When trying to understand Medicare, even some seasoned beneficiaries need a reminder from time to time of how a term is defined or used. Medicare can seem complicated and confusing because many terms sound the same. This glossary includes the more common Medicare terms that can make your journey easier.
Annual Enrollment Period
The period when you can enroll in a Medicare Advantage or Prescription Drug Plan if you are already enrolled in Medicare Part A and Part B. If you already have Medicare Advantage or a Prescription Drug Plan, you can make changes during this period. It runs each year from October 15 through December 7, and coverage begins on January 1.
Annual Notice of Change
A document provided to all enrollees of Medicare Advantage or prescription drug plans that point out any changes in coverage, costs or service area between the plan for the current year and the following year. Medicare requires the private insurer to notify you by mail by September 30 of each year, so you can review the changes before making your health care plan decision during the Annual Enrollment Period.
Assignment
An agreement between Medicare and your doctor, provider or supplier to be paid directly by Medicare, accept the payment amount Medicare approves for the service and bill you no more than the Medicare deductible and coinsurance. You cannot be billed any excess charges.
Coinsurance
The percentage you may be required to pay for medical or prescription drug costs not covered by your health insurance plan as your share after you pay any deductibles. In the case of Original Medicare, for example, it can be 20% of the costs.
Copayment or Copay
You may be required by your health care plan to pay a flat, pre-set amount as your share of the medical or prescription drug costs at the time of service. For example, it may be $20 for a doctor’s visit or $10 for a prescription drug.
Deductible
The amount you may be required to pay each year for health care services or prescription drugs before your Original Medicare, Medicare Advantage or prescription drug plan begins to pay. Some plans have high-deductible options as a way to lower monthly premiums.
Formulary
An updated list of prescription drugs covered by a health insurance plan that is published on the insurer’s website each year by October 15. Each covered drug will be placed in a tier – or pricing category – that determines how much of the cost the insurer will pay. Also called a “Prescription Drug Guide” or “drug list.”
Initial Enrollment Period
The 7-month enrollment period around your 65th birthday (including three months before your birthday month, your birthday month, plus three months after) when you are first eligible to sign up for Medicare in the form of Original Medicare Part A and Part B. You can choose to sign up for Medicare Advantage at the same time. If you delay enrolling in Part B, your Medicare Advantage enrollment period shifts to the three months before the month of your Part B start date. If you fail to enroll in Medicare Advantage during this window, you will have to wait until the next Annual Enrollment Period to enroll.
Medicare
A federal government health insurance program that covers people age 65 or older, certain younger ones with disabilities, and people with amyotrophic lateral sclerosis (Lou Gehrig’s disease or ALS) or End-Stage Renal Disease (ESRD), which is defined as permanent kidney failure that requires dialysis or a transplant.
Medicare Advantage (Part C)
An alternative benefits plan you can choose to replace Original Medicare, which Medicare-approved private insurance companies offer to provide the equivalent of Original Medicare’s Part A and Part B services. Most Medicare Advantage plans also offer prescription drug plans and extra benefits and services such as vision, dental, hearing and wellness coverage. Plan issuers can define their own coverage restrictions, rules and out-of-pocket costs with Medicare approval. Also called “Medicare Part C.”
Medicare Supplement Insurance
If you have Original Medicare, this is supplemental coverage you can buy from private insurance companies for a monthly premium to help cover the gaps: the deductibles, copayments and coinsurance Original Medicare does not pay. Also called “Medigap.”
Medigap
Also called “Medicare Supplement Insurance,” see above.
Network
While Original Medicare is widely accepted by most providers nationwide, Medicare Advantage and Medicare Part D (prescription drug) plans can define limited networks of providers since private insurance companies administer them. “In-network providers” are those hospitals, medical facilities, physicians or pharmacies with whom a health care plan has contracted for services at an agreed-upon rate.
Open Enrollment Period
A period running from January 1 through March 31 each year in which Medicare Advantage policyholders can switch to a different Medicare Advantage plan or drop Medicare Advantage and return to Original Medicare, then sign up for a standalone Part D prescription drug plan. However, if you have Original Medicare, you can’t sign up for a Medicare Advantage plan or a Part D prescription drug plan during this period.
Original Medicare
Sometimes called “Basic Medicare” or “Medicare,” this federal fee-for-service health insurance program combines Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) that eligible beneficiaries first enroll in and covers about 80% of Medicare-approved health care costs. Medicare has a preapproved amount it pays for every contracted service, after which you pay your share.
Out-of-Pocket Maximum or Limit
A maximum amount you will pay each year as out-of-pocket costs: your share of covered medical services or prescription drug costs in the form of deductibles, copayments and coinsurance not paid by your insurance plan. Your plan pays 100% of approved costs once you reach your out-of-pocket maximum.
Part A
Premium-free hospital insurance for most seniors that covers part of your inpatient hospital stays and hospice care, skilled nursing facility care and some home health care. You are automatically enrolled in Part A when you apply for Medicare coverage.
Part B
Premium-based outpatient care that includes doctor’s services, routine and emergency medical services, medical supplies, preventive services and some outpatient hospital care. A monthly premium ($164.90 in 2023) is charged for Part B coverage.
Part C
Also called “Medicare Advantage,” see above.
Part D
Optional coverage plans for prescription drugs that can be purchased from private insurance companies at an additional cost and that can differ from state to state. Since Original Medicare does not cover prescription drugs, a Part D plan can significantly reduce out-of-pocket medication costs. Most Medicare Advantage plans include prescription drug coverage.
Premium
A periodic payment (usually monthly) you pay to an insurance company or Medicare to access health care or prescription coverage. This fee is in addition to any costs related to your plan for deductibles, copayments or coinsurance.
Primary Care Physician (PCP)
The doctor you see first who makes sure you get the health care you need and who coordinates your care with other doctors and health care providers. While with Original Medicare, you can see specialists without a referral from a primary care physician, with most Medicare Advantage plans, your primary care physician must first refer you to specialists for the costs to be covered by your plan.
Referral
A written order provided by your primary care physician that is required for your Medicare Advantage plan to cover the cost of your visit to a specialist or for certain medical services. Original Medicare does not require referrals for costs to be covered.
Special Enrollment Period
An opportunity to access essential health care coverage without waiting for Medicare’s designated enrollment periods if you failed to enroll during your Initial Enrollment Period for whatever reason. You qualify for Special Enrollment Periods when certain life events occur, like job loss or a change in marital status, or when your employer-provided group health coverage ends.
Skilled Nursing Facility (SNF)
A nursing facility with the staff and equipment to provide skilled nursing care – often short-term acute care – which requires skilled rehabilitative and other services by registered nurses or physical therapists. It does not include non-medical, custodial care. Skilled nursing care is covered by Medicare Part A (Hospital Insurance) if you qualify.
Takeaway action step: Print out or bookmark this list of Medicare definitions, so you have easy access whenever you are making decisions about Medicare.