Understand Your Medicare Benefits

Do you know the difference between coinsurance and a copayment? Do you have a PCP? Do you know what information you will find in a formulary? Do you understand what your Medicare benefits cover?

The more familiar you can be with the words and phrases used by Medicare, the better you will understand your health insurance benefits. Medicare has a name for everything, and if you don’t happen to speak “Medicare” as a second language, you can be at a disadvantage when you explore your options or need to use your benefits. This list provides some of the most common Medicare terms. You can review them and keep the list handy for reference when you need it.

Claim. A request for payment that you or your doctor submits to Medicare or other health insurance when you get care or services that you think are covered.

Coinsurance. An amount you may be required to pay as your share of the cost for services after you pay any deductibles. Coinsurance is usually a percentage of the cost (for example, 20%).

Copayment. The amount you pay for a medical service or supply, like a doctor’s visit, hospital outpatient visit or a prescription drug. A copayment is usually a set amount, not a percentage. For example, you might pay $10 or $20 for a doctor’s visit or prescription drug.

Cost sharing. The amount you pay as your share of the cost for a medical service or supply, like a doctor’s visit, hospital outpatient visit or prescription drug. This amount can include copayments, coinsurance and/or deductibles.

Coverage gap (Medicare Part D Prescription Drug coverage). A period of time (also called the donut hole) when you pay higher cost sharing amounts for prescription drugs. The period starts when you and your plan have paid a set amount for prescription during that year. The period ends when you spend enough to reach the maximum out of pocket for prescription drugs. The amounts may change year to year.

Deductible. The amount you must pay for healthcare or prescription drugs before Medicare begins to pay.

End-stage renal disease (ESRD). Permanent kidney failure that requires a regular course of dialysis or a kidney transplant.

Excess charge. If you have Original Medicare and the amount a doctor or other health care provider is legally permitted to charge is higher than the Medicare-approved amount, the difference is called the excess charge.

Extra Help. A Medicare program that can help those with limited income pay for Medicare prescription drug costs, such as premiums, deductibles and coinsurance.

Formulary. The list of prescription drugs covered by a prescription drug plan. Also called a drug list.

Generic drug. A prescription drug that has the same active-ingredient formula as a brand-name drug. Generic drugs usually cost less than brand-name drugs. The Food and Drug Administration (FDA) rates these drugs to be as safe and effective as brand-name drugs.

Guaranteed issue rights. Rights you have when insurance companies are required by law to sell or offer you a Medigap policy. With guaranteed issue rights, an insurance company cannot deny you a Medigap policy, place conditions on your policy or charge you more for a policy because of a past or present health problem.

Guaranteed renewable policy. An insurance policy that cannot be terminated by the insurance company unless you make untrue statements to the insurance company, commit fraud or don’t pay your premiums. All Medigap policies issued since 1992 are guaranteed renewable.

In-network. Doctors, hospitals, pharmacies and other healthcare providers that have agreed to provide plan members services and supplies at a discounted price. With some plans, you are only covered if you receive care from doctors, hospitals and pharmacies who are in-network.

Medicare Advantage Plan (Part C). A Medicare health plan offered by private companies that contract with Medicare to provide Part A and Part B benefits. Most Medicare Advantage Plans offer prescription drug coverage and other additional benefits not covered by Original Medicare.

Medicare Advantage Prescription Drug (MA-PD) Plan. A Medicare Advantage plan that offers Medicare prescription drug coverage (Part D), along with Part A and Part B benefits in one plan.

Medicare Prescription Drug Plan (Part D). Part D adds prescription drug coverage to Original Medicare. Medicare Advantage Plans may also offer prescription drug coverage that follows the same rules as Medicare Prescription Drug Plans.

Medigap Open Enrollment Period. A one-time-only, 6-month period when federal law allows you to buy any policy you want that is sold in your state. It starts in the first month that you’re covered under Part B and you are age 65 or older. During this period, you cannot be denied a policy or charged more due to past or present health problems.

Network. The facilities, providers and suppliers that your health insurer or plan has contracted with to provide healthcare services.

Original Medicare. Part A (hospital insurance) and Part B (medical insurance) provided by the Medicare program.

Out-of-network. A healthcare or service provider that is not in a plan’s specific network. In some cases, your out-of-pocket costs may be higher when you receive a service or supply from a healthcare provider that is not in your plan’s network.

Out-of-pocket costs. Health or prescription drug costs that you must pay on your own because they are not covered by Medicare or other insurance.

Penalty. An amount added to your monthly premium for Part B or a Medicare Part D Prescription Drug Plan if you don’t join when you are first eligible. You typically will pay this higher amount for as long as you have Medicare. There are some exceptions.

Primary care physician (PCP). The doctor you see first for most of your healthcare. Your primary care doctor can coordinate your care and refer you to other healthcare providers when needed. In many Medicare Advantage plans, you must see your primary care physician PCP before you see any other healthcare provider to receive your full benefits.

Referral. A written order from your primary care doctor for you to see a specialist or to get certain medical services. In many Health Maintenance Organizations (HMOs), you need to get a referral before you can get medical care from anyone except your primary care physician (PCP). If you don’t get a referral first, the plan may not pay for the services.

Service area. A geographic where a health plan accepts members, if it limits enrollment based on where people live. This is generally the area where you can get routine, non-emergency services. The plan may disenroll you if you move out of the plan’s service area.

Tiers. Groups of drugs that have a different cost for each group. Generally, a drug in a lower tier will cost you less than a drug in a higher tier.

TTY. A communication device used by people who are hard-of-hearing, deaf or have a sever speech impairment. Special TTY operators can send and interpret TTY messages to those who do not have a TTY device.

Urgently needed care. Care that you get outside of your health plan’s service area for a sudden illness or injury that needs medical care right away but isn’t life threatening.