Common Medicare Words and Phrases

Let us try to clear up some of the common terms and abbreviations you may see when learning about Medicare.

  • CMS: The Centers for Medicare & Medicaid Services (CMS) is the US federal agency tasked with running the Medicare and Medicaid program
  • Coinsurance: You may have to share the cost of care with your health plan. A coinsurance usually refers to a percentage, like 20{48e9a17823c826fdd137fd834d5a2b3e559614c0541675787c47c5447c73909b}, of the overall cost.
  • Copay/copayment: Either way it’s spelled, many health plans require you to pay a copayment for services. Usually, it means a set dollar amount, such as $15.
  • Cost sharing: Coinsurance and copayments are both methods of cost sharing between you and your health plan.
  • Coverage: Often used interchangeably with “plan,” health coverage refers to the balance of liability that you and your insurance plan (or the government) agree to.
  • Donut hole/coverage gap: Part D plans include certain phases in which your prescription drugs have different costs. The donut hole, or coverage gap, is a phase in which your costs may rise until you reach a specific amount of out-of-pocket costs.
  • Deductible: Many insurance plans have a yearly deductible you must meet before the coverage kicks in.
  • Enrollment period: Different rules apply for when you can sign up for Medicare coverage, including the time periods during which you can do so. See the section above about enrollment periods for more information.
  • Extra Help: You might qualify to get help paying for your Part D prescription drug costs through this federal program.
  • Formulary:† The formulary is the list of covered drugs on a prescription drug plan or Medicare Advantage plan with drug coverage.
  • Health Maintenance Organization (HMO): A type of Medicare Advantage plan, HMOs typically have rules like getting a referral to see a specialist or using an in-network doctor or hospital.
  • Late enrollment penalty: If you don’t sign up for Medicare coverage when you’re first eligible, you might have to pay extra when you get it later. Different coverage types have different rules and penalty amounts.
  • Medical Savings Account (MSA): Like some plans in the private insurance market, MSAs pair a high-deductible Advantage plan with a savings account that allows you to put money aside to pay for health costs.
  • Network: Advantage plans have provider networks, which are the pools of doctors, hospitals, and other providers that they contract with to provide care. Some plans require you to stay within the network and only visit providers participating with the plan’s network.
  • Prescription Drug Plan (PDP): You might get your Medicare Part D coverage in the form of a stand-alone PDP offered by private insurance companies.
  • Tiers: Prescription drug coverage is often broken down by categories of drugs called Tiers (e.g., Tier 1, Tier 2). Lower tiers typically have lower copayments than higher tiers.
  • Preferred Provider Organization (PPO): For more flexibility when choosing which doctors you can visit, you may enroll in a PPO plan that lets you see out-of-network providers (usually at a higher cost).
  • Premium: The monthly amount you pay for health coverage is your premium.
  • Provider: This is an umbrella term that includes the medical professionals and facilities that provide care, including physicians, specialists, clinics, hospitals, and medical equipment companies.
  • Referral: On some plans, you may have to ask your primary care doctor to give you a referral, or express permission, to visit a specialist.
  • Special Needs Plan (SNP): If you have a certain condition or disability, you may qualify for a unique type of Advantage plan called an SNP.