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Medicare Glossary


When you or your loved one becomes Medicare-eligible, you’ll likely encounter terminology with which you aren’t familiar. Below, we provide a comprehensive Medicare glossary, defining terms and phrases relating to the program.

Medicare Glossary

Following is a series of words and phrases common in the Medicare lexicon.

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Accountable Care Organizations (ACO)

Networks of doctors, health care facilities, and other providers who collaborate to ensure beneficiaries receive the best treatment.

Advance Beneficiary Notice of Noncoverage (ABN)

Those with Original Medicare may get an Advance Beneficiary Notice of Noncoverage from their health care provider. Specifically, this notice informs the beneficiaries that their upcoming service does not receive coverage from Medicare. Another term for the ABN is a waiver of liability, ABNs provide an estimate of the cost for (a) service(s) and explain why Medicare denies financial responsibility. Individuals who have Advantage plans won’t receive ABNs.

Allowable Amount (Limiting Charge) 

The highest amount a health plan will pay for a health service. Alternatively, the allowable amount is called an eligible expense or payment allowance.

ALS

Amyotrophic Lateral Sclerosis (ALS) is a rare progressive neurological disease. ALS affects the nerve cells in the brain and spinal cord. As a result, it causes loss of muscle control in the arms, chest, throat, and mouth. If you hear someone refer to Lou Gehrig’s Disease, they are talking about ALS.

Ambulatory Surgical Center

Facilities for same-day surgeries. Specifically, procedures that take place at these centers do not require hospital admission. Patients undergo surgery in fully-equipped operating rooms and receive aftercare from highly-skilled nurses.

Annual Notice of Change (ANoC)

Each September, beneficiaries receive an Annual Notice of Change letter from their insurance carrier. This important document outlines coverage changes for the following year. Beneficiaries enrolled in Advantage and Part D plans receive their ANoCs from their plan’s carriers.

Appeal 

An appeal is a formal request filed by individuals who disagree with Medicare’s decision to deny coverage or payment. Further, you have the option to file an appeal if Medicare or your plan decides to no longer pay for a service, prescription drug, or supply.

Balance Billing

A patient receives a balance bill that outlines the difference between what the insurer pays and the amount the provider charges. Medicare forbids this practice if you have Original Medicare and your provider accepts Medicare assignment.

Benefit Period

A benefit period is how Original Medicare monitors the length of time a beneficiary spends at a hospital or skilled nursing facility. It begins the first day you’re admitted to the hospital as an inpatient. It ends after you’re out of the hospital for 60 consecutive days.

Brand-Name Drug

A patent-protected prescription drug, trademarked and sold by a drug company.

Benefits Coordination & Recovery Center (BCRC)

The agency that speaks on behalf of Medicare to collect payment and handle information for beneficiaries. Further, the BCRC decides whether the coverage pays before or after Medicare.

Calendar Year   

A  calendar year is what policyholders pay before Medicare pays its portion.

Catastrophic Coverage Phase

The phase of coverage a beneficiary enters when they spend enough on prescription drugs to make it out of the donut hole (coverage gap) in a given calendar year. During this phase, the plan leaves the beneficiary responsible for a much smaller share of their drugs’ costs than in the previous coverage phases.

Claim

A claim is a request for payment from Medicare for services received.

Coinsurance

The amount you pay out-of-pocket for services after you meet your plan’s deductible. 

Copayment

The dollar amount for services or medications for which the beneficiary is financially responsible.  

Coverage Gap Phase

The donut hole, or coverage gap, refers to the timeframe in which prescription drug plan enrollees pay higher costs for medications until they qualify for catastrophic coverage.

Creditable Coverage

Health insurance or prescription drug coverage that meets a minimum set of requirements. Specifically, Medicare considers creditable coverage to be at least as good as Medicare coverage.

Custodial Care

Non-skilled personal care, for which Medicare does not provide coverage. Particularly, custodial care includes help with bathing, dressing, eating, getting in or out of a bed or chair, and more. 

Deductible

A specific dollar amount beneficiaries pay for their insurance before the plan begins to pay.

Durable Medical Equipment (DME)

Medical equipment patients to use at home; for instance, walkers or wheelchairs.

End-Stage Renal Disease (ESRD)

A permanent kidney failure that requires a regular course of dialysis or a kidney transplant. This condition automatically qualifies people for Medicare if they are under 65.

Excess Charge

This applies to individuals with Original Medicare. It occurs when the amount that a health care provider can legally charge exceeds the Medicare-approved amount.

Extra Help

A Medicare program that helps make prescription drugs more affordable for people with limited income and resources

Formulary

A list of brand-name and generic medications covered by a prescription drug plan or another insurance plan.

Formulary Exception

An exception is a drug plan’s decision to cover a drug not listed on its drug formulary or dismiss (waive) a coverage rule.

Guaranteed Issue Rights

Rights that legally protect beneficiaries from medical underwriting. These prevent insurance companies from denying enrollees a Medigap policy.

Home Health Agency

An organization that provides home health care.

Home Health Care

Any health care services and supplies issued to a patient by their doctor. Medicare covers home health care under certain situations and on a limited basis.   

Hospice

Medical care for people who are terminally ill and entering their final days. Hospice care involves teams that treat the patient’s physical, social, and emotional needs. Hospice staff also offers support to the patient’s family or caregivers.

Inpatient Rehabilitation Facility

A facility that offers intensive rehabilitation care to inpatients.

Late Enrollment Penalty

A fee for which individuals who delay Part B Part D coverage are responsible for paying in addition to their monthly premiums.

Lifetime Reserve Days

Lifetime reserve days apply to Original Medicare enrollees. Medicare covers these additional days if you spend more than 90 days in a hospital. Generally, you have 60 reserve days that can be used during your lifetime. For each lifetime reserve day, Medicare pays all applicable costs except for a daily coinsurance.

Limiting Charge

The cap on how much beneficiaries can be responsible for financially, excluding equipment or medical supplies. The maximum amount that doctors may charge is 15% more than Medicare’s approved amount. 

Long-Term Care

Medical and non-medical assistance for normal day-to-day activities, such as bathing or getting dressed. Beneficiaries can receive these services at home or at a facility. Medicare doesn’t cover long-term care.

Long-Term Care Ombudsman

A representative that advocates for the rights of residents living in nursing homes and assisted living facilities. They also 

Medicaid

A federal public health insurance program functioning on the state level, providing health insurance for low-income Americans.

Medical Underwriting

A process insurance companies use to evaluate applicants’ medical histories, which ultimately determines acceptance or denial of their application. It also decides the price of an insurance plan and if an applicant will need to adhere to a waiting period if they have pre-existing conditions

Medical Necessity

Health care supplies or services that are used to provide treatment to a patient.  

Medicare

A federal health insurance program that provides health insurance to individuals 65 and older, people under 65 with certain disabilities, and those under 65 who live with End-Stage Renal Disease.

Medicare Advantage (Part C)

A type of insurance sold through a private insurance company that provides both Part A and Part B benefits. Most plans cover prescription drugs and other benefits including dental, vision, and hearing. Once these policies go into effect, the private company manages them instead of the federal government.

Medicare Assignment

An agreement between your provider and Medicare that the provider will accept the Medicare-approved amount for a covered service.

Medicare Drug Coverage (Part D)

Medicare drug coverage helps lower the costs of prescription drugs to make them more affordable. It gives you the option to pay copayments for your prescriptions instead of the full price.

Medicare Health Maintenance Organization (HMO) Plan

Typically, with these plans, you can only get treatment from providers within your plan’s network, except in the case of emergencies.

Medicare Medical Savings Account (MSA) Plan

A Medicare MSA plan is a special savings account that pays for health care costs. Medicare makes deposits into an account that allows you to spend money on expenses that Medicare covers. 

Medicare Savings Program (MSP)

A program that offers financial assistance for people living on a fixed income. This program helps pay for deductibles, coinsurance, and expenses not typically covered by Medicare. There are seven types of MSP.

Medicare SELECT

Medicare SELECT is a type of Medicare Supplement (Medigap) that requires you to only receive treatment and services within a specific network of doctors. Once you purchase Medicare Select, have up to 12 hours if you decide you longer want the policy.

Medigap

Medigap is another name for Medicare Supplement plans, which private insurance companies sell for beneficiaries to pair with their Original Medicare. These plans help fill the gaps in coverage. All plans cover the remaining 20% coinsurance that Original Medicare otherwise requires beneficiaries to pay out-of-pocket.

Original Medicare

Two parts make up Original – or Traditional – Medicare; Part A (hospital insurance) and Part B (medical insurance). Once you reach your deductible, Medicare pays its portion of the approved amount. Original Medicare works on a fee-for-service basis.

Out-of-Pocket Costs

Costs that an individual pays for health or prescription drug fees Medicare or other insurance doesn’t cover.

Part A  

Part A of Medicare provides coverage for inpatient hospital stays. Under certain circumstances, Part A also covers short-term post-hospital home health care and skilled nursing services. This Part is one-half of Original Medicare.

Part B  

Part B is the second half of Original Medicare. It covers outpatient medical expenses, including outpatient services, preventive vaccines, cancer screenings, and more.

Pre-Existing Condition

A documented health issue or injury a beneficiary has prior to the starting date of their health plan.

Premium

A recurring payment to Medicare or an insurance company for health services or prescription drug coverage.

Preventive Services

Measures or treatment to prevent illnesses or injuries from occurring. Preventive services include pap tests, flu shots, and different types of screening. 

Prior Authorization

Prior authorization is a requirement from a Medicare drug plan before your prescription can be filled. This ensures that your plan will cover your medication. 

Program of All-Inclusive Care for the Elderly (PACE)

A special type of health plan, mostly for individuals dual-eligible for Medicare and Medicaid. PACE serves frail older adults who need nursing home services but are capable of living semi-independently. PACE combines medical, social, and long-term care services and prescription drug coverage.

Referral

A written letter from your primary care doctor recommending you see a specialist or receive a specific medical service. Generally, most Health Maintenance Organizations (HMOs) require a referral before you can get care from anyone other than your primary care doctor. Oftentimes, insurance companies won’t pay for a visit or service if you don’t get a referral first.

Rehabilitation Services

Health care services that help beneficiaries transition back to regular life after sickness, injury, or disability. These health services include physical therapy, occupational therapy, speech-language pathology, and more.

Respite Care

Respite care provides a short break for caregivers by temporarily caring for their loved ones at a nursing home, hospice inpatient facility, or hospital.

Secondary Payer

A term that specifies the insurance that pays second on a medical claim.

Service Area

A service area is a geographic area that accepts members. Accordingly, the plan has the right to limit who it accepts based on where they live. Further, the rules in these plans holding beneficiaries to a service area usually only apply to non-emergency services. If you move outside of your service area, your plan may no longer serve you.

Skilled Nursing Care

Health care that licensed nurses administer or supervise.

Skilled Nursing Facility (SNF)

An inpatient rehabilitation center that provides care from licensed medical professionals.

State Health Insurance Program (SHIP)

A state program that gives free insurance counseling with funding from the federal government. 

State Survey Agency

Monitors hospitals and health care facilities participating in the Medicare or Medicaid programs. Additionally, the state survey agency investigates safety concerns or complaints filed against health care facilities. 

Step Therapy

A coverage rule for some prescription drug plans. Specifically, this rule requires policyholders to take a lower-priced medication before the plan covers the prescribed prescription. 

Supplemental Security Income (SSI)

Monthly payment from Social Security to people living on a lower income or who are disabled, blind, or 65 years or older. 

Telehealth

Telehealth, uses technology (computer, phone, etc.) to provide health care to patients. Further, telemedicine refers strictly to telehealth of a clinical nature. Thus, all telemedicine is telehealth but n ot all telehealth is telemedicine.

Urgent Needed Care

Health services that are provided for a sudden illness or injury that require a beneficiary to go outside of their plan’s service area. Specifically, this type of care only applies to illnesses or injuries that need to be treated immediately but aren’t life-threatening. 

Jagger Esch

Jagger Esch is the Medicare expert for MedicareFAQ and the founder, president, and CEO of Elite Insurance Partners and MedicareFAQ.com. Since the inception of his first company in 2012, he has been dedicated to helping those eligible for Medicare by providing them with resources to educate themselves on all their Medicare options. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare.

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