Accreditation: Certification that a specific healthcare provider meets an accrediting organization’s standards.
Accumulation period: The period during which a policyholder’s medical expenses will count toward reaching their plan’s deductible.
Activities of daily living (ADL): Necessary daily activities like eating, getting dressed, and bathing. Healthcare providers may assess a person’s health based on their ability to perform ADLs. Support with ADLs is referred to as custodial care. Medicare does not cover costs associated with at-home custodial care or custodial care in nursing facilities.
Advance directive: A legal document that outlines the medical decisions a beneficiary would like someone to make on your behalf in the event that they become incapacitated. An advance directive will include both a power of attorney document (which designates a person to make medical decisions on the beneficiary’s behalf) and a living will (which provides instructions for their medical care).
Agent: A licensed individual who helps people and businesses choose healthcare coverage.
Ambulatory care: Services that do not require an overnight stay in the hospital, also referred to as outpatient care.
Amyotrophic lateral sclerosis (ALS): Also known as Lou Gehrig’s disease, this illness attacks the nerve cells that provide for voluntary motion. Americans with ALS are eligible to enroll in Medicare as soon as they start collecting Social Security disability benefits. They typically begin receiving these benefits after a five-month waiting period.
Annual Enrollment/Election Period (AEP): The period that runs from October 15th to December 7th every year in which Medicare beneficiaries can reevaluate and change their coverage. During this period, Medicare beneficiaries can make the following coverage changes:
- Switch from Original Medicare to a Medicare Advantage plan
- Switch from a Medicare Advantage plan to Original Medicare
- Switch from one Medicare Advantage plan to another
- Select a Medicare Part D plan
- Switch from one Medicare Part D plan to another
- Drop Medicare Part D coverage
Coverage changes will go into effect on January 1st.
Appeal: A formal request that Medicare review a decision related to coverage and costs. If, for example, a certain plan stops covering a necessary drug, a beneficiary might appeal to Medicare.
Balance billing: A practice that sees healthcare providers charge beneficiaries for costs that exceed the reimbursement Medicare will provide. Doctors engaged in balance billing will send their patients bills that are greater than the typical deductible and out-of-pocket coinsurance expenses. Essentially, it is an attempt to recoup the costs that Medicare writes off. Original Medicare providers are forbidden from balance billing.
Beneficiary: An individual who is enrolled in Medicare. Beneficiaries are also called enrollees or policyholders.
Benefit period: For Original Medicare beneficiaries, a benefit period begins the day they enter a hospital or skilled nursing facility and ends when 60 days have passed without receiving care. Part A deductibles are based on benefit periods rather than the calendar year. There is no limit to the number of benefit periods a beneficiary can accrue.
Catastrophic coverage: The point at which a beneficiary’s prescription drug spending exceeds the limit for a calendar year. In 2020, the maximum level is $6,350. Once beneficiaries have reached the catastrophic coverage level, they are out of the “donut hole” and their costs will be limited. They’ll pay $3.60 for generic medications and $8.95 for brand-name options, or 5% of the total cost (whichever is greater).
Centers for Medicare and Medicaid Services (CMS): The government agency that administers America’s primary public healthcare programs, including Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). CMS covers more than 100 million citizens through these programs.
Certificate of medical necessity (CMN): A signed CMN from a doctor can help beneficiaries secure coverage for certain medical equipment.
Chronic condition: A condition that is permanent or long-lasting.
Claim: An application for Medicare benefits.
Coinsurance: The percentage of Medicare costs that a beneficiary is expected to cover after they’ve reached their deductible. Coinsurance is usually represented as a percentage rather than a set dollar amount.
Copayment: The out-of-pocket payment (a set dollar amount) that beneficiaries are required to make after taking advantage of healthcare services.
Creditable coverage (Medigap): Previous health insurance coverage that is at least as comprehensive as Original Medicare.
Critical access hospital: A small hospital facility that provides inpatient and outpatient services to rural beneficiaries.
Custodial care: Non-skilled healthcare support for activities of daily living (ADL). In most instances, Medicare does not cover the cost of custodial care.
Coverage gap: Also called the “donut hole,” this is the point where a beneficiary’s prescription drug costs have exceeded the coverage limit in a given year without reaching “catastrophic coverage” levels.
Deductible: The sum a beneficiary must pay before Medicare begins to share in their healthcare costs.
Deductible limit: The maximum amount of money a provider will cover once a beneficiary has met their deductible.
Denial of coverage: A situation in which Medicare does not pay for a certain healthcare service.
Department of Health and Human Services: The federal government department that is responsible for supervising and administering Medicare.
Donut hole: See “Coverage gap.”
Dual eligible: A term that describes beneficiaries who are enrolled in both Medicare and Medicaid.
Durable medical equipment: Medical equipment like wheelchairs, oxygen tanks, and hospital beds for use in a beneficiary’s home.
End-stage renal disease (ESRD): The point at which a person requires a kidney transplant and/or dialysis treatment. Americans with ESRD are eligible for Medicare as soon as they’re hospitalized for a transplant, after three months of dialysis, or after one month of in-home dialysis.
Enrollment period: The window of time during which an eligible insurance beneficiary can make a change to or enroll in a plan.
Exception: A determination by Medicare related to prescription drug coverage. There are two different types of exception:
- A formulary exception is when a drug plan elects to cover a drug that is not usually on its drug list or to waive a coverage rule.
- A tiering exception is when a drug plan charges less than it normally would for a drug that it designates as non-preferred.
Exception request: A formal request to Medicare asking for either a formulary or tiering exception.
Excess charges: For Original Medicare beneficiaries, excess charges are the difference between a healthcare provider’s fee and the amount that Medicare Part B has approved for the service.
Extra Help: A Medicare program that helps low-income beneficiaries cover the costs of their Medicare Part D plan.
Federal poverty level: A level established each year by the Department of Health and Human Services. To qualify for Medicaid, Extra Help, and other financial assistance programs, a Medicare beneficiary must not collect income that exceeds a certain percentage of this level.
Formulary: The list of prescription drugs that an individual Medicare Part D plan or a Medicare Advantage Prescription Drug plan will cover. Different plans have different formularies. Beneficiaries may have to obtain pre-authorization and/or pay a premium to purchase non-formulary drugs.
Grievance: An expression of dissatisfaction with any aspect of the operations, activities, or behavior of a Medicare health plan, or its providers.
Group health plan: A health insurance plan offered by an employer that covers employees and their dependents.
Guaranteed issue rights: These rights, which vary from state to state, require insurance carriers to offer Medigap policies. They prohibit these providers from denying coverage (or charging more) based on factors like pre-existing conditions. These rights are also called “Medigap protections.”
Guaranteed renewable policy: Medicare policies that cannot be terminated so long as the beneficiary pays their premiums. Every Medigap policy issued after 1992 is a guaranteed renewal policy.
Health exchange: Also known as the “Marketplace,” this is a shopping service that Americans can use to look for private health insurance plans. If you qualify for Medicare, you do not need to shop for plans on the health exchange.
Healthcare provider: A doctor or facility that provides healthcare services.
Home healthcare: Healthcare services administered within the beneficiary’s home.
Hospice: Special healthcare services for terminally ill patients. Medicare Part A covers some of the costs of approved hospice care.
Independent reviewer: An organization that reviews Medicare appeals. These organizations are not affiliated with Medicare.
Initial Enrollment Period (IEP): The 7-month period a Medicare-eligible individual has to sign up for Part A and/or Part B when the individual first becomes eligible. For example, if a person becomes eligible for Medicare when they turn 65, the person can sign up during the 7-month period that begins 3 months before the month the person turns 65, includes the month the person turns 65, and ends 3 months after the month the person turns 65.
Inpatient care: Healthcare services for which a beneficiary is formally admitted to a hospital.
Insurance provider: Also called a “plan provider,” this is the agency that pays for all or part of a policyholder’s healthcare needs after they’ve been billed by the policyholder’s healthcare provider.
Late enrollment penalty: An additional charge that a beneficiary may face if they delay enrolling in Medicare Part A, Medicare Part B, or Medicare Part D after they first become eligible.
- Medicare Part A late enrollment penalty: A fee of 10% of the Part A premium paid by a beneficiary who delays purchasing Part A coverage after their IEP. The beneficiary is responsible paying the fee for twice the number of years they didn’t sign up.
- Medicare Part B late enrollment penalty: A fee of 10% of an enrollee’s Part B premium times the number of years the enrollee delayed purchasing Part B after their IEP. This penalty applies to premium payments throughout the beneficiary’s lifetime. Certain beneficiaries who postponed signing up may be exempt from this late enrollment penalty.
- Medicare Part D late enrollment penalty: A fee calculated by multiplying the number of months a beneficiary went without Part D coverage following the beneficiary’s IEP by 1% of the national base beneficiary premium ($33.06 in 2021).
Some beneficiaries, like those who delay purchasing Part B coverage because they have employer-sponsored plans, may be exempt from late enrollment penalties. Anyone who qualifies for Extra Help will not need to pay a Medicare Part D penalty no matter when they enroll.
Lifetime reserve days: Original Medicare beneficiaries can take advantage of 60 reserve days throughout their lifetime. These are days that Medicare will pay for after a beneficiary has spent more than 90 days in a hospital. Medicare covers all costs associated with lifetime reserve days except for a daily coinsurance payment.
Limiting charge: For Original Medicare beneficiaries, the limiting charge is the largest amount they will pay for services from providers who do not accept assignment. It is currently set at 15% over Medicare’s approved amount.
Living will: See “Advance directive.”
Long-term care: See “Custodial care.”
Long-term care hospital: Hospitals that typically provide treatment for 25 or more days.
Marketplace: See “Health Exchange”
Medicaid: A healthcare program that provides health coverage to low-income individuals.
Medicare-certified: The designation given to any plan that has been approved by the Centers for Medicare and Medicaid Services. Medicare will not cover care provided by non-certified providers.
Medical underwriting: The process by which insurance companies decide what to charge for coverage and whether or not to add waiting periods.
Medically necessary: Describes services or supplies that are necessary to diagnose or treat a condition.
Medicare: Established in 1965, Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD).
Medicare Advantage (Part C): A type of Medicare health plans offered by private insurance companies that contract with Medicare. These plans typically provide all Part A and Part B benefits, excluding hospice. Many also cover the cost of prescription drugs.
There are six types of Medicare Advantage plan:
- Health Maintenance Organizations (HMO): These plans limit coverage to a network of doctors, specialists, and hospitals. Beneficiaries typically need a referral from their primary care physician to go visit other providers.
- Preferred Provider Organizations (PPO): Less restrictive than HMOs, these plans also provide coverage within a network of healthcare providers. Beneficiaries are permitted to go out of network, but may incur additional costs.
- Private Fee-for-Service Plans (PFFS): Plans that allow beneficiaries to visit any provider that accepts Original Medicare. Individual costs will vary considerably from plan to plan.
- Special Needs Plans (SNP): These plans provide specialized care for beneficiaries who meet certain criteria. Someone with a particular chronic illness, for example, might choose an SNP.
- HMO Point of Service Plans (HMOPOS): These are HMO Plans that may allow beneficiaries to go out of their provider network for certain services.
- Medicare Medical Savings Account Plans (MSA): These high-deductible plans create a bank account with deposits from Medicare. Beneficiaries can use this money to cover healthcare costs, but only services covered by Medicare will count toward reaching their deductible.
Medicare Advantage Open Enrollment Period: An exclusive annual enrollment period for Medicare Advantage beneficiaries that runs from January 1st to March 31st. During this period, beneficiaries can:
- Switch from one Medicare Advantage plan to another or
- Switch from Medicare Advantage to Original Medicare and select Medicare Part D coverage if necessary.
Medicare-approved amount: For Original Medicare beneficiaries, this is the amount a doctor or healthcare provider can accept as payment. If it is less than the amount the doctor charges, beneficiaries are responsible for covering the difference.
Medicare cost plan: A type of Medicare plan offered in certain counties. Under Medicare cost plans, beneficiaries can take advantage of healthcare services outside of their provider network without incurring an additional fee.
Medicare Part A: Sometimes called “hospital insurance,” this component of Original Medicare covers the costs of inpatient hospital services, skilled nursing facilities, hospice, lab tests, and some home healthcare services.
Medicare Part B: This component of Original Medicare covers doctors’ visits, outpatient services, some diagnostic and preventative services, and some durable medical equipment.
Medicare Part C: See “Medicare Advantage (Part C).”
Medicare Part D: Part D plans are another way for beneficiaries to cover the cost of prescription drugs. They are offered by private insurers and typically referred to as Prescription Drug Plans (PDPs). Beneficiaries may have a co-pay for each medication in addition to monthly premiums and an annual deductible.
Medicare Savings Program (MSP): A Medicaid program for low-income beneficiaries that can help cover the cost of premiums, deductibles, and coinsurance.
Medicare Select: A specific type of Medigap policy that requires beneficiaries to stay within a network of healthcare providers. Most Medigap policies will cover healthcare costs so long as the provider has not opted out of Medicare.
Medigap: Refers to a range of insurance plans designed to fill in Original Medicare’s gaps and limit out-of-pocket costs. Prior to 2020, private insurance providers offered ten different plans. Medigap plans are no longer permitted to cover the Medicare Part B deductible for beneficiaries. As a result, providers no longer offer Medigap Plans C and F. Beneficiaries who enrolled in Plan C or F prior to January 1st, 2020 can keep their coverage. While pricing will vary from plan to plan and state to state, coverage is consistent for each plan type.
Medigap Open Enrollment Period: A one-time opportunity to enroll in Medigap with a guarantee of coverage. The six-month period begins the first month a beneficiary is both 65 and enrolled in Medicare Part B. After this period, enrollment opportunities will vary from state to state and plan to plan.
Medigap protections: See “Guaranteed issue rights.”
Notice of change: A document that provider’s distribute to policyholders each year to alert them to any adjustments that are being made in the coming year.
Original Medicare: Another term for Medicare Part A and Part B.
Out-of-pocket costs: Costs that a Medicare beneficiary must cover on their own.
Out-of-pocket maximum: The maximum amount of money a beneficiary may have to pay for healthcare in a given benefit period. After the maximum is reached, the beneficiary’s plan will cover costs for the remainder of the period.
Outpatient facility: Healthcare facility where ambulatory care is provided.
Partial Hospitalization Program (PHP): A type of program (generally intended to treat mental illness and/or substance abuse) that allows the patient to live at home while commuting to a treatment center to receive regular care.
Pre-existing condition: A health issue that predates a beneficiary’s insurance coverage. Typically, these conditions are excluded from coverage.
Premium: A periodic payment made by a beneficiary in exchange for healthcare and drug coverage.
Preventive services: Healthcare services intended to help beneficiaries avoid getting sick in the first place.
Primary care physician: The first doctor a Medicare beneficiary will visit in the event of a health concern. This physician will, if necessary, provide referrals to additional healthcare providers.
Primary payer: The first party responsible for covering any health-related expenses. Generally, determining the primary payer is important when an individual is covered by more than one form of insurance.
Prior authorization: Requirement that healthcare providers receive authorization from Medicare before providing care.
Programs of All-Inclusive Care for the Elderly (PACE): A program that combines Medicare and Medicaid coverage with additional medically-necessary healthcare services. PACE enrollees must be at least 55 and live both at home and in an area of the country that offers these programs. State agencies determine eligibility on a case-by-case basis.
Referral: A document from a beneficiary’s primary care physician permitting them to visit additional providers. HMO and HMO-POS enrollees typically need referrals to see anyone other than their primary care physician.
Rehabilitation services: Healthcare services intended to help beneficiaries regain or improve skills that they have lost due to illness, impairment, or injury.
Respite care: Care given with the intention of providing a break for primary caregivers, since they may be unpaid members of the patient’s family.
Secondary payer: When a beneficiary is covered by multiple plans, one plan will serve as the primary payer and the other is the secondary payer. Once the primary payer has paid what it owes toward healthcare costs, the secondary payer pays for its portion.
Service area: The region where a specific health insurance plan is available. It can also refer to the network of healthcare providers covered by a specific plan.
Skilled nursing: Healthcare services that can only be administered by a doctor or registered nurse.
Skilled nursing facility (SNF): A facility with the staff and equipment necessary to administer skilled nursing care. In many cases, SNFs also provide rehabilitative and other healthcare services.
Social security benefits: A benefits package available to Americans over the age of 62. If an individual is 65 years old and is receiving Social Security benefits, that individual will automatically be enrolled in the Medicare program.
Special election/enrollment period: Time periods during which a Medicare beneficiary can review and change their coverage. These can be triggered by certain qualifying events including loss of coverage.
Specialized care: Any care given by a specialist (any doctor who is not a primary care physician). This may include physical therapy, vision, and psychiatry.
Standard premium: The amount a beneficiary will pay per month for their plan, provided that they fall within the normal income bracket (for Plan B, this is $25,000 – $87,000/year per individual) and do not receive assistance from their home state.
State Health Insurance Assistance Programs (SHIP): Federally-backed programs that provide free counseling to Medicare beneficiaries and their families at the state level. Since they are not partnered with insurance providers, SHIPs can be trusted as unbiased resources.
Supplier: Any party (other than a provider) that offers a health-related service.
Telemedicine: Healthcare that is provided remotely (not in person), usually via phone or computer.
Tiers: Groups of drugs included in a Medicare Part D or Medicare Advantage plan’s formulary. Typically, drugs in lower tiers will cost less than drugs in higher ones.
Urgently needed care: Healthcare services obtained outside of the beneficiary’s service area because of a sudden illness or injury. Medicare must cover these costs.
Waiting period: The period between the date a beneficiary enrolls in Medicare and the date their coverage takes effect. Waiting periods vary depending on the date of enrollment and the type of plan:
- Initial window of eligibility: For beneficiaries who enroll in Medicare during the first three months of their initial eligibility period, coverage starts on the 1st day of the month they turn 65. For anyone born on the 1st of the month, coverage will start on the 1st day of the prior month. For anyone who enrolls after they turn 65 and before their eligibility period ends, coverage will begin on the first of the following month.
- Annual Enrollment Period: For beneficiaries who make changes during the Annual Enrollment Period (October 15th to December 7th), updates will go into effect on January 1st.
- Medicare Advantage Open Enrollment Period: For beneficiaries who make changes during the Medicare Advantage Open Enrollment Period (January 1st to March 31st), updates will go into effect on the 1st of the following month.
- Medigap: Some Medigap providers may impose pre-existing waiting periods. In these instances, beneficiaries must wait up to six months for their plan to begin covering expenses associated with the condition or conditions. Beneficiaries who enroll during their Medigap Open Enrollment Period may have an opportunity to shorten or eliminate their waiting period if they were previously enrolled in a plan offering creditable coverage.
Zero-premium plan: A Medicare Advantage plan that does not charge beneficiaries a monthly premium.
Information adapted from the Centers for Medicare & Medicaid Services