When first looking at Medicare options, a person may come across many terms and abbreviations with which they are not familiar. However, once they learn the basics, Medicare definitions can become less confusing.
When a person first becomes eligible for Medicare, it can be challenging to make sense of the information while navigating healthcare options.
This A–Z article defines the most important Medicare terms relating to costs and expenses, as well as some terms that pertain to Medicare Advantage and prescription drug plans (PDPs).
It also defines some medical conditions that qualify people for Medicare before they turn 65 years of age, explores some terms regarding enrollment periods, and discusses how to find advice.
- Amyotrophic lateral sclerosis (ALS) – Also known as Lou Gehrig’s disease, this is a progressive neurological condition. People with ALS who receive Social Security (SS) disability benefits are eligible for Medicare parts A and B.
- Annual cap – This is a yearly limit on out-of-pocket expenses.
- Annual enrollment period – This refers to a 2-month period that runs between October and December every year for those who may have missed their initial enrollment period (IEP).
- Claim – This is a request for reimbursement for a healthcare service that the healthcare provider normally sends directly to Medicare. An individual may also submit a claim if the healthcare provider does not.
- CMS – This is the acronym for the Centers for Medicare and Medicaid Services. They are a federal agency who administer Medicare and Medicaid.
- COBRA – This is short for the Consolidated Omnibus Budget Reconciliation Act. This 1985 law allows some employees to keep their health coverage after leaving employment.
- Coinsurance – This is the percentage cost that a person will pay toward a healthcare service.
- Copayment or copay – This is a fixed dollar amount that an insured person pays toward certain healthcare services.
- Cost-sharing – This refers to the portion of healthcare expenses that an individual pays. These include deductibles, coinsurance, and copayments.
- Deductible – This is a fixed dollar amount that a person must first pay before their health benefits will cover the costs.
- End stage renal disease (ESRD) – This is the last stage of kidney disease, wherein a person needs dialysis or a kidney transplant. People with this condition who also receive SS disability benefits are eligible for Medicare.
- Excess charge – This is the amount a person must pay themselves that is above the Medicare-approved amount.
- Extra Help – This is an assistance program relating to PDPs. The program helps those with low incomes pay for their medication.
- Formulary – This refers to a list of prescription drugs that a PDP covers. A formulary includes at least two of the drugs most commonly prescribed within each drug class.
- FPL – This is short for federal poverty level. It is an income measurement that experts use to determine qualification for and the level of additional support a person may be entitled to.
- General enrollment period – This is the period of time to sign up for original Medicare. It runs from January 1 to March 31 each year. A person can use this sign-up period if they miss the IEP.
- Generic drugs – These are Food and Drug Administration (FDA)-approved copies of brand-name medications that manufacturers can produce once the patent for the original brand-name drug expires.
- Health Maintenance Organization (HMO) – This is one of four types of Medicare Advantage plan. An HMO generally requires someone to use in-network providers.
- IEP – This is the 7-month period in which a person can sign up for original Medicare. The IEP begins 3 months before a person turns 65 years of age, includes the month of their birthday, and ends 3 months later.
- In-network – This term describes a list of healthcare providers that a person may need to use as part of their plan’s rules.
- IRMAA – This is short for the income-related monthly adjustment amount. The amount a person’s premiums will change by depends on their income.
- Jurisdiction – This is a geographical area awarded to private health insurance providers by Medicare to process Medicare claims for certain plans.
- Late enrollment penalty – This is a lifelong higher premium that Medicare may charge a person who does not enroll when they first become eligible. However, Medicare may make exceptions if the person is insured under another plan.
- Medicaid – This is a state-federal assistance program that serves people of any age with low incomes. People with Medicaid have few, if any, out-of-pocket costs.
- Medicare – This is a federal health insurance program that mainly serves people over the age of 65 years, regardless of their income. It also serves younger people with specific health conditions.
- Medicare Advantage – Also known as Medicare Part C, private health insurance companies administer these plans. At a minimum, the plans combine the coverage from parts A and B, though they usually offer additional benefits.
- Medicare Advantage open enrollment period (OEP) – This is an additional opportunity to sign up for Medicare parts C or D. This period runs from January 1 to March 31 every year.
- Medicare-approved amount – This is the maximum fee that Medicare sets to pay a healthcare provider for a specific service.
- Medicare savings programs (MSPs) – This is the collective name for a group of four Medicare plans that help people with limited incomes and resources pay their out-of-pocket Medicare costs.
- Medigap – This is also known as Medicare supplement insurance, which someone with original Medicare may choose. Private health insurance companies administer these plans, and they cover 50–100% of parts A and B out-of-pocket costs.
- Medigap OEP – The Medigap OEP is the 6-month period that starts the month a person turns 65 years old and signs up for Medicare Part B. This is the best time to enroll in a Medigap plan; plans may not be available outside of this period.
- OEP – For Medicare Advantage and PDPs, the OEP runs from October 15 to December 7 each year. For Medigap, the OEP is the 6-month period that runs from the month a person turns 65 years of age and signs up for Medicare Part B.
- Original Medicare – This comprises Part A, which is inpatient hospital insurance, and Part B, which is outpatient medical insurance.
- Out-of-network – This term describes any healthcare provider who Medicare has not specified as preferable to a particular plan. In some plans, using an out-of-network provider may not be an option, or it may cost a person more.
- Out-of-pocket – This term describes the amount a person will have to pay themselves, such as deductibles, coinsurance, copayments, and excess charges.
- Part A – This is one of two parts of original Medicare. Part A provides a person with inpatient benefits.
- Part B – This is the other of two parts of original Medicare. Part B covers outpatient services, such as doctor visits.
- Part C – This is another term for Medicare Advantage.
- Part D – This provides prescription drug coverage, which a person with original Medicare may choose. Private health insurance companies administer these plans.
- Preferred Provider Organization (PPO) – This is one of four types of Medicare Advantage plan. PPOs allow a person the flexibility of choosing either in-network or out-of-network providers.
- Premiums – This refers to the amount a person pays Medicare or a private health insurance company to keep their policy. The person will normally pay these premiums monthly.
- Private Fee-for-Service (PFFS) – This is one of four types of Medicare Advantage plan. PFFS plans have set fees that Medicare will pay providers and set fees that a person will pay when receiving care.
- Qualified Disabled and Working Individuals (QDWI) program – This is another one of four MSPs. The QDWI program helps pay Part A premiums for working people under the age of 65 years who have a disability.
- Qualified Medicare Beneficiary (QMB) program – This is one of four MSPs. The QMB program pays parts A and B premiums, along with deductibles, copays, and coinsurance.
- Qualifying Individual (QI) program – This is another one of four MSPs. The QI program helps pay Part B premiums.
- Special enrollment period – This is an opportunity to sign up for original Medicare under certain circumstances, such as when a person’s employee health insurance coverage comes to an end.
- Special Needs Plans (SNPs) – These plans are available to people with certain medical conditions, such as ESRD. The plans have customized benefits, drug formularies, and provider choices to ensure that people receive the most appropriate care.
- Specified Low-Income Medicare Beneficiary (SLMB) program – This is another one of four MSPs. The SLMB program pays Part B premiums.
- Tiers – This refers to lists of drugs within a formulary that a Part D PDP categorizes. For example, tier 1 usually has less expensive drug options and the lowest copayments.
- Underwriting – This involves a full review of a person’s medical history to determine the premiums they should pay. Sometimes, this can lead to Medicare or the private insurer excluding certain medical conditions from the coverage they offer.
As a person’s 65th birthday approaches, they may wish to visit the Medicare website to become familiar with the programs, what they cover, and their out-of-pocket costs.
If the person has questions, they can call 800-633-4227. Deaf or partially deaf people can call 877-486-2048 instead.
People who wish to check their eligibility for Medicare may visit the SS website or call 800-772-1213. Deaf or partially deaf people can contact SS at 800-325-0778 instead.
Learning Medicare definitions takes some time at first, but the terms will usually become easier to understand with time and experience.
The most important things to know are the basic programs’ definitions, including those of original Medicare, Medicare Advantage, Part D, and Medigap.