Medicare Dictionary: Terms You Need to Know

Medicare Terms You Should Know

Every industry has its own language and health insurance is certainly no exception. If you’re new to Medicare – or even if you’re a seasoned pro – it’s important to understand the terms that Medicare uses to describe benefits and services. Of course, we provide a glossary of Medicare terms. However, the following 20 items are the terms you’ll see referenced most often on this site, as well as in all of your Medicare dealings.

Benefit Period

In Medicare, benefit period refers to your use of hospital and skilled nursing facilities. You pay co-insurance (see the next entry) for each benefit period, which begins the day you are admitted as an inpatient. The benefit period ends when a full 60 days passes without you receiving inpatient care at either a hospital or skilled nursing facility (SNF).

Co-insurance

This is the amount you pay for covered services (after you meet your yearly deductible). Typically, co-insurance is a percentage rather than a flat fee. For example, Medicare Part B includes 20 percent co-insurance for most services.

Co-payment

Essentially the same thing as co-insurance, except that co-payments are typically a set dollar amount. You may have a co-payment for doctor’s visits or prescription drugs.

Coverage Gap

Refers to your costs in two separate ways.

  1. If you have Medicare Prescription Drug Coverage, this occurs when your out-of-pocket spending and the amount Medicare pays meet a certain threshold ($3,750 in 2018). Also known as the donut hole, you pay a higher amount for covered prescription drugs while in the coverage gap. Once your out-of-pocket spending reaches $5,000, you enter catastrophic coverage and pay only a small co-pay for the rest of the year.
  2. Also refers to the costs not covered by Original Medicare. Many beneficiaries purchase Medicare Supplement Insurance (also known as Medigap) to cover these costs.

Medicare Terms You Should Know

Creditable Prescription Drug Coverage

You may delay enrolling in Medicare Part D if you currently have prescription drug coverage from another provider. However, to avoid paying a penalty, your coverage must be creditable, which means equal to or greater than the coverage you’d have through Medicare.

Deductible

This is the amount you pay per benefit period before your plan begins to pay. For most insurance plans, this is a yearly occurrence. Medicare Part A, however, calculates benefit periods differently (see the first entry).

Durable Medical Equipment

Includes medical equipment that your doctor orders you to use at home, such as a hospital bed, oxygen tank, wheelchair, or walker.

Excess Charge

This is the amount a provider charges that exceeds the Medicare-approved amount for services. For example, if Medicare approves a service for $100 but your doctor charges $110, the excess charge is $10. You are responsible for the excess charge in addition to any co-pays or co-insurance.

Formulary

Also known as a drug list, this details the drugs covered by a prescription drug plan.

Guaranteed Issue Rights

Also known as Medigap protections, this requires insurance companies to sell you a Medigap policy without exclusions, provisions, or higher rates, assuming you meet certain requirements.

Health Maintenance Organization (HMO)

A type of Medicare Advantage plan that requires receiving medical care via a network of contracted providers, including physicians, hospitals, clinics, and labs. Beneficiaries choose a primary care physician (PCP) who coordinates care and provides referrals to specialists.

Medicaid

Medicaid is a health insurance program financed jointly by state and federal governments. Requirements are based mainly on income.

Medical Underwriting

Private health Insurance companies review applicants’ medical history to determine whether to sell that person insurance and, if so, at what rate. Buying Medicare Supplement Insurance outside of your Medigap open enrollment period typically means you must undergo medical underwriting.

Medicare Terms You Should Know

Medicare Advantage Plan

Also known as Medicare Part C and MA, Medicare Advantage plans are sold by Medicare-approved private insurance companies. Plan options include HMO and PPO (the most popular choices) as well as private fee-for-service plans, special needs plans, and Medicare medical savings account plans. Enrollment in an MA plan may require a monthly premium in addition to your Part B premium.

Medigap

Also known as Medicare Supplement Insurance, Medigap plans are offered by Medicare-approved private insurance companies. Benefits help cover some of the costs not covered by Original Medicare, such as deductibles and co-insurance.

Original Medicare

This is federally-funded health insurance that includes two parts. Part A is hospital insurance and Part B is medical insurance. Medicare contracts with providers to offer services, including physicians, hospitals, labs, clinics, and other healthcare professionals. In addition, Medicare sets approved amounts it will pay for all covered services. Beneficiaries share costs via monthly premiums, deductibles, co-insurance, and co-pays.

Preferred Pharmacy

Organizations that are part of Medicare’s network of drug plans. Using one of these pharmacies results in lower out-of-pocket costs for beneficiaries than if they were to use a non-preferred pharmacy.

Preferred Provider Organization (PPO)

A type of Medicare Advantage plan that contracts with a network of healthcare providers, similar to an HMO plan. However, with a PPO, you may visit an out-of-network provider and still receive coverage, just at a higher cost. In addition, you do not need a referral to see a specialist.

Prescription Drug Plan

Also known as Medicare Part D, these plans helps cover the costs of prescription drugs. The plan can be added to Original Medicare as well as to a Part C plan if it does not include prescription drug coverage.

Skilled Nursing Care

This is care that can only be provided by a physician or registered nurse, such as intravenous injections. It may be provided in-home under certain circumstances or in a skilled nursing facility.

GET FREE MEDICARE PLAN QUOTES!