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Common Medicare Glossary of Terms to Know

Medicare coverage related terms

Navigating Medicare can be difficult at times, and you need a specific guide to understand every aspect of health insurance services. We provide this glossary of terms to assist you in finding the Medicare definitions you require when acronyms and strange-sounding words get in the way of your healthcare.

Examine the following standard Medicare terms, listed alphabetically:

A:

Advance Beneficiary Notice of Noncoverage or ABN

When a healthcare provider believes that the original Medicare plan will not cover recently obtained service or piece of equipment, they will send you an ABN letter before filing any Medicare claims. It warns you that you might need to pay some or all of these expenses yourself. You don’t get an ABN for items or benefits that the Medicare plan never covers because there’s no doubt about it. Those expenses will not be accepted. 

Advantage (check Medicare Advantage plan)

This is another indication for Medicare Part C coverage. Private insurance companies sell Medicare Advantage plans to supplement Medicare Parts A and B coverage (Original Medicare). There are six different types of MA (Medicare Advantage) plans. They typically provide benefits that Original Medicare does not, i.e., prescription drugs and dental, vision, and hearing care coverage.

Appeal

If you think differently about your Medicare plan’s protection or payment decision, you can file an appeal. You have the right to appeal if your program denies coverage for a medical care service, item, supply, or prescription drug that you believe you should be able to obtain. You may also appeal the decision if your plan discontinues providing or paying for some or all parts of a service or item that you still need or if the program denies your request to change the costs you must pay for that service or item. 

Assignment

This is another way of describing that your healthcare provider, doctor, or supplier wishes to collaborate with Medicare and agrees to take the Medicare-approved costs as full payment for covered benefits. The government administration requires all Medicare suppliers to accept assignments. Those who take assignments must submit claims to Medicare directly and may not charge you for doing so. Before signing a private contract with a provider who has opted out of Medicare, you should consult with a SHIP counselor. 

Annual Notice of Change or ANOC

If you are enlisted in a Part D or Medicare Advantage plan, you should have received this critical document, also known as an ANOC, from your program by September 30. The insurance companies (that sponsor the plans) send this letter ahead of Medicare’s open enrollment window to inform enrollees of any changes to the health plan for the upcoming plan year. You should carefully review this information and details to ensure that your current program still meets your needs. If it does not, you will be able to switch programs during the open enrollment period.

B:

Benefit Period

The benefit period reflects how the Medicare Part A beneficiaries use the medical center and skilled nursing facility (SNF) services. The benefit period starts when a person is admitted. And it ends when the patient has not obtained inpatient care for almost 60 consecutive days. Beneficiaries are responsible for paying the inpatient hospital premiums for each benefit period.

C:

Center for Medicare and Medicaid Services or CMS

This government agency, a member of the Department of Health & Human Services (HHS), manages both the Medicaid and Medicare programs.

Catastrophic Coverage Phase

This is the final phase of prescription coverage in Medicare Part D programs for the calendar year. It occurs after you have spent your way through the donut hole. At this step, Medicare typically covers 95 percent of the cost of your medication, with you paying either 5% coinsurance or $3.95 copays for generic drugs and $9.85 for brand-name medications for the rest of 2022. Furthermore, the catastrophic phase can result in a significant out-of-pocket expense for individuals who need specialty medication.

Copayment

It is a fixed amount cost that you are required to pay when receiving or switching the healthcare services.

Coinsurance

The costs that you are obligated to pay for benefits or medication are called coinsurance. Most of the time, it will be a percentage of the total cost of the prescriptions or services.

Coverage Determination

It is how insurers decide whether or not to cover and pay for prescription medications under Part D plans. Among the factors to consider are whether the network plan’s formulary covers the drug, whether you as the patient meet the requirements for receiving the medication, and how much you will have to pay for the drug.

Coverage Gap

The coverage gap also called the “donut hole,” refers to the third step of insurance coverage under the Medicare Part D plan. During this phase, the patient is responsible for spending 25% of the costs of their generic or brand-name drugs until they meet the year’s out-of-pocket maximum, fixed at $7,050 in 2022. The patient will enter the fourth and final phase of prescription drug coverage “catastrophic coverage” when this number is reached.

Creditable Coverage 

It includes the prescription drug coverage that is comparable or better than Medicare’s standard. You must have creditable coverage within a specific timeframe after enrolling in Medicare, or you will face a Part D late enrollment penalty. Suppose you have medication coverage through an employer, union, or other group health plan. In that situation, you should receive a Notice of Creditable Coverage each year that tells you whether or not your health coverage is creditable. Keep the notice in good condition. You never know when you’ll need it.

D:

Deductible

A deductible is an amount you should pay toward medical care services before Medicare starts to assist in covering health costs— similar to the deductibles you could be used to under private insurance plans.

Deemed Status Notice

Medicare program sends this letter to individuals whose low income makes them eligible for Extra Help with Part D drug coverage. It informs them that they are receiving assistance without having to apply for it.

Dual Eligible

People who become eligible for both Medicare and Medicaid are referred to as “dual eligibles.” People can obtain this status either through Medicare Part C or Original Medicare. They will automatically be granted Extra Help to assist them in paying for their Part D drug coverage.

Donut Hole

This is another name for the coverage gap or the third step of prescription coverage in Medicare Part D programs. During this period, the person is obligated to pay 25% of the cost of their branded and generic medications.

Durable Medical Equipment and Devices

Medically necessary items include iron lungs, hospital beds, oxygen equipment, walkers, seat-lift equipment, scooters, and wheelchairs. When prescribed by a medical care provider, Medicare frequently provides these devices for use in the patient’s home.

E:

Elective Surgery

Surgical procedure that you choose to have rather than emergency surgery performed to save your life. With elective surgery, you can postpone or avoid it without risking instant health consequences. Elective surgery is frequently but not always considered medically necessary. Its examples include hip and knee replacement surgery, as well as cataract surgery.

Enrollment

The process of registering in the Original Medicare or a Supplemental plan through a private insurance company

End-stage-renal disease or ESRD

Permanent kidney failure necessitating regular dialysis or a kidney transplant is termed ESRD. Individuals with end-stage renal disease can be eligible for Medicare and, beginning in 2021, Medicare Advantage even if they are under 65.

Evidence of Coverage

This document is sent to you by the insurance company that manages your Part D or Medicare Advantage plan every year. It outlines the costs and benefits of the health plan for the coming year. You receive it before annual enrollment, so you can check it and decide whether or not to switch plans.

Extra Assistance

This insurance plan, also known as the Low-Income Subsidy (LIS), aims to assist low-income Medicare enrollees in paying for the expenses associated with their Medicare Part D programs, such as premiums, copayments, deductibles, and coinsurance.

F:

Formulary

A formulary represents the list of drugs covered by a Medicare Part D plan. These formularies are usually organized in tiers, with generic medications at the lower-cost level and brand-name or specialty drugs set at higher-cost levels. Each Medicare Part D plan has its formulary because private insurance companies sell them. As a result, determine if your specific prescriptions are included in the formulary list before enrolling in any Part D plan.

G:

Grievance

This is a complaint or concern about how your Medicare Advantage or Medicare Part D plan has handled your care. You can register a grievance if you have difficulty contacting the plan or if a staff member has misbehaved. In contrast, you would file an appeal if you had a complaint about a plan’s refusal to provide a service, prescription, or supply.

Guaranteed Issue Rights

These are your legal rights in certain circumstances when the government requires insurance agencies to sell you Medigap coverage regardless of your health status or age. An insurance company cannot refuse to provide you a Medigap policy in these conditions, nor can it impose limitations on your enrollment in a Medigap policy. Companies are not allowed to charge you more for a Medigap policy because of pre-existing medical conditions.

H:

Home Healthcare

Suppose your doctor determines that you need specific medical care services or supplies to be administered at home. In that situation, Medicare may cover these supplies and services on a limited basis.

Hospice

This medical care outlines the medical, physical, social, emotional, and spiritual needs of terminally ill persons nearing the end of their lives, as well as the patient’s caregivers and family members. Hospice care can be provided in a hospital or at the patient’s home. The long-term care benefit requires a hospice physician and the patient’s doctor to confirm that the patient has a life expectancy of up to six months or less.

I:

Income-related Monthly Adjustment Amount or IRMAA

Medicare beneficiaries with incomes above a certain threshold pay this monthly surcharge in addition to their Medicare Part B and Part D premiums. Individuals are subject to this additional charge based on their revised adjusted gross income as reported on their tax returns two years ago. Individual filers’ 2019 income levels were $88,000 in 2021, while joint filers’ income levels were $176,000 in 2021. 

Independent Reviewer

If you appeal your plan’s payment or coverage decision, or if your plan fails to make a timely appeal decision, Medicare contracts with Independent Reviewer organizations (also known as Independent Review Entities, or IRE) to review your case. These organizations have no affiliation with your Medicare health plan or Medicare prescription drug plan. 

Initial Coverage Phase

This is one of Medicare’s initial phases of drug coverage. It follows the deductible phase, but if you have a Part D plan that does not have a deductible, you will immediately enter the initial phase of drug coverage at the start of the calendar year. 

Initial Enrollment Period

This 7-month duration is your first chance to sign up for Medicare Parts A, B, and D. It starts three months before the month of your 65th birthday. If you do not enroll in Medicare during this period, you will encounter late enrollment penalties unless you purchase other creditable coverage. 

L:

Lifetime Reserve Days

Lifetime reserve days are extra days that Medicare will pay for when you are in the hospital under original Medicare for more than 90 days. You have around 60 reserve days during your lifetime, and Medicare coverage pays for all covered expenses incurred during each lifetime reserve day, except for a daily coinsurance that you are required to pay. 

Long-term Care Services

Long-term health care includes medical and non-medical services provided to individuals who cannot perform basic, necessary tasks such as bathing or dressing. These care services can be delivered in the home, the community, nursing homes, or assisted living facilities. Long-term custodial care is not covered by most health insurance plans, including Medicare. ‘

M:

Medicaid

This is a federal-state partnership program that assists eligible uninsured individuals with poor income in gaining health insurance. Since being given the option and funding, all but 12 regions have expanded their Medicaid programs to cover almost 138 percent of the federal poverty line. Most healthcare expenses will be covered if you qualify for both Medicare and Medicaid (“dual eligible”). 

Medical Underwriting or Medical Financing

Insurance companies use a health rating system to determine whether or not to approve your application for health coverage, such as Medigap. Companies can also impose a waiting period for pre-existing medical conditions (assuming state law permits it) and charge higher insurance premiums based on their findings. 

Medical Cost-sharing Plan

These network-based plans, which the government is phasing out, provide members with some of the added benefits of MA (Medicare Advantage) programs while using original Medicare for health services outside of their network. Moreover, prescription drug coverage could be included or excluded. 

Medicare Part A (Hospital Coverage)

Medicare Part A is the component of Original Medicare that covers the costs of inpatient hospital stays for mental and physical healthcare, skilled nursing facility care, hospice care, and some home medical care.

Medical coverage (Medicare Part B)

The Part B of Original Medicare covers the costs of specific physicians’ services, medical supplies, outpatient care, and preventive services. 

Medicare Advantage plan (or Medicare Part C)

Private insurance companies sell Medicare Part C or Medicare Advantage plans as an alternative to Original Medicare. While these programs are regulated by CMS and must provide all of the benefits provided by original Medicare Parts A and B, they also include coverage for additional benefits such as prescription drugs, hearing, vision, or dental care, among others. 

Medicare Part D (Prescription Drug Insurance)

Medicare Part D programs are sold by private insurance agencies as an optional supplement to Medicare coverage to help cover the costs of prescription drugs. Each Part D plan has its formulary, which is a list of drugs that will be provided. As a result, you should ensure that whichever Part D plan you choose covers some or all of your medications. 

Medicare Plan Finder

It is a tool developed and hosted by government online portals to assist Medicare enrollees in finding and comparing available Medicare Advantage and Part D coverages in their area. 

Medigap Insurance (Medicare Supplemental Plan)

There are about ten nationally standardized Medigap plan types available, each covering a different set of benefits. Private insurance companies offer it as an optional supplement to the Original Medicare plan. Suppose you want to register in one of these plans. In that case, you should do so during your six-month open enrollment period, when you have guaranteed issue protection and cannot be denied or charged more for coverage because of a pre-existing health condition. 

Medicare Savings Programs or MSPs

These programs provide monetary assistance to help you pay for Medicare premiums, deductibles, copays, and coinsurance. These plans are federally funded but managed by state Medicaid offices.

Medicare Special Needs Plan or SNPs

Specific populations with chronic, disabling health conditions or fewer earnings can obtain coverage through Medicare Special Needs Plan. SNPs typically have customized formularies, benefits, and supplier options. They specialize in managing care coordination.

Medicare Summary Notice or MSN

A report that turns up every three months and documents any services or medical supplies you received during that period covered by Medicare Parts A and B. It may appear to be a bill, but it is not one. You will learn what Medicare paid and what you may owe the healthcare provider (similar to an Explanation of Benefits), but this is only for clarification purposes. In addition, if you haven’t received any services in the last three months, you won’t receive an MSN for that period. You can get MSNs electronically or in a more accessible format. However, if you have Medicare Advantage, you will not receive any MSNs. Your MSNs will come in handy for record-keeping and appeals.

Modified Adjusted Gross Income or MAGI

This figure is based on your adjusted gross income from two years ago, as reported on your tax return. You can calculate your MAGI by subtracting any tax-free interest and nontaxable Social Security benefits from your gross income. Therefore, your MAGI determines whether or not you qualify for Medicaid.

O:

Open Enrollment

Open enrollment is a once-a-year opportunity for Medicare enrollees to make significant changes to their health and drug coverage if they believe it is necessary. They can switch, add, or drop plans each year between October 15 and December 7, with a new health plan beginning January 1 of the following year. 

Original Medicare

The Original Medicare plan has two parts. One is Part A (hospital insurance) and the other is Part B (medical insurance). These two components comprise the government’s fee-for-service health insurance program, which was first enacted in 1965. Many applicants become eligible for Medicare coverage when they reach the age of 65, but more than 9 million join the program at a young age due to long-term disabilities.

Out-of-Pocket Expenses

Costs that you pay rather than your health insurance. These typically include copayments, deductibles, and coinsurance. Many factors can have an impact on out-of-pocket costs. Depending on the benefit periods, Medicare Part A medical center charges or out-of-pocket costs can be calculated. For Part D insurance plan, coverage phases, drug tiers, and whether a drug is generic or branded will impact out-of-pocket expenses.

Out-of-Pocket Maximum or Limit

An out-of-pocket maximum, also known as a limit, is the most you can spend on medical care in a calendar year before your insurance company covers all costs. Conventional Medicare (Parts A & B) has no out-of-pocket limit. That’s why, if they don’t have another form of wraparound coverage to help pay for Original Medicare’s coinsurance, deductibles, and copays, many beneficiaries consider purchasing Medigap insurance, also known as Medigap. On the other hand, the government agencies mandated Medicare Advantage programs to establish out-of-pocket maximums for covered services.

P:

Premium

In finance, a premium can refer to a variety of things, including the cost of purchasing an insurance policy or a health plan option.

Pre-existing Health Condition

A health problem or issue that you had before the date your new insurance coverage begins. Medicare cannot refuse coverage or raise premium costs based on pre-existing medical conditions. However, insurance companies that sell Medigap programs may use pre-existing conditions after federal protections defined as guaranteed issue rights are no longer in effect. 

Primary Payer

When other types of health insurance plans (such as retiree coverage) support an individual on Medicare health plan. In that case, Medicare is responsible for paying that individual’s claims. To put it another way, Medicare is the primary payer. Furthermore, the private plan will cover the remaining expenses which are not covered by Medicare (though it may include some out-of-pocket costs).

Prior Authorization or Approval

A condition in health coverage that necessitates an additional layer of authorization before your insurance company agrees to pay for an item, procedure, or service. For some treatments, your prescription drug plan may require the pharmacy or doctor to obtain approval from the insurer before the medication is covered. 

Q:

Quality Evaluations (Star Ratings)

Medicare assesses the quality of Medicare Advantage and Part D plans using a five-star rating system. Programs with the highest ratings on metrics such as quality of medical care and consumer service receive bonus payments. You can use the plan finder tool available on the online health government portals to find a suitable insurance plan.

R:

Referral

Some health insurance and Medicare plans, such as health maintenance organizations (HMOs), may require a referral from your primary care physician before you can visit a veteran or access certain health services. It functions as a kind of certificate of authenticity. The plan may refuse to pay for the services unless the referral is provided first.

S:

Secondary Payer

When an individual on Medicare also has health insurance coverage from a large company or union, the private health plan is typically responsible for paying that individual’s claims. In other words, the Medicare program is the secondary payer, funding for anything that the commercial plan did not cover.

Service Area

Many Medicare Advantage plans restrict enrollment based on where people live. Service areas are those regions from where you receive your coverage. And if you move out of your plan’s service area, you might be disenrolled from the program. In this case, you would be able to enlist in a new health plan through the Special Enrollment Period.

Social Security

The Social Security Department is an independent federal agency of the United States that administers Social Security. It is a social insurance program that provides disability, retirement, and survivor benefits. The amount you spend on Social Security through income taxes for the specified period (40 quarters) will determine Medicare eligibility. The SSD is in charge of enrolling applicants in Medicare.

Skilled Nursing Care

A registered doctor or a nurse can only administer medical care services.

Skilled Nursing Facility (SNF)

SNF refers to the facility with staff members and equipment required to provide skilled nursing care to patients. These facilities are commonly equipped to offer professional rehabilitative services and other related health benefits on-site.

Special Enrollment Period or SEP

In some cases, such as significant life changes, a person may sign up for the Medicare plan or switch from one program to another, outside of the conventional initial enrollment period or open enrollment period.

For example, you can qualify for SEP if you lose your existing health plan or are released from custody. Moving outside of the service area of your current Advantage plan would have the same effect.

State Health Insurance Assistance Program or SHIP

The SHIP is a nonprofit platform that receives federal funding to provide Medicare-eligible people and their caregivers with unbiased, accessible, and local health insurance counseling.

State Pharmaceutical Assistance Program

These programs, which are not available in all states, assist residents in obtaining certain medications (such as those for ESRD or end-stage renal disease or HIV/AIDS) at a lower cost. Sometimes, the Medicare Part D plans also regulate the country’s health insurance plans.

Step Therapy

Some Part D plans have a coverage rule that requires patients to try a similar, lower-cost medication to treat a condition before the plan covers the drug that was initially prescribed.

Surcharge Liability

This is the additional cost you must pay if your adjusted gross income on the federal tax return you registered two years ago is more than $88,000 (if you’re a single person) or $176,000 (if you are married, living together, and submitting joint returns). This means you’ll need to pay higher premium costs for Medicare (Part B & Part D) services.

T:

Trial Right

This rule facilitates Medicare newcomers who began by registering in Advantage programs to switch to the original Medicare plan within the first year. The law also applies to persons who dropped Medigap programs to try a MA plan; they can return to it within 12 months if the Medigap policy is still available.

Telehealth/ Telemedicine

It includes Medical and other related services that a medical care supplier delivers to a patient through phone, television, or computer. Medicare Advantage and Medicare Part B also cover some of these telemedicine benefits. This advantage grew during the COVID-19 pandemic. Tiers are the different groups or categories that correspond to pricing in traditional formulary design. Typically, medications in lower tiers will have lower copays, while drugs in higher tiers would be more expensive.

U:

Urgently Needed Care

This is the medical care you receive outside of your Medicare coverage plan’s service region. It will be required as a result of an unexpected illness or injury that necessitates immediate medical attention. The insurance plan will pay for the care If it is determined that it is not safe to wait until you reach home to see a provider in your network, the insurance plan will pay for the care.