As you explore your Medicare choices, you may run across some unfamiliar words or phrases. This glossary explains what they mean.

Annual Enrollment Period (AEP)
The annual enrollment period is the national enrollment period during which all beneficiaries can make changes in how they receive coverage. The annual enrollment period runs from November 15 to December 31.

Benefits
The services your health plan covers, such as doctor office visits, routine physicals, etc.

Co-insurance
The percent of the Medicare-approved amount that you have to pay after you pay any required deductible. With Original Medicare, for example, the co-insurance is 20% of the Medicare-approved amount for doctor/specialist office visits.

Copay
A set amount you pay for each medical service, like $10 for a doctor visit.

Deductible
The amount you must pay for health care or for prescription drugs before your Medicare plan begins to pay.

Donut Hole
A name for a step in some Part D plans in which you pay all your expenses for eligible drugs. Also known as the “coverage gap”.

Formulary
A list of prescription drugs that are approved by a Medicare prescription drug plan. Formulary drugs are dispensed through participating pharmacies.

Generic Drug
A prescription drug that has the same active-ingredient formula as a brand-name drug. Generic drugs usually cost less than brand-name drugs and are rated by the Food and Drug Administration (FDA) to be as safe and effective as brand-name drugs.

Medicaid
A joint federal and state program that helps with medical costs for some people with low incomes and limited resources. Most health care and prescription drug costs are covered if you qualify for both Medicare and Medicaid.

Medicare Advantage Plan
Medicare Advantage plans are authorized by “Part C” of the Medicare laws. These plans are approved by Medicare but are run by private companies. They provide all your Medicare Part A and Part B coverage and must cover medically necessary services. They may also provide extra benefits, like eyeglasses, vision and hearing exams, and prescription drugs.

Medicare-approved Amount
This is the payment amount that Medicare has agreed a doctor or other provider may charge for a service or supply provided to a Medicare beneficiary. It may be less than the actual amount normally charged by a doctor or provider. If the doctor “accepts assignment,” the difference between the approved amount and the doctor's fee schedule may not be charged to you. If the doctor does not accept assignment, the maximum amount you can be charged is an additional 15 percent

Medicare Part A (Hospital Insurance – Original Medicare)
Medicare hospital insurance that helps pay for inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. Deductible and limitations apply.

Medicare Part B (Medical Insurance – Original Medicare)
Medicare medical insurance that helps pay for doctors’ services, outpatient hospital care, durable medical equipment, and some medical services that are not covered by Part A. Deductible and limitations apply.

Original Medicare
The term “Original Medicare” refers to Medicare Part A and Medicare Part B benefits combined, with no additional benefits included. Deductibles and limitations apply.

Medicare Part C
Medicare Advantage plans are sometimes called “Part C.” These plans are approved by Medicare but are run by private companies. They provide all your Part A and Part B coverage and must cover medically necessary services. They may also provide extra benefits, like eyeglasses, vision and hearing exams, and prescription drugs.

Medicare Part D
Optional Medicare Prescription Drug Plan available to all people with Medicare through private companies like health plans and insurance companies. Medicare Part D can be purchased with a Medicare Advantage plan, or as a stand-alone plan with prescription drugs only.

Medicare Supplement Insurance, or Medigap
An insurance policy sold by private insurance companies that helps pay some deductibles or co-insurance that Original Medicare does not pay (the “gaps” in Original Medicare). There are 12 standardized policies, labeled Plan A through Plan L. (Medigap policies only work with Original Medicare.)

Medigap
An insurance policy sold by private insurance companies that helps pay some deductibles or co-insurance that Original Medicare does not pay (the “gaps” in Original Medicare). There are 12 standardized policies, labeled Plan A through Plan L. (Medigap policies only work with Original Medicare.)

Open Enrollment Period (OEP)
The open enrollment period runs from January 1 through March 31. This 'switch period' offers a single opportunity to enroll into, or disenroll from, a Medicare Advantage plan. You cannot add or drop Medicare prescription drug coverage at this time.

Out-of-pocket Costs
Health care costs that you must pay on your own because they are not covered by Medicare or other insurance.

Prior Authorization
To be sure certain drugs or medical services are used correctly and only when truly necessary, your plan may require a “prior authorization.” This means you or your doctor need to get approval from your plan before a particular drug or service will be covered.

Special Enrollment Period (SEP)
A period during which, because of a specific event, individuals have the opportunity to make an election outside of the Annual or Open Enrollment Periods. Examples include, but are not limited to, change of residence outside of plan’s service area and loss of employer group coverage.

Step Therapy
A type of prior authorization for some prescription medications. With step therapy, in most cases, you must first try using certain less expensive drugs that have been proven effective for most people with your condition before you can get a similar, more expensive brand-name drug covered.

Tiers
To lower costs, a plan places prescription drugs in its formulary into different “tiers.” Your drug copay will vary, depending on the tier. For example, one approach to tiers is the following:

Tier 1: Generic drugs
Tier 2: Preferred brand drugs
Tier 3: Non-preferred brand drugs
Tier 4: Specialty drugs