Medicare Glossary: Definitions You Need to Know

Coordination of benefits. How Medicare works with other insurance, such as employer or retiree coverage, to decide which pays first and what might be covered through a secondary plan.

Copayment. Better known as a copay, it’s the set dollar amount you pay up front for each doctor visit, prescription or other service.

Cost sharing. An umbrella term for the medical expenses you pay yourself outside your monthly health plan premiums. It doesn’t include services from an out-of-network provider or that your insurance doesn’t cover.

Creditable coverage. A prescription plan that the federal government considers as good or better than a basic Part D drug plan available under Medicare. Such a plan, often a part of your insurance while you’re working or as a retiree benefit, can prevent you from paying a penalty if you need to enroll later in a Part D plan.

Custodial care. Personal services that unlicensed caregivers can safely provide, including help with bathing, dressing, eating and light housework such as cooking and doing laundry.

D – D – D

Deductible. A set amount you pay for covered health care services before Medicare or another insurance kicks in.

Donut hole. An obsolete term for the coverage gap that no longer exists in Medicare Part D prescription plans.

Drug tiers. Categories of medications within Part D prescription plans that determine how much you’ll pay for them. Generics usually cost less than brand name or specialty medicines.

Dual eligible. A person who qualifies for both Medicare and Medicaid, the health insurance for people with low income and limited resources. This may include partial Medicaid assistance, such as Medicare Savings Programs.

Durable medical equipment. Health care devices and supplies, such as continuous positive airway pressure (CPAP) machines, hospital beds, infusion pumps, oxygen concentrators and walkers, that can be reused and are likely to last at least three years. Your doctor must prescribe them to be eligible for Medicare coverage.

E – E – E

Electronic health records. A history of your medical care, conditions and treatments that your doctors’ offices, hospitals and other providers keep in secure online systems. With your permission, each can access all this information to get a more complete picture of your health.

Employer coverage. Also called job-based coverage, it’s health insurance you receive while you or your spouse is actively working. If it’s from a company with 20 or more people, you can use it to delay enrollment in Medicare without penalty. COBRA and retiree health insurance you have after leaving work don’t count.

End-stage renal disease (ESRD). The medical name for permanent kidney failure when you need regular dialysis or a kidney transplant to stay alive. Medicare will waive its usual two-year waiting period for people younger than 65 who are diagnosed with kidney failure, but they must also have a sufficient work history and apply for coverage.

Evidence of coverage. A document that Medicare Advantage and Part D plans must send when you enroll in a plan and again every September before open enrollment season that explains what the policy includes and what you’ll pay for.

Excess charge. In original Medicare, this is the difference between a provider’s actual fee and the Medicare-approved payment. Sometimes the doctor or other health care professional is legally permitted to bill more, and some Medigap plans cover it.

Extra Help. Also known as the Part D low-income subsidy, this federal program helps Medicare enrollees with limited income and resources pay for Part D prescription coverage.

F – F – F

Federal Employees Health Benefits (FEHB) program. The health insurance plan for federal personnel and retirees that can work with Medicare.

Federal Insurance Contributions Act (FICA) tax. The payroll deduction that finances Social Security and Medicare. The hospital insurance portion funds Part A, and you or your spouse must have paid it for at least 40 quarters to be eligible for premium-free Part A when you turn 65.

Federal poverty level. A measure of income that the Department of Health and Human Services updates annually. In Medicare, it’s used to determine eligibility for financial assistance programs such as Part D Extra Help and Medicare Savings Programs.

Flex card. A prepaid debit card that some private Medicare Advantage plans issue, not Medicare, to help pay for items that Medicare doesn’t cover, such as over-the-counter medications, grocery allowances for healthy food and copayments for hearing and vision care.

Foreign travel emergency care. Medical care outside the United States that Medicare covers in rare circumstances, such as when an accident or health crisis occurs in the U.S. yet a hospital outside the country is closer to your location. Most Medigap plans — C, D, E, F, G, H, I, J, M and N — cover a portion of this care while you’re on a trip outside the country.

Formulary. The list of a prescription plan’s covered drugs. Insurers choose which medications are included, but Medicare requires plans to cover a wide variety of categories.

G – G – G

General enrollment period (GEP). The time you can sign up for Medicare Part B from Jan. 1 to March 31 if you miss your initial enrollment period but don’t qualify for a special enrollment period. You may have to pay a penalty.

Generic drug. An FDA-approved medication that works in the same way as a brand-name prescription. It is often a substitute for a better-known medicine but costs less.

Guaranteed issue rights. Limited circumstances outside your six-month Medigap open enrollment period when an insurance company must sell you a Medigap policy in your area without considering your health to deny coverage or charge more. These protections may apply when other insurance ends or when you decide to leave Medicare Advantage after fewer than 12 months.

H – H – H

Health maintenance organization (HMO). A type of Medicare Advantage plan that usually requires you to use providers in the plan’s network and has additional restrictions. It generally won’t pay for services from providers outside the plan’s network, except in emergencies.

Health savings account (HSA). If you have a high-deductible health plan, you can set aside pretax money in these financial vehicles and withdraw it anytime tax-free for eligible medical expenses, including for Medicare. But you can’t contribute after you’re enrolled in Medicare and should stop six months beforehand if the Medicare coverage will be retroactive.

High-income surcharge. If the money you report on your federal tax return is above a certain threshold, you may have to pay an additional amount for your Medicare Part B and Part D premiums, known as an income-related monthly adjustment amount (IRMAA).

Homebound. A Medicare term for someone whose illness, injury or other health condition makes leaving the house difficult and who generally needs help from another person or a device such as a walker or wheelchair to do so.

Home health care. Part-time skilled nursing care, therapy or other medical services provided in your residence when you meet Medicare’s eligibility requirements.

Hospice care. Services for patients nearing the end of their lives who choose comfort rather than treatment for their illness. This includes medications and support to manage symptoms and control pain.

I – I – I

In network. Hospitals, pharmacies and other providers that participate in your Medicare Advantage plan. You’ll generally pay more or may not have coverage for services received outside this system.

Initial enrollment period (IEP). The seven-month span that begins three months before your 65th birthday month and ends three months after. For most people, this is the first time they can enroll in Medicare. People who receive Social Security disability have this time centered on their 25th month of eligibility.

Inpatient. Your status after a doctor formally admits you to a hospital. You’re not considered official if you’re in the hospital under observation, even if you spend the night. That matters not only for Medicare coverage but also for whether you qualify for rehab services in a skilled nursing center after you’re discharged.

IRMAA. An acronym for income-related monthly adjustment amount, this surcharge is the extra premium you pay for Medicare Part B and Part D if the money you report on your federal tax return is higher than a certain threshold.

Institutional special needs plans (I-SNPs). A Medicare Advantage option for people who need or are expected to need a nursing-home level of care for 90 days or more. It can also cover people who require that type of care at home.

Issue-age pricing. One of three rate strategies insurers use to calculate premiums for Medicare supplement plans, better known as Medigap. They base premiums on your age when you buy, so they’re lower for people who buy early but can increase because of inflation.

L – L – L

Laboratory test. An analysis of blood, tissue, urine or other samples to diagnose a suspected illness or change in your health.

Large employer. For Medicare purposes, a company with 20 or more workers. Job-based insurance from a big business will pay first if a worker has both Medicare and the company’s plan; Medicare is considered secondary.

Late enrollment penalty (LEP). An extra charge you pay if you didn’t sign up for various parts of Medicare during your initial enrollment period at age 65 and don’t qualify for a special enrollment period. 

Lifetime reserve. An additional 60 days of coverage that you can use after you’ve been hospitalized for more than 90 days during a benefit period. They don’t have to be used all at once but won’t be replenished.

Long-term care. Medical, personal and support services for people who have a chronic illness or disability. These services may be provided in an assisted-living center, nursing home or your own home, but Medicare won’t cover this. 

Lou Gehrig’s disease. Also known as amyotrophic lateral sclerosis, ALS is a progressive condition that affects nerve cells in the brain and spinal cord and has no known cure. People diagnosed with ALS can qualify for Medicare immediately before age 65. 

M – M – M

Medicaid. A health insurance safety-net program offering hospital and medical coverage for individuals and families with limited income and resources. The federal government finances most of it, but the states largely run it.

Medical underwriting. An insurance company practice that uses your current illnesses, preexisting health conditions and overall wellness to decide whether to offer coverage, at what price and with what limits.

Medically necessary. Health services or supplies needed to diagnose or treat an injury, illness or its symptoms that meet clinical standards of care.

Medicare. A federal government health insurance program that primarily serves adults 65 and older. Younger people can qualify if they have amyotrophic lateral sclerosis (ALS) or end-stage renal disease or have been receiving Social Security disability for at least two years.

Medicare Advantage. The private alternative to original Medicare that commercial insurers offer and the government OKs. The plans bundle Part A hospitalization, Part B doctor and outpatient services and usually Part D prescription coverage into one.

Medicare-approved amount. The payment to a provider that original Medicare sets for a covered item or service. Deductibles and coinsurance you’ll owe are generally calculated from this.

Medicare card. A red, white and blue paper credential with a unique set of numbers and letters that is mailed to you after you enroll. You can also print a copy through your secure Medicare account, but be aware of scams pitching plastic IDs or ones with embedded chips.

Medicare drug price negotiation. A federal program that allows Centers for Medicare & Medicaid Services (CMS) officials to bargain with manufacturers to discount certain high-cost prescriptions. The reductions then apply to the selected medications Medicare covers.

Medicare Prescription Payment Plan. A program that allows enrollees in both stand-alone and Medicare Advantage Part D plans to spread out-of-pocket drug costs throughout a calendar year rather than paying all at once, much like an installment loan but with no accumulating interest.

Medicare Savings Programs. Through one of four state-run options, enrollees with limited financial resources are eligible for assistance to pay Medicare Part A and Part B premiums as well as some additional cost-sharing. If you qualify, you also become automatically eligible for Part D Extra Help, but you may need to check with your state to make sure you get enrolled.

Medicare summary notice (MSN). A paper statement sent twice a year to original Medicare enrollees that lists medical services you’ve received, noting what each provider billed, what Medicare paid and any balance you may owe. If you don’t receive services or supplies during the six months it covers, you won’t receive a mailing for that period.

Medigap. An optional supplemental insurance policy from private insurers that helps with copayments, coinsurance and deductibles in original Medicare. Any plan, identified with the letters A through N, must cover the same medical services as any other plan with that letter.

Medigap open enrollment. Federal law provides Medicare enrollees age 65 and older with a six-month window to buy a Medicare supplement plan when they first enroll in Medicare Part B. During this time, you can’t be turned down or charged more for health problems. If you miss this window, in many states getting a policy can be more difficult or cost more.

O – O – O

Observation status. A type of outpatient hospital care that allows doctors to monitor your condition and decide whether you should be admitted as an inpatient. Even if you stay overnight, Medicare may classify you as an outpatient.

Occupational therapy. Treatment that helps improve your ability to perform activities following trauma or injury or to manage symptoms from a chronic illness or condition. It can include learning to use a walker or wheelchair; exercises to increase strength and coordination; or learning ways to do household chores, get dressed and prepare food based on your physical limitations.

Open enrollment period. The 54 days from Oct. 15 to Dec. 7 each year when you can join, switch or drop any Medicare Advantage or Part D plan as well as move to or from original Medicare. Your new coverage begins Jan. 1.

Original Medicare. The Part A hospitalization and Part B doctor and outpatient services of Medicare together, also called traditional Medicare.

Out of network. A provider, clinic or hospital that doesn’t have a contract with your insurance plan. Original Medicare doesn’t have those restrictions, but Medicare Advantage limits which doctors, hospitals and other health care professionals you can use for the least cost.

Out-of-pocket costs. Money you pay for medical expenses that insurance won’t reimburse, including deductibles, copays and coinsurance for covered services and any additional fees for services not covered.

Out-of-pocket maximum. The most you need to pay for covered medical services in a year, including deductibles, copays and coinsurance. It does not include premiums, out-of-network costs or services above the allowed amount. Part D and Medicare Advantage plans have limits on these costs; original Medicare doesn’t, but buying a Medigap policy helps curb your expenses.

Outpatient. Your status for services provided in a clinic or hospital when a doctor has not formally admitted you. Medicare Part B, not Part A, covers many of these services.

P – P – P

Part A. The portion of Medicare that covers inpatient hospital services, some home health, skilled nursing center care and hospice.

Part B. The section of Medicare that covers doctor bills, durable medical equipment, some home health care, outpatient care including observation stays, and many preventive services.

Part C. The private insurance alternative to original Medicare that rolls up Part A, Part B and often Part D into one plan. It’s better known as Medicare Advantage.

Part D. Medicare’s most recent addition, which debuted in 2006. These plans from private insurers help cover prescription drugs and some vaccines.

Pharmaceutical assistance programs. Initiatives that drug manufacturers, state governments or nonprofits operate to help you pay for prescriptions; companies often call them patient assistance programs. They may operate outside Medicare Part D and Medicare Advantage plans with drug coverage.

Physical therapy. Rehabilitation or treatment to improve, maintain or restore mobility, typically after an injury, illness or surgery.

Plan finder tools. Medicare databases that help you compare Medicare Advantage and prescription options, Medigap policies, dialysis centers, medical equipment suppliers, nursing homes, procedure costs, providers and rehabilitation centers available in your area.

Preexisting condition. A health problem such as asthma, cancer or diabetes that was diagnosed or treated before new insurance coverage begins.

Preferred pharmacy. An in-network drugstore or mail-order option where your Part D or Medicare Advantage drug benefit charges lower out-of-pocket costs for your medications than at other locations in the plan’s network.

Preferred provider organization (PPO). A type of Medicare Advantage plan that costs you less when you use doctors, hospitals and other providers in the plan’s network. You can go out-of-network for services, but expect to pay more.

Premium. What you pay each month to keep your insurance coverage active.

Preventive care. Lifestyle counseling, risk assessments, screenings and services that help you stay healthy and find problems early. It also helps limit the negative effects of chronic diseases.

Primary care physician or provider (PCP). A doctor or other licensed medical professional, such as a nurse practitioner or physician assistant, who manages a person’s health over time, diagnosing and treating a wide variety of common medical conditions.

Primary payer. The insurance plan responsible for settling a medical bill up to the plan’s limits. The remaining claim goes to a secondary insurer. If the secondary policy doesn’t cover all the remaining claim, you may be responsible for the rest.

Prior authorization. A requirement that a health care provider obtain approval from an insurer before certain medications, services or treatments will be covered.

Private-duty nursing. A registered nurse (RN) or licensed practical nurse (LPN) who provides round-the-clock, one-on-one care for someone, typically at home but also in a hospital or nursing home.

Private fee-for-service (PFFS) plans. A type of Medicare Advantage plan that allows members to use providers who agree to its payment terms and has no prior authorization requirements. The plans usually charge a premium in addition to Part B and decide how much you’ll pay when you get care.

Program of All-inclusive Care for the Elderly (PACE). A Medicare and Medicaid option that provides medical and social services for some older adults who need a nursing-home level of assistance but wish to remain in their home.

Provider network. Doctors and other clinicians, hospitals and outpatient centers that your Medicare Advantage plan has contracted with to supply health care services. Plans can add or remove physician groups and others from their preferred lists at any time during the year.

Q – Q – Q

Qualified Medicare Beneficiary (QMB) Program. One of four Medicare Savings Programs, which are a type of Medicaid assistance. This covers Part A premiums if you aren’t eligible for premium-free Part A, Part B premiums, deductibles, coinsurance and copayments for services and supplies that Medicare covers.

Qualified Disabled & Working Individual (QDWI) Program. One of four Medicare Savings Programs, which are a type of Medicaid assistance. This helps pay for Part A premiums only and is designed for people with disabilities who are returning to the workforce but have lost Social Security disability benefits and premium-free Part A during the transition.

Qualifying Individual (QI) Program. One of four Medicare Savings Programs, which are a type of Medicaid assistance. This helps pay for Part B premiums if you already have Part A and Part B but don’t qualify for any other Medicaid benefits. You must reapply every year, and applications are approved on a first-come, first-served basis.

Quantity limits. Drug plans may cap the amount of a medicine they cover during a certain period, such as 30 pills a month, because of safety and cost.

R – R – R 

Rehabilitation hospital. Inpatient care, including occupational, physical and speech therapy, to help you recover from a serious illness, injury or surgery, also known as a rehab center.

Retiree coverage. Health insurance from a former employer that kicks in after you leave that job. It generally will not be your primary coverage after you turn 65, and benefits vary depending on the company.

S – S – S

Secondary payer. An insurance policy that contributes to a medical bill only if the primary insurer hasn’t covered the entire amount. If Medicare should have been your primary coverage but you didn’t enroll, you may be responsible for all the costs yourself.

Service area. A defined region where a Medicare Advantage or Part D prescription plan operates and has in-network providers. To become a plan member, you must live within its boundaries. The size can range from a single county to an entire state and can include counties in more than one state if a city’s suburbs cross state lines.

Skilled nursing facility (SNF). A rehabilitation center or nursing home where patients receive short-term medical and therapy services after discharge from a hospital.

Small employer. For Medicare purposes, a company with fewer than 20 workers. This distinction between a small and a large business can affect whether you need to enroll in Medicare Part A and Part B at age 65.

Social Security Administration (SSA). The federal agency known for retirement and disability checks, also in charge of enrolling people in Medicare and deducting Part B premiums from those payments.

Social Security Disability Insurance (SSDI). A federal program that pays monthly benefits to people who can no longer work because of a serious medical condition. Most recipients are automatically enrolled in Medicare 24 months after becoming eligible for the payments.

Special enrollment period (SEP). An opportunity to sign up for Medicare or make changes to your Medicare Advantage or Part D prescription plan because of certain life events, such as a move, natural disaster or coverage loss. Options for Medigap plans are more limited.

Special needs plans (SNPs). Medicare Advantage options that provide extra benefits and coordinated care for people who have chronic medical conditions, qualify for both Medicaid and Medicare or live in nursing homes.

Specialist. A doctor or other health care professional who is licensed and trained in a particular area of expertise, such as a dermatologist, a neurologist or an oncologist.

Specified Low-Income Medicare Beneficiary (SLMB) Program. One of four Medicare Savings Programs, which are a type of Medicaid assistance. This helps pay for Part B premiums if you already have Part A and Part B.

Spending cap. The annual out-of-pocket maximum you pay for covered medical services or prescription drugs. AARP is backing a federal bill to limit your health care costs in original Medicare.

Star ratings. A measure of quality of medical services and enrollees’ experiences with their health plan, hospitals and nursing homes. Five ★★★★★ is the highest.

State Health Insurance Assistance Program (SHIP). State initiatives that get money from the federal government to provide free, in-depth, unbiased, local Medicare coverage counseling. Fifty-four main offices and more than 2,200 community-based offices are in the United States, Guam, Puerto Rico and the U.S. Virgin Islands.

Step therapy. A type of prior authorization that requires you to try less-expensive prescriptions on a plan’s drug list that have been effective for most people with your condition before you can get approval for a more expensive medication. Your plan may require you to try a generic or biosimilar drug before allowing a brand-name medicine.

T – T – T

Telehealth. Also called telemedicine, it involves seeing your doctor or other health care provider online rather than in person. Unless Congress takes additional action, Medicare covers most of these visits only until the end of 2027.

Traditional Medicare. The Part A hospitalization and Part B doctor and outpatient services of Medicare together, also called original Medicare.

Tricare. Health care coverage for active duty and retired military and their families. At age 65, you must sign up for Medicare Part A and Part B to retain coverage. The insurance then becomes Tricare for Life and supplements Medicare.

V – V – V

Veterans Affairs (VA) coverage. Health benefits available to eligible former service members through the federal government. Medicare may cover eligible services outside the VA system, and prescription benefits through that system are considered creditable coverage for Medicare Part D.

Contributing: Dee Ann Kuhn, Jacqueline Salmon and Linda Dono

This Medicare dictionary, originally published May 1, 2009, has been updated to include more terms that prospective and present enrollees need to know.