If you recently turned 65, you’re most likely eligible for Medicare coverage. Now is the time to gain a full understanding of this federal program so you can choose health coverage that suits your needs. Before diving into learning about Medicare, let’s first identify and define common terms that you’ll want to become familiar with, such as specific types of coverage, enrollment periods and other common Medicare terms.
Parts of Medicare and Basic Terms
Medicare provides health coverage to approximately 60 million eligible individuals, including those aged 65 and older, younger people with qualifying disabilities and persons with End-Stage Renal Disease (ESRD). You want to select the optimal Medicare coverage based on your health conditions and prescription drug needs, budget and other important considerations.
- Part A (Hospital and inpatient coverage) – This part of Medicare covers inpatient hospitalization, home health care, hospice and skilled nursing facility admissions. This is the first part of Original Medicare.
- Part B (Medical and outpatient coverage) – This coverage provided under the Medicare program includes outpatient medical treatments including doctor visits and services rendered by other healthcare providers. It also covers durable medical equipment and some preventative services. This is the second part of Original Medicare.
- Part C / Medicare Advantage – This is a Medicare-approved plan offered through a private insurance company as an alternative to Parts A and B.
- Part D – This coverage helps cover the cost of prescription drugs and is provided via a private insurance company.
- Original Medicare – This is the term for bundling Part A and Part B together, allowing you to use any doctor or hospital in the US that accepts Medicare.
- Medigap (Medicare Supplement) – Medigap is extra insurance that you purchase from a private company to help pay your medical costs.
- Inpatient Care – When you are admitted to the hospital under a doctor’s care to treat illness or injury.
- Outpatient Care – Services received at a hospital as an outpatient. It can include emergency room care, lab tests, x-rays, and preventative and screening services.
- Benefit Period – Begins when you are admitted as an inpatient to a specific hospital. The benefit period begins the day that you are admitted as an inpatient to a hospital, and ends when you do not receive inpatient care for 60 days in a row.
- National Coverage Determination – This is the term used nationwide when the Center for Medicare & Medicaid Services (CMS) makes a decision about whether or not to cover payments for a service or item.
These are the periods of time in which you are eligible to sign up for Medicare benefits coverage. It’s important to know what the right time is to sign up for each type of Medicare plan to avoid coverage gaps or being assessed with late enrollment penalties.
- Initial Enrollment Period (IEP) – This is when most people sign up for Medicare. This period encompasses the three months before and after your 65th birthday.
- Annual Enrollment Period (AEP) – Also known as Fall Open Enrollment, this is the time when you can evaluate your options and change your Medicare coverage. This occurs from October 15 through December 7; coverage changes take effect on January 1.
- General Enrollment Period (GEP) – If you miss your Initial Enrollment Period, you can sign up during the General Enrollment Period, which is from January 1 through March 31. Coverage begins July 1.
- Special Enrollment Period (SEP) – Extenuating circumstances, such as a qualifying life changing event, may entitle you for a Special Enrollment Period to choose or change your Medicare coverage. You might also qualify for an SEP when working past age 65, providing that you obtain creditable coverage.
Medicare Cost Terms
When it comes to your medical expenses, remembering these terms will be key to understanding what costs you’re responsible for paying.
- Premium – A premium is the monthly amount that you regularly pay to Medicare or private insurance provider for your prescription drug and healthcare coverage.
- Deductible – The amount that you must pay out of pocket before your health insurance will begin paying for your covered prescriptions or healthcare services.
- Out-of-Pocket – The portion of medical costs that you’re responsible for, including deductibles, copayments, coinsurance plus expenses not covered by your health insurance plan.
- Copayment (Copay) – A copay is the amount you’re required to pay as a part of a covered healthcare-related visit, such as a doctor’s appointment. In general, a copay will be a set amount of money and not a percentage.
- Coinsurance – Coinsurance is the amount that you will have to pay for your prescriptions and healthcare services after you’ve hit your deductible. This is usually a percentage.
- Maximum Out-of-Pocket Cost – This is the maximum amount that you would be required to pay out-of-pocket for a Medicare Advantage plan during a calendar year.
- Late Enrollment Penalties – Late enrollment penalties are the additional costs that you will incur if you don’t sign up for your Medicare coverage on time within the applicable enrollment period.
These terms are important to know if you want to fully understand your Medicare coverage. Understanding these terms can help you find a Medicare plan that meets your needs as well as confirm what’s covered.
- Creditable Coverage – When existing healthcare insurance provided by an employer meets the minimum requirements to qualify as alternative or additional coverage. If the coverage is not deemed creditable, the eligible beneficiary must enroll in Medicare.
- Evidence of Coverage (EOC) – EOC is the list of coverage and benefits that will be in effect as of January 1 of the next year. Every fall, you should be receiving an EOC from your Medicare plan or plans so that you can review them and figure out if they’re right for your expected healthcare coverage needs.
- Explanation of Benefits (EOB) – This is a document that you will receive after a healthcare service detailing what the doctor billed to Medicare, what the approved amount is and how much you will have to pay out of pocket.
- Coordination of Benefits – When two or more health coverage plans share the costs for your healthcare services, it is called the coordination of benefits. The two or more health plans will coordinate as a primary payer and secondary payer so that your medical claim gets paid.
- In-Network – If doctors, hospitals, pharmacies, home health agencies, skilled nursing facilities or equipment suppliers are “in-network” for your private Medicare plan (Part C, Part D and Medigap), you will generally pay less out of pocket than you would for out-of-network providers.
- Drug Tier – Also known as “tiers,” these are the categories that Medicare uses to determine what you pay for specific prescription drugs. Tier 1 has the lowest out-of-pocket cost and is often a generic brand of your prescription. The higher the tier, the greater the prescription drug costs you as it moves up to brand name, then specialty drugs.
- Formulary – Also known as a drug list, this is the list of prescription drugs that are covered under a given insurance plan (Part C and Part D).
It’s important to understand the above terms once you begin to learn about Medicare. This foundation of knowledge is necessary to help you choose the most suitable plan for your needs. Reach out to our team today if you need assistance with understanding your coverage options, determining which plans fit your budget, figuring out when to enroll and more. Medicare Portal is here to assist you online, over the phone or in person as needed. Contact us to speak to a licensed Medicare insurance agent today.