When first looking at Medicare options, a person may come across many terms and abbreviations. Learning about the definitions and acronyms can help make understanding Medicare easier.

When a person first becomes eligible for Medicare, it can be challenging to make sense of the information while also navigating healthcare options.

This A to Z article defines the most important Medicare terms relating to costs and expenses, as well as some terms that pertain to Medicare Advantage and prescription drug plans.

It also defines some medical conditions that qualify people for Medicare before they turn 65 years old, explores some terms regarding enrollment periods, and discusses how to find advice.

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  • Affordable Care Act (ACA): President Barack Obama signed the ACA in 2010. It included provisions to expand health coverage to all eligible Americans, improve healthcare delivery systems, and control healthcare costs. For Medicare this meant expanding preventive care services, making strides to close the coverage gap (donut hole), and providing an annual free wellness visit for beneficiaries.
  • Amyotrophic lateral sclerosis (ALS): Also known as Lou Gehrig’s disease, amyotrophic lateral sclerosis (ALS) is a progressive neurological condition. People with ALS who receive Social Security disability benefits are eligible for Medicare parts A and B.
  • Annual cap: This is a yearly limit on out-of-pocket expenses.
  • Catastrophic coverage: This is the Part D stage a person enters when they reach the annual out-of-pocket cap. When they enter catastrophic coverage, they no longer pay anything for prescription drugs for the rest of the year.
  • Claim: This is a request for reimbursement for a healthcare service that the healthcare professional typically sends directly to Medicare. An individual may also submit a claim if the healthcare professional does not.
  • CMS: This is the acronym for the Centers for Medicare & Medicaid Services. It is a federal agency that administers Medicare and Medicaid.
  • COBRA: COBRA is short for the Consolidated Omnibus Budget Reconciliation Act. This 1985 law allows some employees to keep their health coverage after leaving employment.
  • Coinsurance: Coinsurance is the percentage cost that a person will pay toward a healthcare service.
  • Copayment: Also called copay, this is a fixed dollar amount that an insured person pays toward certain healthcare services.
  • Cost sharing: This refers to the portion of healthcare expenses that an individual pays. These include deductibles, coinsurance, and copayments.
  • Creditable coverage: Creditable coverage means that an eligible policyholder’s prescription drug coverage will pay as much, on average, as the standard Medicare prescription drug coverage.
  • Deductible: This is a fixed dollar amount that a person must first pay before their health benefits will cover the costs.
  • Durable medical equipment (DME): DME is reusable medical equipment that a healthcare professional deems medically necessary to help manage an injury or condition. Medicare covers various types of DME, including wheelchairs, hospital beds, and home oxygen equipment.
  • End stage renal disease (ESRD): ESRD is the last stage of kidney disease, when a person needs dialysis or a kidney transplant. People with this condition who also receive Social Security disability benefits are eligible for Medicare.
  • Excess charge: The Medicare Part B excess charge is the amount a person must pay themselves that is above the Medicare-approved amount.
  • Extra Help: Extra Help is an assistance program relating to prescription drug plans. The program helps those with a low income pay for their medication.
  • Formulary: A formulary is a list of prescription drugs that a prescription drug plan covers. A formulary includes at least two of the drugs most commonly prescribed within each drug class.
  • FPL: This is short for “federal poverty level.” It is an income measurement that experts use to determine qualification for and the level of additional support a person may be entitled to.
  • General enrollment period: This is the period of time to sign up for Original Medicare (parts A and B). It runs from January 1 to March 31 each year. A person can use this signup period if they miss the initial enrollment period.
  • Generic drugs: Generic drugs are copies of brand-name medications approved by the Food and Drug Administration (FDA). Manufacturers can produce these drugs once the patent for the original brand-name medication expires.
  • Health Maintenance Organization (HMO): An HMO is one of four types of Medicare Advantage plans. An HMO generally requires someone to use in-network professionals and facilities.
  • Initial enrollment period (IEP): The IEP is the 7-month period in which a person can sign up for Original Medicare (parts A and B). The IEP begins 3 months before a person turns 65 years of age, includes the month of their birthday, and ends 3 months later.
  • In network: This term describes a list of healthcare professionals that a person may need to use as part of their plan’s rules.
  • IRMAA: IRMAA is short for the term “income-related monthly adjustment amount.” This means that the amount by which a person’s premiums will change depends on their income.
  • Jurisdiction:This is a geographical area that Medicare assigns to private health insurance providers to process Medicare claims for certain plans.
  • Late enrollment penalty: The late enrollment penalty may be a lifelong higher premium that Medicare can charge a person who does not enroll when they first become eligible. However, Medicare may make exceptions if the person is insured under another plan.
  • Lifetime reserve days: Reserve days are extra days in the hospital that Medicare will cover beyond the initial 90 days. An individual is still responsible for any coinsurance payments. Each person has 60 reserve days for their lifetime, but they do not have to use them in the same hospital stay.
  • Medicaid: This is a state-federal assistance program that serves people of any age with low income. People with Medicaid have few, if any, out-of-pocket costs.
  • Medically necessary: This refers to procedures, equipment, or services that are necessary for the diagnosis and treatment of medical conditions and that meet the accepted medical standards.
  • Medicare: This is a federal health insurance program that mainly serves people over age 65 years, regardless of their income. It also serves younger people with specific health conditions.
  • Medicare Advantage: Medicare Advantage is also known as Medicare Part C. At a minimum, the plan combines the coverage from parts A and B, though it usually offers additional benefits. Private health insurance companies administer this plan.
  • Medicare Advantage open enrollment period (OEP): The Medicare Advantage OEP is an additional opportunity to sign up for Part C or Part D. This period runs from January 1 to March 31 every year.
  • Medicare-approved amount: This is the maximum fee that Medicare sets to pay a healthcare professional for a specific service.
  • Medicare savings programs (MSPs): MSP is the collective name for a group of four Medicare plans that help people with limited incomes and resources pay their out-of-pocket Medicare costs.
  • Medigap: Medigap is also known as Medicare supplement insurance, which someone with Original Medicare may choose. Private health insurance companies administer these plans, and they cover 50% to 100% of the out-of-pocket costs for parts A and B.
  • Medigap OEP: The Medigap OEP is a 6-month period that starts the month a person turns 65 years old and signs up for Medicare Part B. This is the best time to enroll in a Medigap plan. Plans may not be available outside of this period.
  • Open enrollment period (OEP): For Medicare Advantage and prescription drug plans, the annual OEP runs from October 15 to December 7 each year. For Medigap, the OEP is the 6-month period that runs from the month a person turns age 65 years and signs up for Medicare Part B.
  • Original Medicare: This includes Part A, which is inpatient hospital insurance, and Part B, which is outpatient medical insurance.
  • Out of network: This term describes any healthcare professional whom Medicare has not specified as preferable to a particular plan. In some plans, using an out-of-network professional may not be an option, or it may cost a person more.
  • Out of pocket: This term describes the amount a person will have to pay, such as deductibles, coinsurance, copayments, and excess charges.
  • Out-of-pocket maximum (MOOP): This is also known as the maximum out-of-pocket. The MOOP is the annual limit on out-of-pocket costs that each Medicare Advantage plan must set. Medicare sets a maximum amount each year. In 2025, this is $9,350 but plans may have lower MOOPs. Once a person reaches the MOOP for their plan, they no longer pay for their Medicare-approved healthcare for the rest of the year.
  • Part A: Medicare Part A is one of two parts of Original Medicare. Part A provides a person with inpatient benefits.
  • Part B: Medicare Part B is the other of two parts of Original Medicare. Part B covers outpatient services, such as doctor visits.
  • Part C: Medicare Part C is another term for Medicare Advantage.
  • Part D: Medicare Part D provides prescription drug coverage, which a person with original Medicare may choose. Private health insurance companies administer these plans.
  • Part D out-of-pocket savings cap: In 2025, the previous Part D coverage gap (donut hole) was eliminated and replaced by the savings cap. With this change, all Part D out-of-pocket expenses are capped at $2,000. When a person reaches this cap, they no longer have to pay out-of-pocket for prescription drugs for the rest of the year.
  • Preferred Provider Organization (PPO): A PPO is one of four types of Medicare Advantage plans. PPOs allow a person the flexibility of choosing either in-network or out-of-network professionals.
  • Premiums: This refers to the amount a person pays Medicare or a private health insurance company to keep their policy. The person will typically pay these premiums monthly.
  • Private Fee-for-Service (PFFS): A PFFS is one of four types of Medicare Advantage plans. PFFS plans have set fees that Medicare will pay providers and set fees that a person will pay when receiving care.
  • Qualified Disabled and Working Individuals (QDWI) program: The QDWI program is one of four Medicare savings programs. It helps pay Part A premiums for working people under age 65 years who have a disability.
  • Qualified Medicare Beneficiary (QMB) program: The QMB program is one of four Medicare savings programs. The QMB program pays parts A and B premiums, along with deductibles, copays, and coinsurance.
  • Qualifying Individual (QI) program: The QI program is another one of four Medicare savings programs. The QI program helps pay Part B premiums.
  • Special enrollment period: This is an opportunity to sign up for Original Medicare under certain circumstances, such as when a person’s employee health insurance coverage comes to an end.
  • Special Needs Plans (SNPs): SNPs are available to people with certain medical conditions, such as end stage renal disease (ESRD). The plans have customized benefits, drug formularies, and healthcare professional choices to ensure that people receive the most appropriate care.
  • Specified Low-Income Medicare Beneficiary (SLMB) program: The SLMB program is one of four Medicare savings programs. The SLMB program pays Part B premiums.
  • Tiers: Tiers refer to lists of drugs within a formulary that a Part D prescription drug plan categorizes. For example, tier 1 usually has less expensive drug options and the lowest copayments.
  • Underwriting: This involves a full review of a person’s medical history to determine the premiums they should pay. Sometimes, this can lead to Medicare or private insurers excluding certain medical conditions from the coverage they offer.
  • Work credits: These are also known as Social Security Credits. A person must earn at least 40 credits in order to qualify for premium-free Part A at 65 years old. This equates to around 10 years of working and paying Federal Insurance Contributions Act (FICA) taxes. An individual earns 1 credit for every $1,810 they make in income, for up to 4 credits per year.

As a person’s 65th birthday approaches, they may wish to visit the Medicare website to become familiar with the programs, what they cover, and their out-of-pocket costs.

If the person has questions, they can call 800-633-4227. Deaf or partially deaf people can call 877-486-2048 instead.

People who wish to check their eligibility for Medicare may visit the Social Security website or call 800-772-1213. Deaf or partially deaf people can contact Social Security at 800-325-0778 instead.

Medicare resources

For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.

Learning Medicare definitions takes some time at first, but the terms will usually become easier to understand with time and experience.

The most important things to know are the basic programs’ definitions, including those of Original Medicare, Medicare Advantage, Part D, and Medigap.