Understand commonly used Medicare terms.
The first step toward deciding on your Medicare health plan is to understand the terminology. All terms with definitions are provided in alphabetical order in the Medicare and You publication. Below is a sample of commonly used Medicare terms.
An organization of health care providers, hospitals and doctors who voluntarily come together to provide coordinated care to Medicare beneficiaries with the goal of providing high-quality care without duplicating services while preventing medical errors.
A form issued by health care providers to Original Medicare beneficiaries before providing an item or service that is not covered by Medicare. The Advance Beneficiary Notice (ABN) is provided to transfer the financial liability for payment for the service to the beneficiary.
A decision by a private fee-for-service (PFFS) plan about whether it will cover a health care service. Advance Coverage Decision notices can be given to any beneficiary, not just Original Medicare beneficiaries.
Also called Obamacare, the Affordable Care Act is a comprehensive health care reform law enacted in March 2010 to make affordable health care insurance available to more people, expand the Medicaid program so that all adults with income below 138% of the federal poverty line qualify, and help lower the costs of health care.
During this annual open enrollment period, which runs from October 15 to December 7, you can enroll in a Medicare Advantage Plan or a Part D Medicare prescription drug plan if you have Medicare Part A and B. If you’re currently enrolled in a Medicare Advantage Plan, you can disenroll or change your existing coverage. Coverage begins January 1 of the new year.
A person who is eligible for Medicare health insurance and enrolled in the program.
The time during which Medicare pays for your treatment at a hospital or skilled nursing facility. The benefit period begins the day you enter the hospital and ends 60 days after you’re no longer receiving inpatient care. Each benefit period incurs a new deductible. If you go back into a hospital after your benefit period ends, a new benefit period begins. There’s no limit to the number of benefit periods.
The amount you’re responsible for paying for health care services after paying your deductibles. Medicare Part A has no coinsurance unless you’re hospitalized for more than 60 days in a benefit period. Part B coinsurance is usually 20% of the charge for the service that’s approved by Medicare. In a Medicare Prescription Drug Plan, the coinsurance varies depending on your plans’ formulary but may be as much as 50%.
The amount you’re required to pay for each medical service you receive, including doctor’s visits, prescription drugs, and some hospital outpatient services. The copayment is typically a set amount, not a percentage of the overall charge for the service.
The amount you’re required to pay for health care or prescriptions before Medicare or other insurance kicks in and starts to pay. Deductibles for Medicare Part A reset every benefit period. Deductibles for Medicare Part B reset every calendar year. Deductible amounts may change every year.
Medical equipment that a doctor orders for use in your home, typically for therapeutic reasons or to help you perform tasks you couldn’t manage otherwise. Examples of durable medical equipment (DME) include hospital beds, walkers, and wheelchairs.
A document that certifies a beneficiary is enrolled in a health plan and explains the health care services and benefits of the plan. All Medicare plans post their Evidence of Coverage (EOC) documents to their websites every fall before Open Enrollment.
Any medical service or items that a health plan doesn’t cover.
The list of prescription drugs a prescription drug plan will pay for. The list is subject to change on a yearly basis. Medicare prescription drug plans post copies of their formulary on their websites every fall. The formulary is also known as a Prescription Drug Guide or a prescription drug list.
A managed health care plan that covers services only within the plan’s network of health care providers, with a primary care physician (PCP) referring patients to specialists as needed. Beneficiaries’ choices of hospitals and doctors are typically somewhat restricted. Medicare Advantage members may opt to receive their health care plan’s benefits through a health maintenance organization (HMO).
The seven-month period during which a beneficiary is first eligible to enroll in Medicare and Medicare Advantage plans. The Initial Coverage Election Period (ICEP) begins three months before the beneficiary’s 65th birthday month, includes the birthday month, and ends three months later. If the beneficiary doesn’t enroll in Medicare during this period, they may face a penalty payment for enrolling later. Also known as the Initial Enrollment Period (IEP).
Any health care provider that has agreed to provide beneficiaries of a specific health insurance plan with discounted rates on medical services and supplies. In-network health care providers may include physicians, hospitals, pharmacies, and other medical facilities. Some insurance plans will only cover services provided by in-network providers. Also known as participating providers.
The maximum amount of money you can be charged by any health care provider that doesn’t accept the charge preapproved by Medicare. The limiting charge, which is 15% higher than the amount Medicare approves, only applies to specific services. It doesn’t apply to equipment or supplies. You’re responsible for the limiting charge payment, although some Medigap health insurance policies cover it as an excess charge. The limiting charge doesn’t apply to in-network Medicare Advantage coverage.
A program administered jointly by the federal government and state governments to pay health care costs for people with low incomes and limited assets, and those with disabilities. Each state offers its own version of Medicaid, and Medicaid programs vary across states. People who qualify for both Medicare and Medicaid have most of their health care costs covered by the programs.
Another name for Medicare Part C (see Medicare Part C).
One part of the federal health insurance plan for people aged 65 and older, and those with certain disabilities or with end-stage renal disease. Medicare Part A provides hospital insurance and covers inpatient hospital care, skilled nursing facility (SNF) care, hospice, and some home health care. Medicare Parts A and B together are called Original Medicare or traditional Medicare.
Part B provides health care insurance to cover health care services like physician visits and outpatient care. Costs covered include lab tests, X-rays, chemotherapy, and emergency room visits, and some durable medical equipment. Medicare Part B also covers some preventative and health maintenance care. Medicare Parts A and B together are called Original Medicare or traditional Medicare.
A Medicare health plan provided by a private health insurance company contracting with Medicare. Part C plans, also known as Medicare Advantage (MA) plans, provide all benefits under Medicare Parts A and B, excluding hospice care. Many Medicare Advantage plans offer prescription drug coverage. MA may also include coverage for vision, dental, hearing, and wellness care.
Types of Medicare Advantage plans include HMOs, preferred provider organization (PPO), Private Fee-For-Service (PFFS), special needs plan (SNP), and Medical Savings Account (MSA) plans. While Medicare Advantage plans must offer all the benefits of Medicare Parts A and B, they often have different costs, rules, and restrictions. You must be enrolled in Medicare Parts A and B to join a Medicare Advantage Plan, and you must live in the service area of the plan you choose.
An optional benefit plan covering prescription drugs that all Medicare beneficiaries can purchase. Coverage is provided by private insurance companies that have contracted with Medicare and are federally subsidized. Beneficiaries’ prescription costs are generally lower with Medicare Part D than they would be without the coverage. Medicare Part D may be added to Original Medicare and Medicare Advantage plans. On a stand-alone basis, Medicare Part D plans are also referred to as Prescription Drug Plans (PDP). When part of a Medicare Advantage Plan, they’re also known as MA-PD.
A notice Original Medicare beneficiaries receive every 3 months detailing the Part A and B services and supplies received and billed to Medicare, the amount Medicare paid for these services, and the maximum amount the beneficiary may owe. Note that this is not a bill.
Insurance sold by private insurance companies to fill coverage gaps in Original Medicare plans. Beneficiaries must be enrolled in Original Medicare to qualify for this supplemental insurance, also known as Medigap insurance. If you have Medicaid, you don’t typically need a Medigap plan. You aren’t eligible for a Medigap plan if you have a Medicare Advantage Plan. Medigap policies cover additional hospital benefits not covered by Original Medicare, and some also include emergency health care when traveling in foreign countries. Medigap plans typically cover copayments, coinsurance, and deductibles not already covered by other health insurance plans, such as Veterans Affairs, employer, and union coverage. There are 10 standardized Medigap plans that are available in most states.
A collective name for Medicare Parts A and B. The federal government manages this fee-for-service health insurance, paying its share of the payment amount Medicare approves. Beneficiaries pay an annual deductible and coinsurance costs. Also known as traditional Medicare.
Benefits usually available through Medicare Advantage that allow beneficiaries to seek health care services from health care providers outside the insurance plan’s network. You can expect to pay higher costs for out-of-network services.
A type of Medicare Advantage Plan that allows flexibility in the choice of health care provider. Beneficiaries may use physicians, hospitals, and other health care providers that are out-of-network for an additional cost while the Medicare Advantage Plan still covers some costs. No referrals are needed to see specialists with a PPO plan.
The monthly payment that you pay to Medicare or another health insurance company for health insurance and/or prescription drug coverage. Premiums don’t count toward your out-of-pocket maximum or your deductible.
A type of Medicare Advantage Plan offered by private insurance companies. PFFS plans allow beneficiaries to see any Medicare-approved health care provider. The PFFS plan’s reimbursements, deductibles, and copayments may differ from Medicare’s, and the PFFS plan decides what you have to pay. PFFS plans may provide benefits and services not included in Original Medicare.
A written order from your PCP that allows you to see a specialist or to receive health care services not provided by your primary care provider. Some Medicare Advantage plans, especially HMOs, won’t pay for any services if the required referral hasn’t been obtained.
A period during which you can change your Medicare plan outside of the annual open enrollment period or your initial enrollment in the plan. Examples of events that trigger the opening of a special enrollment period include loss of a job, loss of health insurance under an employer or union plan, moving to a new coverage area, and moving into or out of a long-term care facility.
A Medicare Advantage Plan that serves beneficiaries with chronic conditions, such as diabetes. SNPs also cover people in long-term care facilities or nursing homes, those who require institutional care, and those with dual eligibility for Medicare and Medicaid. SNPs may cover multiple special needs. SNPs provide primary care providers or care coordinators to manage care, and they typically include prescription drug coverage.
Immediate medical care required for a sudden illness or injury that isn’t life-threatening. If you’re within your plan’s service area, your PCP should provide this care. If you’re out of your plan’s service area, your plan must pay for your urgently needed care.
The time between when you’re eligible to enroll in a Medicare Advantage or Medigap plan and when the coverage begins. This waiting period does not count as a gap in coverage.
Roseann Birch has worked in insurance for more than 35 years – which has shown her that Medicare is the most misunderstood of all insurance products. Although many adults 65 and over are eligible for Medicare, nearly just as many don’t understand how it works. Birch chose Medicare as her area of expertise, learning the ins and outs of Medicare and its variations and supplements to help beneficiaries and their families understand benefits. She finds there is often misinformation – even from official sources – and it’s her mission to clear up confusion so everyone can enjoy the full extent of Medicare benefits.