Medicare Glossary

Advance Coverage Decision. A notice you get from a Medicare Advantage Plan letting you know in advance whether it will cover a particular service.

Appeal. The action you can take if you disagree with a coverage or payment decision made by Medicare, your Medicare health plan, or your Medicare Prescription Drug Plan.

Assignment. An agreement by a health care provider to accept the amount that Medicare will pay for various hospital and medical services. This agreement states the provider will not bill you for any other amounts except for deductibles and co-insurance.

Co-insurance. The amount you are required to pay as your share of the cost for services after you have met your deductible. This amount is usually a percentage of the total cost (for example, 20 percent).

Co-payment. The amount you are required to pay as your share of the cost of services, due at the time service is provided. This is usually a set amount, rather than a percentage. For example, a plan may have a co-payment of $15 for prescription drugs.

Coverage Gap. Also known as the “donut hole,” this is a gap in coverage that occurs when someone with Medicare goes beyond the initial prescription drug coverage limit. When this happens, the person is responsible for more of the cost of prescription drugs until their expenses reach the catastrophic coverage threshold.

Deductible. The amount you must pay for health care or prescriptions before your insurance begins to pay in full or in part.

Fee-for-service. A program where doctors and other health care providers receive payment for each service provided. Payments are issued after the services are provided.

Formulary. A list of medicines covered  by a benefit plan.

Health Maintenance Organization (HMO). An organization that provides managed care on a prepaid basis. HMO members are required to select a primary care physician (PCP) who is responsible for managing and coordinating all of the member’s health care. Most, or all, services received must be performed by a provider in the network, and a member must receive a referral to see a provider other than their PCP.

Medically Necessary. Health care services or supplies needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.

Medicare-approved Amount. In Original Medicare, this is the amount a doctor or supplier that accepts assignment can be paid. It may be less than the actual amount a doctor or supplier charges. Medicare pays part of this amount and you are responsible for the difference.

Original Medicare. Fee-for-service coverage under which the government pays your health care providers directly for your Part A and/or Part B benefits.

Preferred Provider Organization (PPO). A health plan with a network of “preferred” providers from which you can choose. Unlike an HMO, you are not required to select a primary care physician and you do not need referrals to see other providers in the network. You may see out-of-network providers but will usually pay more out-of-pocket costs.

Pre-existing Condition. A medical condition that existed before the date that a new insurance policy starts.

Premium. A periodic payment to Medicare, an insurance company, or a health care plan for health care or prescription drug coverage.

Preventive Services. Health care or other services to prevent illness or detect it at an early stage.


Medicare has neither reviewed nor endorsed this information.