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Medicare Terms Glossary

A

Accepting Assignment

In Medicare Part B, a doctor “accepts assignment” when he or she agrees to take payment of the Medicare-approved amount as payment in full for a service. If a doctor accepts assignment, your share of the cost is limited to your coinsurance payment (usually 20% of the Medicare-approved amount).

Annual Election Period (AEP)

The time period each year when anyone with Medicare can enroll in Medicare prescription drug plans (Part D) and Medicare Advantage (Part C) plans. The Annual Election Period (AEP) is October 15 through December 7 every year, with coverage effective on January 1 of the following year.

B

Balance Billing

In Medicare Part B, doctors who do not accept assignment may use this method to bill you for an additional payment. Another name for balance billing is “excess charges.” A doctor cannot bill you more than 15% of the Medicare-approved amount. In some states, balance billing may be limited to less than 15% or may not be allowed at all. 

Benefit Period

This is the way that Medicare measures your use of hospital and skilled nursing facilities (under Part A). A benefit period starts when you enter the hospital for an overnight stay 
and ends when you have been out of the hospital (or skilled nursing facility) for 60 days in a row. You can have multiple benefit periods in one year, and the Medicare Part A deductible applies to each benefit period (not annually). 

Brand-Name Drug

A prescription medication that has been patented and is produced only by one manufacturer. It is trademarked and sold under a brand name, and may or may not have a generic equivalent. 

C

Catastrophic Coverage

This term applies to Medicare prescription drug coverage. It is the time period when you pay only a small amount (copay or coinsurance) for a covered drug and your plan pays the rest. Catastrophic coverage starts after you have spent $4,550 in total out-of-pocket costs for your covered drugs in a single year (this is the 2014 “trigger” and may change each January). 

Centers for Medicare & Medicaid Services (CMS)

This is the federal agency that runs the Medicare program, and that works with the states to run their Medicaid program. CMS makes sure that beneficiaries in both programs are able to get access to high-quality health care. 

Coinsurance

This is a kind of cost sharing where you pay a percentage of the cost (rather than a fixed amount). For example, if your coinsurance is 20% and Medicare approves a $100 doctor isit, Medicare will pay $80 and you pay $20. With some plans, you do not pay coinsurance until you have first paid a deductible.

Coordination of Benefits

A way to figure out who pays first when two or more health insurance plans are responsible for paying a medical claim.

Copayment (Copay)

This is the other kind of cost sharing, where you pay a flat amount for a particular service. You usually have copays in Medicare Advantage and Prescription Drug plans (such as $10 to see the doctor and $7 for generic prescriptions).

Cost Sharing

This is the percentage (coinsurance) or flat amount (copay) you must pay. Generally speaking, it is a term for the way Medicare or a plan shares your health care costs with you. Deductibles are also a way of sharing costs.

Coverage Gap (or Donut Hole)

This is the cost-sharing stage of a Medicare Part D plan in which you pay most of the cost for your prescriptions. You enter the coverage gap when you and the plan together 
have paid a pre-set amount for your drugs. This amount is determined by the plan, but Medicare establishes a maximum. The maximum for 2014 is $2,850. You remain in the 
coverage gap stage until you have spent your plan’s out-of-pocket limit in a single year. Deductibles, copays, coinsurance and other payments count toward the out-of-pocket 
limit, but premiums do not. Once you are through the coverage gap stage, you enter the cost-sharing stage called “catastrophic coverage.” 

Creditable Drug Coverage

This is prescription coverage from a health plan other than a Part D stand-alone plan or Medicare Advantage plan that is considered as good as the Medicare prescription 
coverage. If you have creditable coverage, you can delay enrollment for Part D benefits and can avoid the late-enrollment penalty when you do sign up. 

D

Deductible

A set amount you may be required to pay before you receive coverage for your plan benefits. Generally, deductibles apply to Medicare Parts A, B and D. Deductibles may 
also apply to Medicare Supplement (Medigap) plans and certain Medicare Advantage (Part C) plans.

Dual Eligible

This is a person who is eligible for both Original Medicare (Parts A and B) and Medicaid (or other state medical assistance programs such as MassHealth).

Durable Medical Equipment

This is equipment needed for medical reasons that is sturdy enough to be used many times without wearing out – such as wheelchairs and hospital beds. Durable medical equipment is covered under Part B

E

Emergency

A sudden, serious and unexpected illness, injury or condition in which a person believes his or her health is in danger if medical treatment is not received immediately.

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.

Exclusions

Health plans do not cover all health care services. Exclusions are those services that are not covered by (or excluded from) the plan.

Extra Help

A Medicare program to help people with limited income and resources pay Medicare prescription drug program costs, such as premiums, deductibles and coinsurance. To 
qualify, you must make less than $17,235 a year (or $23,265 for married couples). Even if your annual income is higher, you still may be able to get some extra help. Your resources must also be limited to $13,300 (or $26,580 for married couples). Resources include bank accounts, stocks and bonds, but not your house or car.

F

Formulary

A list of the prescription drugs that are covered by a specific Medicare Part D plan (a stand-alone plan or Medicare Advantage plan that includes drug coverage). In some cases, doctors must order or use only drugs listed on the health plan’s formulary.

G

Generic Drug

Prescription drugs that have the same active ingredient formula as a brand-name drug. Generic drugs usually cost less than brand-name drugs and are rated by the Food and Drug Administration (FDA) to be as safe and effective as their brand-name equivalent.

H

Health Maintenance Organization (HMO)

A type of Medicare Advantage plan where you choose a Primary Care Physician (PCP) who provides or arranges for all your care with providers who are in the plan’s network. Referrals 
are required. If you go outside the network, other than for emergency care, for urgent care or for out-of-area renal dialysis, you are responsible for paying for your own care.

Home Health Care

Health care services and supplies a doctor decides you may receive 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.

Hospital Insurance (Medicare Part A)

This is the part of Original Medicare that pays for “room and board” if you’re a patient in a hospital or skilled nursing facility. It also pays benefits for hospice care.

I

Initial Enrollment Period (IEP)

When you first become eligible to enroll in Medicare or a Medicare plan. For most, it’s the seven-month period that begins three months before the month you turn 65 and ends three months after the month you turn 65.

L

Late-Enrollment 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. 

Long-Term Care

Care that gives help with the activities of daily life, like eating, dressing and bathing, over a long period of time. Most long-term care is considered custodial care. Original Medicare, Medicare Advantage and Medicare Supplement plans do not cover long-term care.

M

Maximum Out-of-Pocket Limit

A limit that Medicare Advantage plans set on the amount of money you will have to spend out of your own pocket in a plan year. In Medicare Part D, 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.

Medical Insurance (Medicare Part B)

This is the part of Original Medicare that helps pay for doctors’ services, outpatient care and other services that Part A doesn’t cover, including physical and occupational therapy. Part B generally pays 80% of the approved cost for Medicare-covered services (you pay 20%). Part B coverage is optional and has a monthly premium. You must have Part B if you want to enroll in a Medicare  advantage or Medicare Supplement plan.

Medicare Advantage (Medicare Part C)

A type of plan offered by a private company. In Medicare Advantage plans, a single plan provides you with both hospital and doctors’ care. Many Medicare Advantage plans also include prescription drug coverage. You must have Part A and Part B to enroll in a Medicare Advantage plan and continue to pay Part B premiums, in addition to any plan premium.

Medicare Advantage Disenrollment Period

If you enroll in a Medicare Advantage plan during the Annual Enrollment Period (AEP) from October 15 through December 7, then you have until February 14 of the following year to disenroll. If you disenroll, you will return to Original Medicare automatically. If prescription drug coverage was included in your Medicare Advantage plan, you can enroll in a standalone Medicare Part D prescription drug plan during this time. You can also enroll in a Medicare Supplement plan.

Medicare Supplement (or Medigap)

These are health insurance policies that typically have standardized benefits, are sold by private insurance companies and allow you to use any doctors and hospitals that accept
Medicare. These plans help fill Medicare’s gaps by paying some or all of the deductibles, coinsurance and copayments (your share of costs). You must have Part A and Part B to enroll in a Medicare Supplement plan and continue to pay Part B premiums, in addition to the plan premium.

Medigap Open Enrollment Period (OEP)

You are guaranteed the right to buy any Medicare Supplement insurance plan available where you live during the six months after you are enrolled in Medicare Part B at age 65 or
older. This six-month period is called your Open Enrollment Period (OEP). During this time, the insurer cannot refuse to sell you a plan or charge a higher premium due to your medical history or current health.

Monthly Plan Premium

The payment you make to a health benefits company like Tufts Health Plan Medicare Preferred for your health plan. Members pay the monthly plan premium in addition to Medicare Part A (if applicable) and Part B premiums.

N

Network

A group of doctors, hospitals, pharmacies and other health care providers contracted with a health plan to take care of its members. In an HMO, you must use network providers.
With PPO plans, you pay less when you use the plan’s network providers – or you can use providers outside the network for a higher copay or coinsurance.

O

Original Medicare

Original Medicare is fee-for-service coverage under which the government pays your health care providers directly for your Part A and/or Part B benefits. Learn more in our What is Medicare section.

Out-of-Pocket Costs (formerly True Out-of-Pocket (TrOOP) costs)

Indicates the amount you pay or others pay on your behalf toward the cost of your prescription drugs, including deductible, copays, coinsurance and payments made in the coverage gap. Premiums do not count toward out-of-pocket costs. It is used by Part D plans to differentiate between total drug costs (the amount paid by the plan and the member) and the member’s share of costs.

Out-of-Pocket Maximum

The total amount a member pays for coinsurance and copays in a calendar year before the plan picks up the full cost of covered expenses.

P

Pre-Existing Condition

When you are applying for an insurance plan, a name for an illness or medical condition you currently have.

Preferred Provider Organization (PPO)

A type of Medicare Advantage plan in which you use doctors, hospitals and other health care professionals who have contracted with a health plan to provide care to its members. You can also use providers outside the preferred provider network for an additional cost. Unlike an HMO, you don’t need to get referrals to see specialists.

Prescription Drug Plan (Medicare Part D)

A Medicare Part D prescription drug plan may be a stand-alone drug plan you can enroll in if you have Original Medicare, a Medicare Supplement (Medigap) plan or certain kinds of Medicare Advantage plans. It can also be a Medicare Advantage plan that offers Part D prescription drug coverage in addition to health benefits.

Preventive Care

Health care that emphasizes prevention, early detection and early treatment of conditions. Examples of preventive care are flu shots, screening mammograms and diabetes screenings.

Primary Care Physician (PCP)

This is a doctor who provides basic care. Your primary care physician is the doctor you see for most health problems. In an HMO, you must receive a referral from your primary care physician in order to see a specialist.

Private Fee-For-Service Plan (PFFS)

A type of Medicare Advantage plan that allows you to visit any Medicare-eligible doctor, hospital or other health care service provider who is willing to accept the plan’s payment terms and conditions. If the plan does not offer prescription drug coverage, you are eligible to join a stand-alone drug plan.

R

Referral

This is approval from your primary care physician to see a specialist or receive certain services. In some Medicare Advantage plans (like an HMO), you need to get a referral to see someone other than your primary care physician.

Retiree Health Coverage

This is group health insurance coverage offered through an employer or other plan sponsor to retired employees.

S

Secondary Payer

The insurance policy, plan or program that pays second on a claim for medical care. This could be Medicare, Medicaid or other insurance depending on the situation.

Service Area

A service area is typically a county, state or region in which a Medicare Advantage plan offers service. You must live in the plan’s service area to join.

Skilled Nursing Care

Care that can only be given by a registered nurse or doctor.

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.

Supplemental Security Income (SSI)

A monthly benefit paid by Social Security to people with limited income and resources who are disabled, blind, or age 65 or older. SSI benefits aren’t the same as Social Security retirement or disability benefits.

T

Tiered Formulary

This is a drug plan formulary that divides drugs into groups. Each group, or tier, has a different level of cost sharing. For example, a generic version of a drug may have a lower copay than a brand-name version of the drug. The details of the cost sharing vary from plan to plan.