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Terms and Definitions


  • Actuarial equivalence —  Drug coverage considered to be at least as good as another plan. This drug coverage is computed in dollar amounts. For example, if you delay Part D because you have drug coverage through your employer, your current drug plan must be at least actuarially equivalent to the standard Part D plan. If it is, then you will not have to pay penalties if you enroll at a later date.
  • ALS —  Amyotrophic lateral sclerosis, or Lou Gehrig’s disease.
  • Appeals —  Action you can take if you disagree with a decision about Medicare coverage or payment.
  • Assets —  Bank accounts, savings, stocks, real estate and other resources that are used to determine if you are eligible for benefits programs, such as Extra Help. Your primary residence and one car are not considered assets. If you are married and live in the same household as your spouse, your assets will be added together to determine eligibility for benefits.
  • Assignment —  Agreement by your doctor or other healthcare provider/supplier to be paid directly by Medicare and accept Medicare’s payment amount for the service.
  • Auto-enrollment —  When you are enrolled into a plan or benefit (e.g., Extra Help) without having to fill out paperwork.


  • Beneficiary —  A person who has Medicare coverage is a Medicare beneficiary.


  • Catastrophic coverage —  Period you enter after you’re spent $4,700 out-of-pocket for the year on prescriptions in the Part D coverage gap. Once you get out of the coverage gap, you automatically get “catastrophic coverage.” It assures you only pay a small coinsurance amount or copayment for covered drugs for the rest of the year.
  • Claim —  A request for payment that you submit to Medicare or other health insurance when you get items and services that you think are covered.
  • Coinsurance —  Amount you pay for your share of the cost of services after you pay any deductible. Usually expressed as a percentage of costs (e.g., 20% of Medicare-covered service).
  • Copayment —  Amount you are required to pay as a share of your cost for a medical service or prescription. Usually expressed as a dollar amount and not a percentage. For example, you may have a $20 copayment each time you visit the doctor or a $5 copayment for your prescription covered under Part D.
  • Cost sharing —  An amount you may be required to 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 —  A period of time in which you pay higher cost sharing for prescription drugs until you spend enough to qualify for catastrophic coverage. The coverage gap (also called the “donut hole”) starts when you and your plan have paid a set dollar amount for prescription drugs during that year.
  • Covered drug, or covered Part D drug —  These are prescription drugs that are on the plan’s drug list, or formulary, that you can get at a network pharmacy or under a special circumstance.
  • Creditable coverage —  This means your plan has comparable coverage (actuarially equivalent) to Part D plans. Some plans offering creditable coverage may be through an employer, TRICARE or a union.


  • Deductible —  The amount you must spend on drugs or services before your plan pays insurance benefits.
  • DME —  Durable medical equipment. Equipment like a walker, wheelchair or hospital bed that are ordered by your doctor for use in the home.
  • Donut hole —  See coverage gap.
  • Dual-eligible —  Person who is eligible for Medicare and for full benefits under Medicaid.


  • ESRD —  End-Stage Renal Disease. Permanent kidney failure that requires a regular course of dialysis or a kidney transplant.
  • Exceptions process —  A process to ask Medicare to cover drugs not on your plan’s drug list, or formulary. You can do this if a doctor decides the drugs that are available are not as effective, harmful or both. In the first step, you may ask for an exception. If the plan does not grant an exception, you may appeal.
  • Extra Help —  Other name for the Part D Low Income Subsidy (LIS), which helps people with limited income and resources pay for their prescription drugs.


  • Fail first —  A policy that requires you to try one drug, usually a less costly drug, and for it to fail, before you can get approval to use a more costly drug.
  • Formulary —  A list of drugs covered by your Part D plan or by another plan that includes prescription drug benefits.
  • FPL —  Federal Poverty Level (officially: the HHS Federal Poverty Guidelines). The level set by the federal government that states how much money an individual or families of varying sizes need to live a basic existence. The FPL is used to determine if people are eligible for assistance programs.


  • Generic —  A prescription drug that has the same active-ingredient formula as a brand-name drug, but is known by a different name and usually costs less.
  • Guaranteed issue rights —  Rights you have in certain situations when insurance companies are required by law to sell or offer you a Medigap policy and cannot place conditions based on your health.


  • Hospice —  A special way of caring for people who are terminally ill, which involves a team-oriented approach that addresses the medical, physical, social, emotional and spiritual needs of the patient and his/her caregivers and family.


  • In-network —  Doctors, hospitals, pharmacies, and other providers that have agreed to provide members of a certain insurance plans with services and supplies at a discounted price. In some insurance plans, your care is only covered if you get it from in-network doctors, hospitals, pharmacies and other healthcare providers.
  • Initial enrollment period —  7-month period that begins three months before the month you first become eligible for Medicare (age 65) and ends three months later.


  • Long-term care —  Medical and non-medical care provided to people who are unable to perform basic activities of daily living, like dressing or bathing. Long-term supports and services can be provided at home, in the community, in assisted living or in nursing homes. Medicare usually does not pay for long-term care services.
  • Low-income subsidy —  See Extra Help.


  • Medicaid —  A joint federal and state program that helps with medical costs for some people with limited income and resources.
  • Medicare Advantage —  A private managed health care plan, also known as Part C or Medicare health plans. Some MA plans may include prescription drug coverage. You must have Medicare Parts A and B to enroll in Medicare Advantage.
  • Medicare Savings Programs —  Programs that help to pay for the costs of Medicare Parts A and B for those with limited incomes and resources. Also known as QI, QMB and SLMB.
  • Medigap —  Supplemental insurance plans that provide wrap-around insurance coverage for Medicare Parts A and B. These plans often pay deductibles and copayments for Original Medicare. They also pay for services those programs do not cover.


  • Network pharmacy —  A licensed pharmacy that is under contract to a plan to provide covered drugs at negotiated prices to anyone enrolled in the plan.
  • Non-preferred drug —  A drug that your plan discourages you from getting, usually by requiring a higher copayment.


  • Original Medicare —  Also called “fee-for-service Medicare” – Medicare Parts A and B.
  • Out-of-network —  A licensed pharmacy or provider that is not under contract with Medicare health or drug plans and will not give you negotiated prices.
  • Out-of-pocket costs —  Health or prescription drug costs that you must pay on your own because they aren’t covered by Medicare or other insurance.


  • Part A —  Medicare Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care and some home healthcare.
  • Part B —  Medicare Part B covers outpatient services and some medical supplies.
  • Part C —  See Medicare Advantage.
  • Part D —  Part D is Medicare’s prescription drug benefit.
  • Patient Assistance Program —  Programs that provide free or low price drugs to qualifying patients who have limited income and resources. Charitable foundations usually offer these.
  • Penalty —  Amount added to your monthly premium for Part B or a Medicare drug plan (Part D) if you don’t join when you’re first eligible.
  • Premium —  The amount you may pay monthly for your health and/or prescription drug coverage.
  • Prior authorization —  Requires a doctor to get prior approval from the plan before the plan will pay for a certain drug.


  • QI —  Qualified Individual. A type of Medicare Savings Program that helps pay Part B premiums for people who have Part A and limited income and resources.
  • QMB —  Qualified Medicare Beneficiary. A type of Medicare Savings Program that provides for premium and/or cost-sharing assistance to Medicare beneficiaries.


  • Skilled nursing facility —  A nursing facility with the staff and equipment to give skilled nursing care and rehabilitative services and other related health services on a continuous daily basis.
  • SLMB —  Specified Low-Income Beneficiary. A type of Medicare Savings Program that provides for premium and/or cost-sharing assistance to Medicare beneficiaries.
  • SPAP —  State Pharmaceutical Assistance Program. A state-operated program (other than Medicaid) that provides Medicare beneficiaries help with costs to buy prescription drugs.
  • Special Enrollment Period —  Opportunity to enroll in a health insurance plan outside of open, initial, or general enrollment for people with certain circumstances, e.g., moving or losing employer-sponsored insurance.
  • Special needs plan —  Type of Medicare Advantage plan (Part C) that provides more focused and specialized healthcare for specific groups of people, like those who have both Medicare and Medicaid, who live in a nursing home or have certain chronic medical conditions.
  • Step therapy —  Requires you to try one drug before having access to another; that is, you may use a non-preferred drug only after you have used a preferred drug and it has not worked.


  • Therapeutic substitution —  A plan’s request that your doctor prescribe an alternate preferred drug in the same category or class.
  • 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.
  • TRICARE —  A healthcare program for active-duty and retired uniformed services members and their families. TRICARE For Life is expanded coverage for those eligible for Medicare.