs associated with their Medicare Part D plan, such as deductibles, premiums, copayments, and coinsurance.
F
Formulary
A formulary is the list of drugs covered by a Medicare Part D plan. Often, these formularies are organized according to a tier system, in which generic drugs are placed in the lower-cost tiers and brand-name or specialty drugs are placed in the higher-cost tiers. Because they are sold by private insurance companies, each Medicare Part D plan has its own unique formulary. For this reason, it is important to ensure that your specific medications are included in the formulary before you enroll in any particular Part D plan.
G
Grievance
This is a complaint about the way your Medicare Advantage plan or Medicare Part D plan has provided care. You may file a grievance if you have a problem getting in touch with the plan or if a staff person behaved inappropriately. In contrast, if you have a complaint about a plan's refusal to cover a service, supply, or prescription, you would file an appeal.
Guaranteed issue rights
These are rights you have in specific situations when insurance companies are required by law to sell you a Medigap policy regardless of your age or health status. In these situations, an insurance company can't refuse to sell you a Medigap policy, nor can it place conditions on your enrollment in a Medigap policy. Companies are forbidden from charging you more for a Medigap policy due to pre-existing health conditions.
H
Home healthcare
If a doctor decides you need certain healthcare services or supplies to be administered in your home, Medicare may cover these home healthcare services and supplies on a limited basis.
Hospice
Hospice care addresses the medical, physical, social, emotional, and spiritual needs of terminally ill patients toward the end of life, while also providing support to the patient's caregivers and family members. Hospice services may be provided in an institutional environment or at the patient’s home. The hospice benefit requires a hospice doctor and the patient’s doctor to certify that the patient has a life expectancy of 6 months or less.
I
Income-related monthly adjustment amount (IRMAA)
Medicare enrollees with income over a certain level pay this extra charge each month on top of both their Part B and their Part D premiums. A person is subject to this extra charge based on their modified adjusted gross income on their tax returns from 2 years ago. In 2021, the 2019 income levels were $88,000 for individual filers and $176,000 for people who filed jointly.
Independent reviewer
Medicare contracts with Independent Reviewer organizations (sometimes called an Independent Review Entity, or IRE) to review your case in the event that you appeal your plan's payment or coverage decision, or if your plan doesn't make a timely appeal decision. These organizations have no connection to your Medicare health plan or Medicare prescription drug plan.
Initial coverage phase
This is one of the first phases of Medicare drug coverage. It comes after the deductible phase, but if you have a Part D plan without a deductible, you go right to the initial phase of drug coverage at the start of the calendar year.
Initial enrollment period
This 7-month period is your first opportunity to enroll in Medicare Parts A, B, and D. It begins 3 months before the month when your 65th birthday occurs. If you don’t sign up for Medicare during this time, you’ll be hit with late enrollment penalties unless you have other creditable coverage.
L
Lifetime reserve days
Under original Medicare, lifetime reserve days are additional days that Medicare will pay for when you're in a hospital for longer than 90 days. You have a total of 60 reserve days that can be used during your lifetime, and Medicare pays for all covered costs incurred during each lifetime reserve day, with the exception of a daily coinsurance that you will be responsible for paying.
Long-term care
Long-term care consists of medical and nonmedical services provided to people who are unable to perform basic, necessary activities, like dressing or bathing. These services can be provided at home, in the community, in assisted living facilities, or in nursing homes. Most health insurance plans, including Medicare, don’t cover long-term custodial care.
M
Medicaid
This is a joint federal and state program that helps eligible uninsured people with low income gain health insurance. Since being given the choice and funding, all but 12 states have expanded their Medicaid programs up to 138% of the federal poverty level. If you qualify for both Medicaid and Medicare (referred to as “dual eligible”), most healthcare costs will be covered.
Medical underwriting
A health rating process used by insurance companies when deciding whether to approve your application for insurance such as Medigap. Companies also can institute a waiting period for pre-existing conditions (assuming your state law allows it) and charge higher premiums based on their findings.
Medicare cost plan
Now being phased out by the government, these network-based plans give members some of the added benefits of Medicare Advantage plans while enabling them to use original Medicare for care outside their network. Prescription drug coverage may or may not be included.
Medicare Part A (hospital insurance)
Medicare Part A is the part of original Medicare that covers costs associated with inpatient hospital stays for physical and mental healthcare, care provided in skilled nursing facilities, hospice care, as well as some home healthcare.
Medicare Part B (medical insurance)
Medicare Part B is the part of original Medicare that covers costs for certain doctors' services, outpatient care, medical supplies, and preventive services.
Medicare Part C (Medicare Advantage)
Medicare Part C, or Medicare Advantage, plans are sold by private insurance companies as an alternative to original Medicare. While these plans are regulated by CMS and are required to provide all of the benefits covered under original Medicare Parts A and B, these plans often include coverage for additional benefits, like prescription drugs, vision, hearing, and/or dental care, among others.
Medicare Part D (prescription drug plans)
Medicare Part D plans are sold by private insurance companies as an optional supplement to original Medicare to help cover the costs of prescription drugs. Each Part D plan has a unique formulary, which is the list of drugs it will cover. For this reason, you should ensure that whichever Part D plan you decide to enroll in covers all or most of your medications.
Medicare Plan Finder
A tool created and hosted by CMS on Medicare.gov to help Medicare enrollees find and compare available Medicare Advantage and Part D plans in their area.
Medigap (Medicare supplement insurance)
Offered by private insurance companies as an optional supplement to original Medicare, there are up to 10 nationally standardized Medigap plan types available, each of which covers a unique set of benefits. If interested in enrolling in one of these plans, it is best to do so during your 6-month open enrollment period, when you have guaranteed issue rights and cannot be denied coverage, or charged more for coverage due to a pre-existing health condition.
Medicare Savings Programs (MSPs)
These programs provide money to help you pay for Medicare premiums, deductibles, copays, and coinsurance. They are funded by the federal government but run by state Medicaid offices.
Medicare Special Needs Plan (SNPs)
Special needs plans are a type of Medicare Advantage plan designed to address specific populations with chronic, disabling medical conditions, and/or low incomes. SNPs typically have tailored formularies, benefits, and provider choices. They specialize in coordinating care.
Medicare Summary Notice (MSN)
A report that shows up every 3 months to document any services or medical supplies you received in that time that were covered by Medicare Parts A and B. It may look like a bill, but it’s not a bill. You will see what Medicare paid and what you may owe the healthcare provider (similar to an Explanation of Benefits), but it’s just for explanation. And if you didn’t receive any services in the last 3 months, you won’t get an MSN for that period. You can choose to receive MSNs electronically or in a more accessible format. But if you have Medicare Advantage, you won’t get any MSNs. Your MSNs can be helpful for recordkeeping and appeals.
Modified adjusted gross income (MAGI)
This number is based on the adjusted gross income figure on your tax return of 2 years ago. Any tax-exempt interest and nontaxable Social Security benefits that you may have are added in to calculate the MAGI. Your MAGI determines whether you are eligible for Medicaid.
O
Open enrollment
Open enrollment is Medicare enrollees’ once-a-year chance to make major changes to their health and drug coverage if they feel it is necessary. They can add, switch, or drop plans every year from October 15 through December 7, with new coverage beginning January 1 of the following year.
Original Medicare
Original Medicare is composed of two parts: Part A (hospital insurance) and Part B (medical insurance). These two parts make up the government’s fee-for-service health insurance program that was first signed into law in 1965. Many enrollees become eligible for Medicare coverage upon turning 65, but more than 9 million enrollees join the program at younger ages because of long-term disabilities.
Out-of-pocket costs
Costs that you pay instead of your health plan. These typically include deductibles, copayments, and coinsurance. Out-of-pocket costs can be influenced by many factors. For Medicare Part A hospital charges, out-of-pocket costs are based on benefit periods. For Medicare Part D, drug tiers, phases of coverage, and whether a drug is a brand name or generic all affect out-of-pocket costs.
Out-of-pocket limit or maximum
An out-of-pocket maximum, or limit, is the most you are allowed to spend for your healthcare in a calendar year before your insurer pays all costs. Traditional Medicare (Parts A and B) doesn’t have an out-of-pocket maximum. That’s why many enrollees consider buying Medicare supplement insurance known as Medigap if they don’t have another form of wraparound coverage to help pay for original Medicare’s deductibles, coinsurance, and copays. By contrast, Medicare Advantage plans are required by law to have out-of-pocket maximums for covered services.
P
Premium
A payment due to Medicare, an insurance company, or a healthcare plan for health or prescription drug coverage on a regular (typically monthly) basis.
Pre-existing medical condition
A health issue or problem that you had before the date that your new health coverage starts. Medicare isn’t allowed to deny coverage or raise premiums based on preexisting conditions. But insurance companies that issue Medigap policies may use preexisting conditions to do so after federal protections known as guaranteed issue rights no longer apply.
Primary payer
When a person on Medicare is also covered by certain kinds of health insurance (such as retiree insurance), Medicare has the main responsibility for paying that person’s claims. In other words, Medicare is the primary payer. Whatever it doesn’t cover is paid for by the private plan (though you may still be left with some out-of-pocket costs).
Prior authorization
A condition of coverage that requires an extra layer of permission before your insurance plan agrees to pay for a service, item, or procedure. For some medications, your prescription drug plan may require the doctor or pharmacy to get the insurer’s approval before it will cover the medication.
Q
Quality measures (star ratings)
Medicare measures the quality of Part D and Medicare Advantage plans with a star ratings system of 0 to a maximum of 5 stars. Plans with the highest ratings on measures such as quality of care and customer service receive bonus payments. Results are posted on Medicare’s Plan Finder tool.
R
Referral
With some health insurance and Medicare plans, like health maintenance organizations (HMOs), you may need to get a recommendation from your primary-care physician to see a specialist or access certain medical services. It acts as a kind of stamp of approval. The plan may not pay for the services without having the referral in hand first.
S
Secondary payer
When a person on Medicare is also covered by health insurance from a large employer or union, usually the private health plan has most of the responsibility for paying that person’s claims. In other words, Medicare is the secondary payer, covering whatever the private plan did not pay for.
Service area
Many Medicare Advantage plans limit their membership based on where people live. The designated areas are known as service areas. If you move out of the plan’s service area, you may be disenrolled from the plan. In this situation, you would be eligible to enroll in a new plan via a special enrollment period.
Skilled nursing care
Care services that can only be given by a registered nurse or doctor.
Skilled nursing facility (SNF)
A facility with the staff and equipment needed to provide skilled nursing care. Often, these facilities will also be equipped to provide skilled rehabilitative services and other related health services on site.
Social Security
The Social Security Administration is an independent agency of the U.S. federal government that administers Social Security, a social insurance program consisting of retirement, disability, and survivor benefits. Paying into Social Security via taxes on your income for the designated amount of time (40 quarters) is one aspect of eligibility for the Medicare program. The SSA is responsible for enrolling people in Medicare.
Special enrollment period (SEP)
In certain circumstances, like big life changes, a person may be able to enroll in Medicare, or change from one plan to another, outside of the traditional open enrollment period or the initial enrollment period. For example, losing your current healthcare coverage or being released from jail would qualify you for a SEP. Moving out of your current Medicare Advantage plan’s service area would do the same.
State Health Insurance Assistance Program (SHIP)
The State Health Insurance Assistance Program, or SHIP, is a nonprofit network that receives funding from the federal government to provide free, unbiased, and local health insurance counseling to Medicare-eligible people and their caregivers.
State Pharmaceutical Assistance Program
Not available in all states, these programs help residents get certain drugs (such as those for end-stage renal disease or HIV/AIDS) at lower cost. Often, the state programs are coordinated with Medicare Part D plans.
Step therapy
A coverage rule used by some Medicare Part D plans that requires patients to try a similar, lower-cost drug to treat a condition before the plan will cover the (typically more expensive) drug that was originally prescribed.
Surcharge liability
This is the additional amount you’ll be required to pay if your modified adjusted gross income (MAGI), based on the federal tax return you filed two years ago, is greater than $88,000 (if you’re a single person) or $176,000 (if you’re married, living together, and filing joint returns). This means you’ll pay higher premiums for Medicare Part B and Part D services.T
T
Telemedicine/telehealth
Medical and related services that a healthcare provider delivers to a patient using a computer, phone, or television from a location physically distant to the patient. Medicare Part B and Medicare Advantage plans cover some telehealth services. This benefit grew during the coronavirus pandemic.TiersIn traditional formulary design, tiers refer to the various groups or categories that correspond to pricing. Generally, drugs in lower tiers will be associated with lower copays, while drugs in higher tiers will be more expensive.
Trial right
This rule allows Medicare newcomers who started off by signing up for Medicare Advantage plans to switch to original Medicare within their first year. The rule also applies to people who dropped Medigap policies to try a Medicare Advantage plan; they can go back to their Medigap policy within 12 months, if that policy is still available.
U
Urgently needed care
This is care that you access outside of your Medicare health plan's service area due to a sudden illness or injury that needs immediate medical attention. If it’s determined that it would not be safe to wait until you get home to get care from a doctor in your network, the health plan must pay for the care.
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References
Internal Revenue Service. (2022). Definition of adjusted gross income.
Medicare.gov. (n.d.). 5-star special enrollment period.
Medicare.gov. (n.d.). Hospice care.
Medicare.gov. (n.d.). Lower costs with assignment.
Social Security Administration. (n.d.). Medicare benefits.
State Health Insurance Assistance Program. (n.d.). Home.
