Definitions of Common Medicare Terms: Parts, Plans, Coinsurance, and More

Medicare “parts” and “plans”

Medicare refers to different types of coverage as “parts,” while the term “plans” typically refers to insurance and supplemental insurance offered by private insurance companies that contract with Medicare.

Medicare Part A (hospital insurance)

Medicare Part A is hospital insurance. It covers your stays in the hospital, as well as stays in long-term care facilities. You can also get some coverage for home health or hospice care.

Medicare Part B (medical insurance)

Medicare Part B is medical insurance. It covers doctor’s visits, specialist visits, mental health care, and durable medical equipment. Part B also covers urgent care and visits to the emergency room.

Medicare Part C (Medicare Advantage)

Medicare Advantage, or Medicare Part C, refers to plans offered by private companies that contract with Medicare.

Medicare Advantage plans replace your coverage with Original Medicare (Part A and Part B). All Medicare Advantage plans must cover everything that parts A and B cover. Many Part C plans also offer additional coverage for things like:

• dental care
• vision services
• medications

If you choose Medicare Advantage, you are still responsible for paying your Medicare Part A and Part B premiums. However, Medicare Advantage plans may also have their own premiums, deductibles, and out-of-pocket costs.

Medicare Part D (prescription drug coverage)

Medicare Part D is optional coverage for prescription drugs.

Since Medicare parts A and B offer only limited outpatient prescription drug coverage, some people choose to purchase additional coverage with a Part D plan. Your Part D plan will have a separate premium.

Medigap plans

Medigap plans, or Medicare supplement plans, are optional plans that help pay for the out-of-pocket costs of Original Medicare. These plans are offered by companies that contract with Medicare.

There are 10 different Medigap plans. In many states, these plans are represented by a letter: A, B, C, D, F, G, K, L, M, and N. Some plans may not be available to new enrollees.

Each plan may cover slightly different medications, as indicated in the plan’s formulary (drug list).

Medigap costs vary depending on where you live.

Original Medicare (parts A and B)

Medicare parts A and B together are often referred to as Original Medicare.

Original Medicare doesn’t include Part C (Medicare Advantage), Part D, or Medigap plans.

Medicare enrollment terms

Medicare has specific enrollment periods and deadlines.

General enrollment period

You can enroll in Original Medicare (parts A and B) every year between January 1 and March 31, known as the general enrollment period. To use this window, you must be eligible for Medicare but not already receiving coverage.

Initial enrollment period

Your initial enrollment period (IEP) is a 7-month window that starts 3 months before the month of your 65th birthday, which is when you can first sign up for Medicare. It ends 3 months after your birthday month.

For example, if you turn 65 years old in August 2025, your IEP would run from May 2025 through November 2025.

Late enrollment penalty

If you don’t enroll in Part B when you first become eligible for Medicare, you might need to pay a late enrollment penalty when you do enroll.

Generally, you’ll pay an additional 10% for each year you were not enrolled. The penalty amount is added to your monthly premium payment.

You won’t pay a late enrollment penalty if you qualify for a special enrollment period.

Open enrollment period

The open enrollment period, also known as the annual enrollment period (AEP), occurs at a set time every year, from October 15 through December 7. During the AEP, you can sign up for an Advantage plan, purchase Medigap, and more.

Special enrollment period (SEP)

Special enrollment periods (SEPs) refer to an 8-month window when you can enroll in Medicare outside of initial or general enrollment time frames under certain circumstances.

SEPs occur when you have a major life change, such as moving to a new coverage area or retiring from the job that previously provided your health insurance.

If you enroll during this period, you won’t pay a late enrollment penalty.

The 2-year waiting period

You can get Medicare if you’re under 65 years old and have a chronic disability. You’ll need to qualify for Social Security disability income and receive it for 2 years before Medicare coverage begins. This is known as the 2-year waiting period.

It’s important to note that this 2-year waiting period doesn’t apply to people with end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS).

Medicare costs, fees, and copays

You typically pay out-of-pocket for certain aspects of coverage with Medicare, and Medicare refers to these costs with specific terms.

Coinsurance

The coinsurance cost of a service is a percentage of the total cost you’re responsible for. Medicare Part B has a coinsurance of 20% of the Medicare-approved amount of most covered services. This means that Medicare will pay 80% of the cost, and you’ll pay the remaining 20%.

Copay (copayment)

A copay, or copayment, is a set amount you pay for a particular service. Your plan covers the remaining cost. For example, your Medicare Advantage plan might have a $25 copay for every doctor visit.

Deductible

A deductible is the amount you must pay out of pocket for a service before your Medicare plan will pay any costs. In 2025, the Medicare Part B deductible is $257.

So, you’ll pay the first $257 out of pocket for healthcare services. After that, your Medicare plan will begin to pay 80% of the approved amount for the service.

Income-related monthly adjustment amount (IRMAA)

Income-related monthly adjustment amount (IRMAA) refers to an increased premium amount for Medicare Part B.

For 2025, Medicare beneficiaries with a yearly income of more than $106,000 (filing individually) or $212,000 (filing jointly) will pay more than the standard $185 Part B monthly premium. The higher your income, the more your IRMAA will be, up to a maximum of $628.90 if you make $500,000 or above.

These numbers increase each year.

Medicare-approved amount

Medicare has set prices that it will pay for healthcare services. This set price is called the Medicare-approved amount. All healthcare facilities that accept Medicare have agreed to charge these approved amounts for services.

If a facility does not accept Medicare, you may have to pay excess charges, or 15% beyond what Medicare pays.

Out-of-pocket costs

Your out-of-pocket costs are the amounts you pay for your healthcare. They may include your deductible, coinsurance, and copayment amounts.

Out-of-pocket maximum (MOOP)

The out-of-pocket maximum is a cap on how much you will pay for approved healthcare services in any specific year. Once you reach this amount, your insurance will pick up all costs for these approved services.

Out-of-pocket maximums include copayment and coinsurance amounts. Only Medicare Advantage (Part C) plans have them, and each plan can set this amount, so it may vary. In 2025, the maximum out-of-pocket (MOOP) cannot exceed $9,350.

Premium

A premium is a monthly amount you pay for insurance coverage. Since most people pay no premium for Medicare Part A, you’ll usually pay a premium for only Part B when you have Original Medicare. The standard Part B premium in 2025 is $185.

Private insurance companies sell Medicare Advantage, Part D, and Medigap plans. Depending on the company or plan you choose, they may charge a different premium.

Work credits

Work credits determine your eligibility for Social Security benefits and premium-free Part A. You earn work credits at a rate of 4 per year. You’ll generally need 40 credits to receive premium-free Part A or SSA benefits. Younger workers who become disabled can qualify with fewer credits.

You may be able to use your spouse’s work credits to qualify.

Coverage-related terms

Specific terms describe what Medicare covers.

Claims, denial letters, and appeals

A claim is a request for payment sent to an insurance plan like Medicare. Either Medicare or the insurance company providing coverage will process the claim and pay the provider (healthcare professional or facility).

Medicare or the insurance company can reject the claim if the service isn’t covered or the required conditions aren’t met. You can also file an appeal with Medicare if your claim is not approved.

Coverage gap (donut hole) and catastrophic coverage

In 2025, the Medicare Part D coverage gap (donut hole) was officially eliminated.

This means, you automatically start receiving catastrophic coverageonce you reach the maximum amount of out-of-pocket spending for your prescription drugs for the year. In 2025, catastrophic coverage begins at $2,000. Once you reach this amount, you will pay nothing for your prescriptions for the rest of the year.

The out-of-pocket limit for Part D is set to increase to $2,100 in 2026.

Durable medical equipment (DME), medical devices, and medical supplies

Durable medical equipment (DME) includes medical supplies you might need in your home to manage a condition. DME includes things like home oxygen tanks and supplies, or mobility aids like walkers. Your Medicare Part B plan covers DME that a Medicare-approved doctor has ordered for you.

Drug formulary

A formulary is a list of medications that a specific Part D plan covers. If you take a medication not on your plan’s formulary, you’ll need to pay out of pocket or ask your doctor to prescribe a similar medication that your plan covers.

Each Part D plan and some Medicare Advantage (Part C) plans may have their own formulary. To find out if a drug is covered, check your plan’s Part D formulary, or covered drug list.

Medicare Advantage-specific terms

Part C (Medicare Advantage) plans use specific terms to describe what’s covered.

HMO and PPO plans with Medicare Advantage

Medicare Advantage (Part C) plans might be offered in a few different formats depending on your location.

With a Health Maintenance Organization (HMO) plan, you must use a set network of healthcare professionals and facilities if you want your Medicare plan to cover the costs. You may also be required to choose a primary physician (primary care provider) and get referrals from that doctor if you need to see a specialist.

Preferred Provider Organization (PPO) plans work with a set network of professionals and facilities. However, with a PPO, you can go outside your network if you’re willing to pay higher copayment or coinsurance amounts.

Medicare savings accounts

A Medicare savings account (MSA) is a type of Medicare Advantage plan with a high deductible and an attached savings account. MSA plans deposit money into the savings account, which you can use to pay for your medical expenses before you meet your deductible.

Participating provider

A participating provider is a healthcare professional who contracts with Medicare to provide a service or is part of the HMO or PPO plan network. Participating providers have agreed to accept the Medicare-approved amount for services and to treat Medicare beneficiaries.

Primary care provider (PCP)

Your PCP is the doctor who provides routine and preventive care, such as annual wellness appointments. Under some Medicare Advantage HMO plans, you must work with an in-network PCP. If you need specialized care, your PCP will have to make a referral for your plan to cover this care.

Private Fee-For-Service (PFFS) plans

A PFFS plan is a less common type of Medicare Advantage plan that does not have a network or require you to have a primary physician. Instead, you’ll pay a set amount for each service you receive from any Medicare-approved facility.

Terms for specialized plans and programs

Some people are eligible for specialized plans or additional assistance.

Extra Help

Extra Help is a Medicare program that helps participants cover the cost of Medicare Part D. Extra Help programs are based on your income and can help you with coinsurance or premium costs.

Medicaid

Medicaid is different from Medicare. It is a health insurance program designed for individuals with limited incomes. Each state administers Medicaid, so rules and exact program details can vary.

If you qualify for Medicaid, you can use it alongside Medicare to reduce or eliminate your out-of-pocket expenses.

Special Needs Plans (SNP)

Some companies offer Medicare Advantage plans known as SNPs. An SNP is designed for people with special financial or healthcare needs. These include:

• Institutional Special Needs Plans (I-SNPs) for people who live in nursing facilities
• Dual Eligible SNPs (D-SNPs) that offer additional coverage to people with both Medicare and Medicaid
• Chronic Condition Special Needs Plans (C-SNPs) for people managing a chronic condition like diabetes

Summary

There are many terms related to Medicare that can make the process difficult to understand. Knowing some of the basic terms and what they mean can help make it easier for you to navigate Medicare.