Definitions of Key Medicare Terms
Appeal – An appeal is the action you can take if you disagree with a coverage or payment decision made by Medicare, your Medicare health plan, or your Medicare Prescription Drug Plan.
Annual Enrollment Period (AEP) – The period between Oct. 15 and Dec. 7, where you can change your Medicare Advantage or Part D prescription drug plans for the following year. You can also switch from Original Medicare to Medicare Advantage or from Medicare Advantage back to Original Medicare.
Assignment – An agreement by your doctor, provider, or supplier to be paid directly by Medicare, to accept the payment amount Medicare approves for the service, and not to bill you for any more than the Medicare deductible and coinsurance.
Beneficiary – Any person who receives benefits from a health plan, including those eligible for health insurance through Medicare and/or Medicaid.
Benefit Period – The way that Original Medicare measures your use of hospital and skilled nursing facility (SNF) services. A benefit period begins the day you’re admitted as an inpatient in a hospital or SNF. The benefit period ends when you haven’t gotten any inpatient hospital care (or skilled care in a SNF) for 60 days in a row. If you go into a hospital or a SNF after one benefit period has ended, a new benefit period begins. You must pay the inpatient hospital deductible for each benefit period. There’s no limit to the number of benefit periods.
Claim – A request for payment that you submit to Medicare or other health insurance when you get items and services that you think are covered.
Coinsurance – An amount you may be required to pay as your share of the cost for services after you pay any deductibles. Coinsurance is usually a percentage (for example, 20%).
Copayment – An amount you may be required to pay as your share of the cost for a medical service or supply, like a doctor’s visit, hospital outpatient visit, or prescription drug. A copayment is usually a set amount, rather than a percentage. For example, you might pay $10 or $20 for a doctor’s visit or prescription drug.
Coverage Gap – A period of time in which you pay higher cost sharing for prescription drugs until you spend enough to qualify for catastrophic coverage. The coverage gap (also called the “donut hole”) starts when you and your plan have paid a set dollar amount for prescription drugs during that year.
Creditable Prescription Drug Coverage – Prescription drug coverage (for example, from an employer or union) that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. People who have this kind of coverage when they become eligible for Medicare can generally keep that coverage without paying a penalty, if they decide to enroll in Medicare prescription drug coverage later.
Critical Access Hospital – A small facility that provides outpatient services, as well as inpatient services on a limited basis, to people in rural areas.
Custodial Care – Non-skilled personal care, like help with activities of daily living like bathing, dressing, eating, getting in or out of a bed or chair, moving around, and using the bathroom. It may also include the kind of health-related care that most people do themselves, like using eye drops. In most cases, Medicare doesn’t pay for custodial care.
Deductible – The amount you must pay for health care or prescriptions before Original Medicare, your prescription drug plan, or your other insurance begins to pay. Demonstrations Special projects, sometimes called “pilot programs” or “research studies,” that test improvements in Medicare coverage, payment, and quality of care. They usually operate only for a limited time, for a specific group of people, and in specific areas.
Donut Hole – See: Coverage Gap
Dual-eligible – An individual who is eligible for Medicare Benefits and for Medicaid benefits.
Durable medical equipment (DME) – Certain medical equipment, like a walker, wheelchair, or hospital bed, that’s ordered by your doctor for use in the home.
Employer or Union Retiree Plans – Plans that give health and/or drug coverage to employees, former employees, and their families. These plans are offered to people through their (or a spouse’s) current or former employer or employee organization.
End-Stage Renal Disease (ESRD) – Permanent kidney failure that requires a regular course of dialysis or a kidney transplant.
Extra Help – A Medicare program to help people with limited income and resources pay Medicare prescription drug program costs, like premiums, deductibles, and coinsurance.
Fee-for-service – A system of health care payments where providers are paid separately for each particular service rendered.
Formulary – A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Also called a drug list.
Generic Drug – Any prescription drug with the same active-ingredient formula as a brand-name drug, but is known by a different name, and usually costs less.
Inpatient Rehabilitation Facility – A hospital, or part of a hospital, that provides an intensive rehabilitation program to inpatients.
Home Health Care – Health care services and supplies a doctor decides you may get in your home under a plan of care established by your doctor. Medicare only covers home health care on a limited basis as ordered by your doctor.
Hospice – A special way of caring for people who are terminally ill. Hospice care involves a team-oriented approach that addresses the medical, physical, social, emotional, and spiritual needs of the patient. Hospice also provides support to the patient’s family or caregiver.
In-network – Doctors, hospitals, pharmacies, and other providers who agreed to provide beneficiaries of certain insurance plans with services and supplies at a lower price. In some plans, your care is only covered if you receive it from in-network doctors, hospitals, pharmacies and other healthcare providers.
Initial Enrollment Period (IEP) – The 7-month period that begins three months before the month you turn 65, and three months after the month you turn 65.
Lifetime Reserve Days – In Original Medicare, these are additional days that Medicare will pay for when you’re in a hospital for more than 90 days. You have a total of 60 reserve days that can be used during your lifetime. For each lifetime reserve day, Medicare pays all covered costs except for a daily coinsurance.
Long-term care – Services that include medical and non-medical care provided to people who are unable to perform basic activities of daily living, like dressing or bathing. Long-term supports and services can be provided at home, in the community, in assisted living, or in nursing homes. Individuals may need long-term supports and services at any age. Medicare and most health insurance plans don’t pay for long-term care.
Long-term Care Hospital – Acute care hospitals that provide treatment for patients who stay, on average, more than 25 days. Most patients are transferred from an intensive or critical care unit. Services provided include comprehensive rehabilitation, respiratory therapy, head trauma treatment, and pain management.
Medical Underwriting – The process that an insurance company uses to decide, based on your medical history, whether to take your application for insurance, whether to add a waiting period for pre-existing conditions (if your state law allows it), and how much to charge you for that insurance.
Medically Necessary – Health care services or supplies needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.
Medicare-approved Amount – In Original Medicare, this is the amount a doctor or supplier that accepts assignment can be paid. It may be less than the actual amount a doctor or supplier charges. Medicare pays part of this amount and you’re responsible for the difference.
Medicare-certified Provider – A health care provider (like a home health agency, hospital, nursing home, or dialysis facility) that’s been approved by Medicare. Providers are approved or “certified” by Medicare if they’ve passed an inspection conducted by a state government agency. Medicare only covers care given by providers who are certified.
Medicare Health Plan – Generally, a plan offered by a private company that contracts with Medicare to provide Part A and Part B benefits to people with Medicare who enroll in the plan. Medicare health plans include all Medicare Advantage Plans, Medicare Cost Plans, and Demonstration/Pilot Programs. Programs of All-inclusive Care for the Elderly (PACE) organizations are special types of Medicare health plans. PACE plans can be offered by public or private companies and provide Part D and other benefits in addition to Part A and Part B benefits.
Medicare Savings Program – A resource that helps people with limited income and assets pay their Medicare premiums, deductibles and coinsurance.
Medicare Plan – Any way other than Original Medicare that you can get your Medicare health or prescription drug coverage. This term includes all Medicare health plans and Medicare Prescription Drug Plans.
Out-of-Pocket Costs – Health or prescription drug costs that you must pay on your own because they aren’t covered by Medicare or other insurance.
Out-of-pocket Limit – A limit that some health plans set on the amount of money you will have to spend out of your own pocket in a plan year. For Medicare Part D plans, this is the maximum amount of money you will have to spend out of your own pocket before catastrophic coverage begins for the remainder of the year.
Penalty – An amount added to your monthly premium for Part B or a Medicare drug plan (Part D) if you don’t join when you’re first eligible. You pay this higher amount as long as you have Medicare. There are some exceptions.
Pre-existing condition – A health problem you had before the date that new health coverage starts.
Premium – The periodic payment to Medicare, an insurance company, or a health care plan for health or prescription drug coverage.
Preventive services – Health care to prevent illness or detect illness at an early stage, when treatment is likely to work best (for example, preventive services include Pap tests, flu shots, and screening mammograms).
Primary Care Doctor – The doctor you see first for most health problems. He or she makes sure you get the care you need to keep you healthy. He or she also may talk with other doctors and health care providers about your care and refer you to them. In many Medicare Advantage Plans, you must see your primary care doctor before you see any other health care provider.
Prior Authorization – Approval that you must get from a Medicare drug plan before you fill your prescription in order for the prescription to be covered by your plan. Your Medicare drug plan may require prior authorization for certain drugs.
Provider – An individual or an organization that provides medical services and products, like doctors, hospitals, pharmacies, laboratories and outpatient clinics.
Referral – A written order from your primary care doctor for you to see a specialist or get certain medical services. In many Health Maintenance Organizations (HMOs), you need to get a referral before you can get medical care from anyone except your primary care doctor. If you don’t get a referral first, the plan may not pay for the services.
Service Area – A geographic area where a health insurance plan accepts members if it limits membership based on where people live. For plans that limit which doctors and hospitals you may use, it’s also generally the area where you can get routine (non-emergency) services. The plan may disenroll you if you move out of the plan’s service area.
Skilled Nursing Facility (SNF) Care – Skilled nursing care and rehabilitation services provided on a daily basis, in a skilled nursing facility (SNF). Examples of SNF care include physical therapy or intravenous injections that can only be given by a registered nurse or doctor.
Special Enrollment Period – A period of time beneficiaries can enroll in a health insurance plan outside of open, initial, or general enrollment due to special circumstances (such as moving or losing employer-sponsored insurance).
Step therapy – A coverage rule used by some Medicare Prescription Drug Plans that requires you to try one or more similar, lower cost drugs to treat your condition before the plan will cover the prescribed drug.
Telemedicine – Medical or other health services given to a patient using a communications system (like a computer, phone, or television) by a practitioner in a location different than the patient’s location.
Tiers – Groups of drugs that have a different cost for each group. Generally, a drug in a lower tier will cost you less than a drug in a higher tier.
Urgently needed care – Care that you get outside of your Medicare health plan’s service area for a sudden illness or injury that needs medical care right away but isn’t life threatening. If it’s not safe to wait until you get home to get care from a plan doctor, the health plan must pay for the care.