50 Medicare Definitions & Terms To Know

Accepting Assignment

When a doctor or healthcare provider agrees to accept the Medicare-approved amount as full payment for a service. Providers who accept assignment cannot charge you more than the Medicare-approved amount, except for any applicable deductibles or coinsurance.

Advance Beneficiary Notice of Noncoverage (ABN)

A written notice your healthcare provider gives you before providing a service or item that Medicare might not cover. The ABN explains:

• Why Medicare may deny payment
• Estimates how much you'll have to pay if Medicare doesn't cover the service

Advance Directive

A legal document that states your wishes for medical treatment if you become unable to communicate or make decisions for yourself. This includes a living will and healthcare power of attorney. Medicare covers counseling about advance directives during your annual wellness visit.

Annual Enrollment Period (AEP)

Also called Open Enrollment, this period runs from October 15 to December 7 each year. During AEP, you can enroll in, switch, or drop Medicare Advantage plans and Part D prescription drug plans. Changes to plans will take effect January 1 of the following year.

Annual Notice of Change (ANOC)

A document that your Medicare Advantage or Part D plan sends you each fall (typically by September 30) explaining any changes to coverage, costs, or service areas that will take effect the following January 1. Reviewing your ANOC helps you decide whether to stay with your current plan during Open Enrollment.

Annual Wellness

Visit A yearly appointment with your doctor to develop or update a personalized prevention plan based on your current health and risk factors. Medicare Part B covers one Annual Wellness Visit each year at no cost to you if your doctor accepts assignment.

Appeal

A formal request for reconsideration when Medicare or your Medicare plan denies coverage for a service, treatment, prescription drug, or payment amount. You have the right to appeal any decision and receive a written explanation of the denial.

Approved Amount

The dollar amount that Medicare determines is reasonable for a covered service or item. This is the maximum amount Medicare will pay. If your provider accepts assignment, you pay only your deductible and coinsurance based on this approved amount.

Balance Billing

When a healthcare provider who doesn't accept assignment charges you the difference between the provider's charge and the Medicare-approved amount.

• For Original Medicare plans, providers can balance bill up to 15% more than the Medicare-approved amount.
• Medicare Advantage plans don't allow balance billing from network providers.

Beneficiary

A person who receives health insurance benefits through Medicare or Medicaid. If you're enrolled in Medicare, you're a Medicare beneficiary.

Benefit Period

For Medicare Part A, a benefit period begins the day you're admitted to a hospital or skilled nursing facility and ends when you haven't received inpatient care for 60 consecutive days. You can have multiple benefit periods in a year, and you must pay the Part A deductible for each benefit period.

Brand-Name Drug

A prescription medication that's marketed under a trademarked name by the company that developed it. Brand-name drugs typically cost more than generic drugs, which contain the same active ingredients.

Catastrophic Coverage

A phase in Medicare Part D prescription drug coverage that begins after you reach the set out-of-pocket limit for covered drugs during the year of your policy. Once you enter catastrophic coverage, you pay nothing for covered prescription drugs for the rest of the year. In 2026, the out-of-pocket cap is $2,100, after which catastrophic coverage will begin.

Centers for Medicare & Medicaid Services (CMS)

The federal agency that administers the Medicare program, works with states to manage Medicaid, and oversees the Children's Health Insurance Program (CHIP). CMS also regulates the quality of care in nursing homes and hospitals.

Coinsurance

Your share of the cost for a covered healthcare service, calculated as a percentage of the Medicare-approved amount. For example, with Medicare Part B, you typically pay 20% coinsurance after meeting your deductible.

Copayment (Copay)

A fixed dollar amount you pay for a covered healthcare service or prescription drug. For example, your Medicare Advantage plan might charge a $20 copay for a primary care doctor visit or $10 for a generic prescription.

Creditable Coverage

Health insurance that covers as much as or more than Medicare Part A and Part B. Creditable coverage also refers to prescription drug benefits that cover as much as or more than Medicare Part D. If you have creditable coverage and are eligible for Medicare, you typically won't receive a penalty if you postpone Medicare enrollment.

Custodial Care

Non-skilled personal care assistance with activities of daily living like bathing, dressing, eating, and using the bathroom. Medicare typically does not cover custodial care (only home health care, to an extent) when it's the only type of care you need.

Deductible

The amount you must pay out-of-pocket for healthcare services before Medicare or your Medicare plan begins to pay. In 2026, the Medicare Part B deductible is $283 per year, and the Part A deductible is $1,736 per benefit period.

Donut Hole (Coverage Gap)

A temporary coverage phase in Medicare Part D that formerly existed between initial coverage and catastrophic coverage. As of 2025, the coverage gap has been eliminated; in 2026, beneficiaries now move directly from initial coverage to catastrophic coverage once they have reached $2,100 in out-of-pocket spending.

Dual-Eligible

A person who qualifies for both Medicare and Medicaid. Dual-eligible individuals receive coordinated benefits from both programs and may be eligible for Special Needs Plans designed specifically for people with dual coverage.

Dual-Eligible Special Needs Plan (D-SNP)

A type of Medicare Advantage Special Needs Plan specifically designed for people who are eligible for both Medicare and Medicaid. D-SNPs coordinate benefits between both programs and often include additional services.

Durable Medical Equipment (DME)

Medical equipment ordered by your doctor for use in your home, such as wheelchairs, hospital beds, walkers, oxygen equipment, and blood sugar monitors. Medicare Part B covers 80% of the cost for medically necessary DME after you meet your deductible.

End-Stage Renal Disease (ESRD)

Permanent kidney failure requiring dialysis or a kidney transplant. People with ESRD can qualify for Medicare regardless of age, though there's typically a three-month waiting period after beginning dialysis treatment.

Evidence of Coverage (EOC)

A detailed document your Medicare Advantage or Part D plan provides that explains exactly what's covered, what you pay, which providers and pharmacies you can use, and your rights and responsibilities as a plan member.

Extra Help

Also called the Low-Income Subsidy (LIS), this is a Medicare program that helps people with limited income and resources pay for Medicare Part D prescription drug costs, including premiums, deductibles, and coinsurance. Extra Help can save beneficiaries thousands of dollars per year on drug costs.

Formulary

The list of prescription drugs covered by a Medicare Part D or Medicare Advantage plan. Formularies are organized into tiers, with different cost-sharing amounts for each tier. Plans can change their formularies during the year, but they must notify you in advance.

General Enrollment Period (GEP)

A yearly enrollment period from January 1 to March 31 when people who missed their Initial Enrollment Period can sign up for Medicare Part A and Part B. Coverage typically begins the first month after you sign up. Late enrollment penalties may apply.

Generic Drug

A prescription medication that has the same active ingredients as a brand-name drug and works the same way in the body. Generic drugs typically cost significantly less than brand-name versions and are usually placed in lower formulary tiers.

Health Maintenance Organization (HMO)

A type of Medicare Advantage plan that typically requires you to get care from doctors and hospitals in the plan's network (except in emergencies). HMO plans usually require you to choose a primary care provider and get referrals to see specialists.

Home Health Care

Skilled nursing care, therapy services, and other healthcare services you receive in your home under a doctor's order. Medicare Part A and Part B cover home health care if you're homebound and need part-time skilled nursing or therapy services from a Medicare-certified home health agency.

Homebound

Medicare's requirement for receiving home health care services. You're considered homebound if leaving your home requires considerable and taxing effort, you need assistance from another person or supportive devices to leave home, or leaving home is medically inadvisable.

Hospice Care

Compassionate care for people who are terminally ill with a life expectancy of six months or less if the illness runs its normal course. Medicare Part A covers hospice care, which focuses on comfort and quality of life rather than curing the illness. Hospice services include pain management, counseling, and support for patients and families.

Initial Coverage Election Period (ICEP)

The period when you first become eligible for Medicare and can enroll in a Medicare Advantage plan. For most people, this is the same seven months as the Initial Enrollment Period. If you delay Medicare Part B enrollment, your ICEP is the three months before your Part B coverage begins.

Initial Enrollment Period (IEP)

The seven-month period when you first become eligible for Medicare (typically three months before your 65th birthday month, your birthday month, and the three months after your birthday month). Typically this is when you should enroll in Medicare Part A and Part B to avoid late enrollment penalties.

Inpatient Care

Healthcare services you receive when you're formally admitted to a hospital or skilled nursing facility. Medicare Part A helps covers inpatient care, including room and board, nursing care, and other hospital services during your stay.

Late Enrollment Penalty

A permanent increase in your monthly premium if you don't sign up for Medicare Part B or Part D when you're first eligible and don't have creditable coverage from another source. Part B penalties are 10% for each 12-month period you could have had coverage but didn't enroll. Part D penalties are 1% of the national base beneficiary premium for each month without coverage after 63 days.

Lifetime Reserve Days

Under Medicare Part A, you have 60 lifetime reserve days that can be used for hospital stays longer than 90 days in a benefit period. Once you use these 60 reserve days, they're gone forever (they don't renew).

Low-Income Subsidy (LIS)

See Extra Help.

Maximum Out-of-Pocket Limit

The most you'll pay out-of-pocket for covered services in a year with a Medicare Advantage plan. Once you reach this limit (varies by plan but is capped by law), the plan pays 100% of covered services for the rest of the year. Original Medicare doesn't have a maximum out-of-pocket limit.

Medicaid

A joint federal and state program that provides health coverage to people with limited income and resources. Many people have both Medicare and Medicaid (dual-eligible). Medicaid can help pay Medicare premiums, deductibles, and coinsurance, and covers some services Medicare doesn't, like long-term care.

Medically Necessary

Healthcare services or supplies that are needed to diagnose or treat your medical condition and meet accepted standards of medical practice. Medicare only covers services and items that are medically necessary.

Medicare Advantage (Part C)

Private health insurance plans approved by Medicare that provide all Medicare Part A and Part B benefits, usually include Part D prescription drug coverage, and may also offer additional benefits. You must have Part A and Part B to enroll in Medicare Advantage.

Medicare Advantage Open Enrollment Period (MA OEP)

A period from January 1 to March 31 each year when people already enrolled in a Medicare Advantage plan can make one change:

• Switch to a different Medicare Advantage plan
• Return to Original Medicare (and join a Part D plan)

Medicare Savings Program (MSP)

State programs that help people with limited income and resources pay Medicare premiums and sometimes deductibles and coinsurance. The four MSP programs are: Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), Qualifying Individual (QI), and Qualified Disabled and Working Individuals (QDWI).

Medicare Supplement Insurance (Medigap)

Private insurance policies that help pay some of the out-of-pocket costs that Original Medicare doesn't cover, such as deductibles, coinsurance, and copayments. You must have Original Medicare (Parts A and B) to purchase Medigap, and you cannot use Medigap with Medicare Advantage plans.

• Medigap plans are titled with letters (A, B, D, G, K, L, M, N) as a way to show standardized benefits. The same letter will offer the same coverage regardless of the insurer, though the price may vary. These letters are not the same as Medicare Parts (A, B, C, D).

Network

The doctors, hospitals, pharmacies, and other healthcare providers that have contracted with a Medicare Advantage plan or Part D plan to provide services at pre-negotiated rates. Using in-network providers typically costs less than going out-of-network.

Observation Stay

When you receive hospital services but aren't formally admitted as an inpatient, you're considered an outpatient receiving observation services. This distinction is important because observation stays are covered under Medicare Part B (not Part A), which can result in higher out-of-pocket costs.

Original Medicare

The traditional fee-for-service Medicare coverage managed directly by the federal government. Original Medicare includes Part A (hospital insurance) and Part B (medical insurance) but doesn't include prescription drug coverage (Part D) or extra benefits like dental and vision.

Outpatient Care

Healthcare services you receive without being admitted to a hospital or facility, such as doctor visits, lab tests, X-rays, and same-day surgeries. Medicare Part B covers outpatient care services.

Part A (Medicare)

Hospital insurance that covers inpatient hospital stays, skilled nursing facility care (following a qualifying hospital stay), hospice care, and some home health services. Most people get Part A premium-free.

Part B (Medicare)

Medical insurance that covers doctor services, outpatient care, preventive services, durable medical equipment, and other healthcare services. Part B requires a monthly premium ($202.90 for most people in 2026).

Part C (Medicare)

See Medicare Advantage.

Part D (Medicare)

Prescription drug coverage offered through private insurance companies. Part D is available as a standalone plan (to add to Original Medicare) or included in most Medicare Advantage plans.

Preferred Provider Organization (PPO)

A type of Medicare Advantage plan that allows you to see any doctor or specialist without a referral, though you'll pay less if you use providers in the plan's network. PPO plans offer more flexibility than HMO plans, but may have higher costs.

Premium

The amount you pay each month for your Medicare coverage. Most people don't pay a Part A premium, but everyone with Part B pays at least the standard premium ($202.90 in 2026). Medicare Advantage and Part D plan premiums vary by plan.

Primary Care Provider (PCP)

The doctor you see for routine care, preventive services, and initial treatment of health problems. Some Medicare Advantage HMO plans require you to choose a PCP and get referrals from them to see specialists.

Prior Authorization

Approval you must get from your Medicare plan before receiving certain services or medications. If you don't get prior authorization when required, the plan may not cover the service. Original Medicare generally doesn't require prior authorization, but Medicare Advantage plans often do.

Qualifying Event

A specific life change that makes you eligible for a Special Enrollment Period to enroll in or change your Medicare coverage outside of regular enrollment periods. Qualifying events include moving to a new area, losing other health coverage, or becoming eligible for Extra Help.

Quality Improvement Organization (QIO)

A group of healthcare quality experts, doctors, and other healthcare professionals paid by the federal government to monitor and improve the care given to Medicare patients. QIOs also review complaints about the quality of care and premature hospital discharges.

Skilled Nursing Care

Nursing care and therapy services that can only be performed safely and correctly by licensed nurses or therapists under a doctor's supervision. This is different from custodial care. Medicare helps cover skilled nursing care in a skilled nursing facility following a qualifying three-day hospital stay.

Skilled Nursing Facility (SNF)

A nursing facility with skilled nursing staff that provides 24-hour nursing care and rehabilitation services. Medicare Part A covers up to 100 days per benefit period in a SNF after a qualifying three-day inpatient hospital stay, though you pay coinsurance after day 20.

Social Security

The federal program that provides retirement, disability, and survivor benefits to eligible individuals. Most people become eligible for Medicare when they start receiving Social Security retirement benefits or have received Social Security Disability Insurance (SSDI) for 24 months.

Special Enrollment Period (SEP)

A time outside the regular enrollment periods when you can enroll in or change your Medicare coverage due to certain qualifying life events, such as moving, losing employer coverage, or qualifying for Extra Help. Each SEP has specific rules about timing and what changes you can make.

Special Needs Plan (SNP)

A type of Medicare Advantage plan designed for people with specific diseases or characteristics. The three types are:

• Chronic Condition Special Needs Plans (C-SNPs) for people with specific severe or disabling chronic conditions.
• Dual-Eligible Special Needs Plans (D-SNPs) for people with both Medicare and Medicaid.
• Institutional Special Needs Plans (I-SNPs) for people who live in institutions like nursing homes.

Step Therapy A Medicare

Advantage or Part D plan requirement dictating that you must try a lower-cost drug before the plan will cover a more expensive drug for the same condition. For example, you might need to try a generic medication before your plan covers the brand-name version.

Tier

A grouping of prescription drugs on a formulary based on cost. Most Part D plans have 3-5 tiers, with Tier 1 (usually generic drugs) costing the least and Tier 5 (usually specialty drugs) costing the most. Your copayment or coinsurance varies by tier.