Common Medicare Terms You Should Know

Apr 04, 2025

10 min read

Annual Open Enrollment Period (OEP)

The Annual Open Enrollment Period is the period from October 15 through December 7 every year when people can change their drug and health plan for the upcoming year. Coverage is effective January 1 of the following year.

Benefit Period

Under Medicare Part A, a benefit period begins the day you enter a hospital or Skilled Nursing Facility. The period ends after you have not received services for 60 days. You must pay the Part A deductible for each benefit period.

Coinsurance

Coinsurance is the amount of money you must pay out of pocket for a service, after you meet your required deductible. It is a percentage of the total cost of the service. For example, if you have a doctor visit that costs $100 and your coinsurance is 20%, you pay $20 for the visit and the insurance pays $80 (after you have met your deductible).

Copayment

A Medicare copayment is a set amount that you must pay for a covered service. For example, you may have to pay $10 for generic drugs or an office visit, with the insurance paying the balance.

Creditable prescription drug coverage

Under certain circumstances, to avoid a penalty under Medicare you must show that you have prescription drug coverage from a non-Medicare source that is at least as good as the standard Medicare plan. For example, this coverage could come from you or your spouse’s employer. You would receive a letter or other communication annually informing you that your employer based health insurance is considered creditable. If you have coverage from an alternate source, you must provide proof to Medicare. Once the alternate coverage ends (for example, you are no longer working), you can elect prescription drug coverage under Medicare and not pay any penalty.

Custodial care

Custodial care is defined as assistance with activities of daily living (i.e. bathing, dressing, transferring, etc.) either at home, in a nursing facility, or in assisted living. This type of care can be performed by non-licensed people, including nursing assistants, and is typically not covered by Original Medicare.

Deductible

A deductible for Medicare is the amount of money you must pay for a covered service, hospital stay, or prescription before Medicare or other health insurance will pay its share.

Extra Help/Low-Income Subsidy

Medicare Part D's Low-Income Subsidy, also referred to as 'Extra Help', is a program under Medicare to help pay Part D costs (premiums, deductibles, and co-insurance) for people with limited income and resources. People who receive Medicaid, one of the Medicare Savings Programs (MSPs), or those who receive Supplemental Security Income (SSI) automatically receive Extra Help under Medicare. Other people with limited income and resources can apply for the program at the Social Security Administration. You can also learn more about Extra Help and apply online at NCOA's BenefitsCheckUp.org.

Formulary

A formulary is the list of prescription drugs that are paid for under a prescription plan. Before you enroll in a prescription drug plan and every year after you should evaluate the formulary to make sure that your needed prescriptions are covered. This list is available from the company you get your prescription drugs through and is updated regularly. It is also available on the Medicare Plan Finder tool on Medicare.gov. Your plan can change your formulary at any time, but they must notify you before the change is made.

General Enrollment Period

You can sign up for Part A and/or Part B during the General Enrollment Period between January 1–March 31 each year if both of these apply:

You did not sign up for Parts A and/or B when you were first eligible.
You are not eligible for a Special Enrollment Period (see below).

You must pay premiums for Part A and/or Part B. If you enroll during the General Enrollment Period, your coverage will start July 1. You may have to pay a higher premium for late enrollment in Part A and/or Part B.

Initial Enrollment Period (IEP)

Medicare's Initial Enrollment Period is the period three months before, the month of, and the three months after a person initially becomes eligible for Medicare. For example, if a person initially becomes eligible for Medicare because they are turning 65, their initial enrollment period is the three months before their birthday, the month of their birthday, and the three months after their 65th birthday.

Lifetime reserve days

Under Medicare Part A, a person has 90 days of covered hospital care per benefit period. They will not be eligible for another benefit period until they have been out of the hospital for 60 days. After a person exceeds their 90-day covered period they will have to use their lifetime reserve days. These are 60 total days that can be used once in a person’s lifetime.

Long-term care hospital

A long-term care hospital is an acute care hospital that provides extended stay services, usually for people coming from intensive care units or other critical care hospitals.

Medicaid

Medicaid is a joint federal and state program that provides health insurance to low-income individuals and families. The Medicaid program covers 1 in 5 Americans and pays for a broad range of medical services.

Medically necessary

Something that is considered 'medically necessary' is a service or test that a health care provider indicates meets accepted medical standards and is required to diagnose or treat a specific condition or injury.

Medicare

Medicare is the national health care program for people over age 65 and certain younger people with disabilities. Medicare has four Parts: A, B, C, and D that offer different health care services and prescriptions. People have to make choices about their Medicare enrollment, including whether to receive services under Original Medicare or through one of the private health or prescription drug programs that contract with Medicare.

Most people qualify for Part A for free based on their work history. The remaining parts of Medicare must be purchased and have different costs based on the program selected and/or income levels (i.e., people with higher incomes pay a higher Part B premium).

Medicare Advantage Annual Open Enrollment Period

Beneficiaries enrolled in a Medicare Advantage (MA) Plan can switch to a different Medicare Advantage Plan or switch to Original Medicare (and join a separate Medicare drug plan) once from January 1 to March 31 each year. This is called the Medicare Advantage Open Enrollment Period.

Medicare Part A

Medicare Part A covers inpatient hospital, skilled nursing facility care, nursing home, and home health care. Part A also covers hospice care for people who are terminally ill and meet other criteria. Most people receive premium-free Medicare Part A based on their employment history (40 quarters of qualified work over a lifetime).

Medicare Part B

Medicare Part B covers services provided in a doctor’s office, such as labs, screenings and other preventive care, tests, rehabilitation therapies and mental health services, and durable medical equipment (such as walkers, hospital beds, etc.).

Medicare Part B Premium

Medicare beneficiaries must pay a monthly premium for Part B coverage. The majority of Medicare beneficiaries will pay $185.00 per month in 2025 for coverage.¹ Individuals with income over $106,000 and people filing joint tax returns over $212,000 pay progressively more for Part B, depending on their income level.¹

Medicare Part C

Medicare Part C is also known as Medicare Advantage (MA). Medicare Advantage (MA) plans combine services offered under Original Medicare Parts A and B, and often Part D prescription drug benefits. MA plans are available from private companies who are approved by Medicare.

Medicare Part D

Medicare Part D is the outpatient prescription drug coverage of Medicare. Medicare beneficiaries can choose to get their drug coverage from a stand-alone plan offered by a private insurance company, or may elect a Medicare Advantage plan that includes prescription drug coverage. If people choose not to purchase a prescription plan and do not have creditable drug coverage from another source (i.e. spouse’s employment), they may incur a penalty when they later purchase a plan.

Medicare Savings Programs (MSPs)

Medicare Savings Programs (MSPs) are limited Medicaid programs that offer assistance paying for Medicare Part B premiums and cost-sharing. Eligibility is based on income and resource levels. The MSPs are administered by state Medicaid agencies.

Medigap

Also known as Medicare Supplements, Medigap plans are run by private health insurance companies and are designed to fill the “gaps” in Medicare coverage. They cover some Medicare Parts A and B cost-sharing and some provide added benefits (including foreign travel coverage).

Medigap plan options are available in each state ranging from Plans A-N. Each plan offers different benefits and will have different costs depending on the level of coverage and ZIP code. After January 1, 2020, people who became eligible for Medicare could no longer purchase Plans C and F (although if you were eligible for Medicare or purchased those prior to January 1, 2020 you can continue to do so). Enrollment is different if you live in Massachusetts, Minnesota, or Wisconsin.

Medigap Guarantee Issue Period

The Medigap Guarantee Issue Perios is the six-month Medigap open enrollment period that begins the month you first enroll in Medicare, often when you turn 65. At this time you are allowed to enroll in any Medigap plan sold in your state, regardless of your health condition. After the six-month guarantee issue/enrollment period has ended, you are not guaranteed the right to purchase a Medigap plan of your choice (and companies are able to consider your health status when making decisions).

Out-of-pocket expenses

Medicare out-of-pocket costs is the amount of money a person is responsible to pay for their Medicare-covered services. This amount can include monthly premiums, copayments, and deductibles.

Original Medicare

Also known as traditional Medicare, or Fee for Service Medicare. Original Medicare includes Parts A and B.

Part D Late Enrollment Penalty

A Part D late enrollment penalty is an amount that may be permanently added to your Medicare Part D premium if you delay enrollment after your Initial Enrollment Period is over and there is 63 days or more in a row when you don’t have Medicare drug coverage or have other creditable coverage that is as “good as” Medicare drug program.

The penalty is 1% of the national base beneficiary premium cost for each month you go without coverage. The national base beneficiary premium in 2025 is $36.78.²

The prescription drug plan you choose to enroll in will inform you if a penalty is due. You have a right to appeal the decision that you owe a penalty.

Premium

A premium is the amount charged per month for insurance coverage.

Preventive services

Medicare has an extensive preventive services program for beneficiaries. People who have Part B qualify for a free annual wellness visit. Additionally, services like flu shots, pneumococcal, and hepatitis B shots, certain cancer screenings, and other health promotion programs are included.

Skilled nursing facility (SNF) care

A skilled nursing facility (SNF) is care that must be provided in a nursing home facility setting by a nurse or other skilled professional (such as a physical therapist). SNF care is covered under Medicare Part A under limited circumstances, after a three-day inpatient hospital stay. It includes physical, occupational and speech therapies, skilled nursing care, and other services that can only be provided based on a doctor’s order.

Supplemental Nutrition Assistance Program (SNAP)

The Supplemental Nutrition Assistance Program, or SNAP, formerly known as Food Stamps, is a federal program designed to help people buy the food they need to stay in good health. To qualify for this food assistance benefit, people need to meet certain income and resource limits.

Social Security Administration

People can enroll in Medicare and Extra Help through the Social Security Administration. Information can be found at SSA.gov or by making an appointment.

Social Security Disability Insurance (SSDI)

Social Security Disability Insurance (SSDI) supports individuals who are disabled and have a qualifying work history, either through their own employment or a family member.

Special Enrollment Period (SEP)

A Special Enrollment Period allows people to make changes to their Medicare plan based on certain circumstances outside of the established enrollment periods. Some SEPs include: enrolling in Medicare after the initial enrollment period due to loss of employer coverage, moving, losing coverage from another source, becoming eligible for Medicaid, and certain other circumstances.

Sources:

1. CMS.gov. 2025 Medicare Parts A & B Premiums and Deductibles. November 8, 2024. Found on the Internet at https://www.cms.gov/newsroom/fact-sheets/2025-medicare-parts-b-premiums-and-deductibles

2. CMS.gov. CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration. July 29, 2024. Found on the Internet at https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration

What Is Medicare? A Guide from NCOA

If you're turning 65, you're eligible to apply for Medicare. But oftentimes, understanding the different parts of Medicare, when to enroll, and which type of care is not covered by Medicare can seem complicated. That's why we've created this helpful resource.

Read NCOA's Guide to Medicare