Medicare terms, plain English
Every Medicare term you'll encounter — defined simply, without the jargon.
A
Advance Beneficiary Notice (ABN)
A written notice your doctor or provider must give you before providing a service they believe Medicare may not cover. Signing an ABN means you agree to pay for the service if Medicare denies the claim. You have the right to refuse the service without penalty.
Annual Enrollment Period (AEP)
Also called Annual Election Period. The period from October 15 to December 7 each year when you can switch, join, or drop a Medicare Advantage plan or Part D prescription drug plan. Changes take effect January 1 of the following year.
Annual Out-of-Pocket Maximum
The most you will pay for covered services in a plan year under a Medicare Advantage plan. After reaching this amount, your plan pays 100% of covered costs for the rest of the year. In 2026, the maximum allowed is $9,250 for in-network care and $13,900 for combined in- and out-of-network care. Original Medicare has no out-of-pocket maximum.
Appeal
The process of asking Medicare or your insurance plan to review a decision about coverage or payment. If Medicare or your plan denies a service or drug, you have the right to appeal. There are multiple levels of appeal, up to federal court.
Assignment (Accept Assignment)
When a doctor or provider agrees to accept Medicare's approved amount as full payment for a service. Providers who accept assignment cannot charge you more than the standard Medicare copay or coinsurance. Seeing providers who accept assignment protects you from excess charges.
Attained-Age Rating
A method used by some Medigap insurers to set premiums based on your current age. Your premium increases each year as you get older, which can make these plans significantly more expensive over time compared to community-rated or issue-age-rated plans.
B
Balance Billing
When a provider charges you the difference between their billed amount and Medicare's approved amount. Providers who accept Medicare assignment cannot balance bill you. Providers who "opt out" of Medicare entirely can charge whatever they want.
Benchmark
In the context of the Extra Help program for Part D, the benchmark is the average monthly premium for basic drug coverage in your state. If your plan's premium exceeds the benchmark, you pay the difference.
Beneficiary
A person who is enrolled in and receiving benefits from Medicare. If you have Medicare, you are a Medicare beneficiary.
Benefit Period
The way Medicare measures your use of hospital and skilled nursing facility services. A benefit period begins when you are admitted to a hospital or skilled nursing facility and ends when you have been out of that facility for 60 consecutive days. Each new benefit period resets your Part A deductible. In 2026, the Part A deductible is $1,736 per benefit period — not per year.
Brand-Name Drug
A prescription drug made and sold by the company that created it. Brand-name drugs are typically in higher tiers on Part D formularies and cost more than their generic equivalents. A generic version can usually be made once the brand-name drug's patent expires.
C
Carrier
The private insurance company that provides a Medicare Advantage or Part D plan. Major carriers in California include Kaiser Permanente, UnitedHealthcare, Humana, Blue Shield, SCAN Health Plan, Aetna, Alignment Health, Anthem, and Molina Healthcare.
Catastrophic Coverage
In Medicare Part D, catastrophic coverage is the phase that begins once you have spent $2,100 out of pocket on covered drugs in 2026. Once you reach this threshold, you pay $0 for covered medications for the remainder of the calendar year. The former "donut hole" coverage gap has been eliminated — beneficiaries now move directly from initial coverage into catastrophic coverage.
Centers for Medicare & Medicaid Services (CMS)
The federal agency within the U.S. Department of Health and Human Services that administers the Medicare and Medicaid programs, sets coverage rules, approves private plans, and publishes annual cost updates.
Chronic Condition Special Needs Plan (C-SNP)
A type of Medicare Advantage plan designed specifically for people with certain severe or disabling chronic conditions such as diabetes, chronic heart failure, or COPD. C-SNPs tailor their benefits and provider networks to the specific needs of people with these conditions.
CMS Star Rating
Medicare's quality rating system for Medicare Advantage and Part D plans. Plans are rated on a scale of 1 to 5 stars based on quality of care, member satisfaction, and plan performance. Five-star plans can be joined at any time of year without waiting for an enrollment period.
Coinsurance
Your share of the cost of a covered service, expressed as a percentage. Under Original Medicare Part B, you pay 20% coinsurance after meeting your annual deductible. This 20% has no annual cap under Original Medicare, which is why many people add a Medigap supplement plan.
Copayment (Copay)
A fixed dollar amount you pay for a covered service, typically at the time of care. Copays are common in Medicare Advantage plans — for example, a $15 copay for a primary care visit or a $40 copay for urgent care.
Cost Sharing
The portion of healthcare costs that you pay, including deductibles, copays, and coinsurance. Cost sharing is distinct from your monthly premium.
Creditable Coverage
Health or drug coverage that is at least as good as Medicare's standard coverage. If you have creditable coverage through an employer, union, or other source, you can delay enrolling in Medicare without paying a late enrollment penalty. Your provider must notify you in writing each year whether your coverage is creditable.
Custodial Care
Non-medical care that assists you with activities of daily living (ADLs) such as bathing, dressing, eating, and using the bathroom. Medicare does not cover long-term custodial care — only short-term skilled nursing care following a qualifying hospital stay.
D
Deductible
The amount you pay for covered services before your insurance begins to pay. Medicare Part A has a per-benefit-period deductible ($1,736 in 2026). Part B has an annual deductible ($283 in 2026). Part D plans may have a deductible up to $615 in 2026.
Disenrollment
The process of leaving a Medicare plan. You can disenroll from a Medicare Advantage or Part D plan and return to Original Medicare during certain enrollment periods, including the Annual Enrollment Period (October 15 – December 7) and the Medicare Advantage Open Enrollment Period (January 1 – March 31).
Dual Eligible
A person who qualifies for both Medicare and Medicaid. Dual eligibles may qualify for special coordination of benefits between the two programs and are often eligible for Dual Eligible Special Needs Plans (D-SNPs), which are designed to serve this population.
Durable Medical Equipment (DME)
Equipment that serves a medical purpose, is expected to be used repeatedly, and is appropriate for use at home. Examples include wheelchairs, walkers, hospital beds, oxygen equipment, and blood glucose monitors. Medicare Part B covers 80% of the approved cost for medically necessary DME.
E
Effective Date
The date your Medicare or Medicare Advantage coverage begins. For most new Medicare enrollees, coverage begins on the first day of the month after they enroll. For those who enroll during the Annual Enrollment Period, coverage begins January 1.
Effectuation
The process by which a Medicare plan confirms and activates your enrollment. When your enrollment is "effectuated," it means the plan has received and processed your application and your coverage is officially active.
Election Period
Any period during which you can enroll in, switch, or drop a Medicare plan. This includes the Initial Enrollment Period, Annual Enrollment Period, Open Enrollment Period, and Special Enrollment Periods.
Evidence of Coverage (EOC)
A document your Medicare Advantage or Part D plan must send you each fall. It details exactly what your plan covers, what it costs, provider networks, and the rules you must follow. Review it carefully when it arrives — your benefits may have changed for the upcoming year.
Excess Charges
Charges above Medicare's approved amount by doctors who have not accepted Medicare assignment and have not opted out of Medicare entirely. Under Original Medicare, you can be charged up to 15% above the Medicare-approved amount as an excess charge. Medigap Plan G covers excess charges; Plan N does not.
Extra Help (Low Income Subsidy / LIS)
A federal assistance program that helps people with limited income and resources pay for Medicare Part D prescription drug costs. Qualifying individuals may have reduced or eliminated deductibles, copays as low as $1.35–$4.00 per drug, and no late enrollment penalty. Apply through the Social Security Administration.
F
Formulary
The list of prescription drugs covered by a Medicare Part D or Medicare Advantage plan. Drugs are organized into tiers that determine your out-of-pocket cost. Plans can change their formularies from year to year. Reviewing your formulary each fall during the Annual Enrollment Period is essential to ensure your medications are still covered.
Free Look Period
For Medigap plans, the first 30 days after you receive your policy. During this time, you can cancel the plan and receive a full refund of any premiums paid if you are not satisfied. You must have had the old policy for at least 30 days before canceling if you are switching plans.
G
General Enrollment Period (GEP)
A period from January 1 to March 31 each year when you can enroll in Medicare Part A and/or Part B if you missed your Initial Enrollment Period without a qualifying reason. Coverage under the GEP begins July 1. Late enrollment penalties may apply.
Generic Drug
A prescription drug that contains the same active ingredient, strength, and dosage form as its brand-name equivalent, but is sold under a different name and typically at a much lower cost. Generic drugs are FDA-approved and have the same safety, effectiveness, and quality as brand-name drugs. Part D formularies typically place generics in Tier 1 or Tier 2, with the lowest copays.
Grievance
A formal complaint you file with a Medicare Advantage or Part D plan about the quality of care you received, a problem with a plan employee, or a plan's failure to follow proper procedures. A grievance is different from an appeal — appeals challenge coverage decisions, while grievances address service and administrative concerns.
Guaranteed Issue Rights
The right to buy a Medigap policy without being denied coverage or charged more due to pre-existing health conditions. These rights apply during specific periods, most importantly during your Medigap Open Enrollment Period (the six months beginning when you turn 65 and enroll in Part B). Once this window closes, insurers can medically underwrite you.
H
Health Maintenance Organization (HMO)
A type of Medicare Advantage plan that requires you to use a specific network of doctors, hospitals, and other providers. You typically choose a primary care physician who coordinates your care and provides referrals to specialists. Going outside the network for non-emergency care usually means paying the full cost yourself.
HICAP (Health Insurance Counseling and Advocacy Program)
California's free, unbiased Medicare counseling service. Trained volunteers help beneficiaries understand their coverage options, compare plans, file appeals, and resolve billing problems. Contact HICAP at 1-800-434-0222 or visit aging.ca.gov/HICAP.
Home Health Care
Medical care provided in your home by skilled nursing or therapy professionals. Medicare Part A and Part B both cover home health care when it is medically necessary, ordered by a doctor, and provided by a Medicare-certified home health agency. Medicare does not cover non-medical home care such as help with housekeeping or personal care.
Hospice Care
Care for people who are terminally ill and have chosen to focus on comfort rather than treatment. Medicare Part A covers hospice care — including pain relief, counseling, and family support — when a doctor certifies that the patient has six months or less to live if the illness runs its normal course.
I
Initial Coverage Limit
In Part D, the dollar threshold of drug spending at which your coverage moves from the initial coverage phase into catastrophic coverage. In 2026, once your total out-of-pocket drug spending reaches $2,100, you enter catastrophic coverage and pay $0 for the remainder of the year. The former coverage gap (donut hole) has been eliminated.
Initial Enrollment Period (IEP)
A 7-month window centered on your 65th birthday during which you can first sign up for Medicare. It begins 3 months before your birthday month, includes your birthday month, and extends 3 months after. Enrolling during the first 3 months ensures your coverage begins on the first day of your birthday month.
Inpatient
Care you receive when a doctor formally admits you to a hospital as an inpatient. This status is important — it determines whether Medicare Part A (hospital insurance) covers your stay, as opposed to outpatient care covered under Part B. Always ask whether you are being admitted as an inpatient or placed under observation status.
IRMAA (Income-Related Monthly Adjustment Amount)
A surcharge added to your Part B and/or Part D premium if your income exceeds certain thresholds. IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years prior. In 2026, the threshold is $109,000 for individuals and $218,000 for married couples filing jointly. If your income has dropped recently due to retirement or a life-changing event, you may appeal your IRMAA bracket using Form SSA-44.
Issue-Age Rating
A Medigap pricing method in which your premium is based on your age at the time you buy the policy and does not automatically increase just because you get older. Premiums may still increase due to inflation or other factors, but they won't rise simply because of age. Often a better long-term value than attained-age-rated policies.
L
Late Enrollment Penalty
A permanent increase to your Medicare premium if you did not enroll in Medicare Part B or Part D when you were first eligible and did not have other qualifying coverage. The Part B penalty is 10% of the premium for each 12-month period you were eligible but did not enroll — for life. The Part D penalty is 1% of the national base premium ($38.99 in 2026) per month without coverage — also permanent.
Lifetime Reserve Days
Under Medicare Part A, you have 60 lifetime reserve days that can be used when a hospital stay exceeds 90 days. Each reserve day requires a significant coinsurance payment ($868/day in 2026) and once used, cannot be restored. Most beneficiaries rarely need to use lifetime reserve days.
Low Income Subsidy (LIS)
See Extra Help.
M
Maximum Out-of-Pocket (MOOP)
See Annual Out-of-Pocket Maximum.
Medicaid
A joint federal and state program that provides health coverage to people with low income, including children, pregnant women, seniors, and people with disabilities. Medicaid is separate from Medicare, though some people qualify for both (dual eligibles). In California, Medicaid is called Medi-Cal.
Medicare Advantage (Part C)
A Medicare plan offered by a private insurance company approved by Medicare that bundles Part A, Part B, and usually Part D coverage into one plan. Medicare Advantage plans often include extra benefits like dental, vision, and hearing that Original Medicare does not cover. They use provider networks and require you to stay in-network for covered care. In California, the average 2026 monthly premium is $11/month.
Medicare Beneficiary Identifier (MBI)
An 11-character alphanumeric identifier on your Medicare card that replaces the old Social Security Number-based Medicare Claim Number. The MBI is used by providers to bill Medicare for your care and should be kept confidential.
Medicare Cost Plan
A type of Medicare health plan available in some areas where you can see either HMO network providers or non-network providers. If you see non-network providers, Medicare covers the services as if you were in Original Medicare. Not widely available in all areas.
Medicare Savings Programs (MSPs)
State programs that help people with limited income and resources pay for Medicare costs. The four main MSPs are the Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), Qualifying Individual (QI), and Qualified Disabled and Working Individuals (QDWI) programs. California administers its own MSP program through the Department of Health Care Services.
Medicare SELECT
A type of Medigap plan that requires you to use specific hospitals and, in some cases, specific doctors to receive full benefits. Premiums are typically lower than standard Medigap plans in exchange for this network restriction.
Medicare Supplement Insurance (Medigap)
Private insurance that works alongside Original Medicare to help pay costs that Medicare doesn't fully cover — including the Part B 20% coinsurance, hospital deductibles, and skilled nursing facility coinsurance. The ten standardized Medigap plans are labeled A through N. Medigap cannot be used alongside Medicare Advantage.
Medigap Open Enrollment Period
A one-time, six-month window that begins the month you are both 65 years old AND enrolled in Part B. During this period, insurance companies must sell you any Medigap plan they offer — regardless of pre-existing conditions — at the standard rate. After this window closes, insurers may medically underwrite you, meaning they can charge more or deny coverage based on your health history.
Modified Adjusted Gross Income (MAGI)
The income figure Medicare uses to determine IRMAA surcharges. Your MAGI includes your adjusted gross income plus certain deductions added back, such as tax-exempt interest. Medicare uses your MAGI from two years prior — so your 2024 tax return determines your 2026 Medicare premiums.
N
Network
The doctors, hospitals, pharmacies, and other healthcare providers that have contracted with a Medicare Advantage or Part D plan to provide services at negotiated rates. Staying in-network typically means lower costs. HMO plans generally do not cover out-of-network care for non-emergencies. PPO plans cover out-of-network care at a higher cost.
Non-Formulary
A drug that is not on a Part D plan's formulary (covered drug list). If your medication is non-formulary, you may pay the full cost out of pocket, or you can request an exception from your plan to have it covered at a formulary tier rate if there is a medical necessity.
Notice of Denial
A written notice from Medicare or your plan explaining that a service, item, or drug has been denied. This notice is required before you can file a formal appeal and must explain the reason for denial and your appeal rights.
O
Observation Status
A designation used by hospitals when they are monitoring a patient but have not formally admitted them as an inpatient. Being on observation status means you are treated as an outpatient — even if you sleep in a hospital bed — which has significant implications for Medicare coverage, particularly for skilled nursing facility stays (which require a 3-day inpatient hospital stay to qualify).
Open Enrollment Period (OEP)
For Medicare Advantage, the period from January 1 to March 31 each year when you can switch from one Medicare Advantage plan to another, or drop your Medicare Advantage plan and return to Original Medicare. You can only make one change during the OEP.
Original Medicare
The traditional federal Medicare program consisting of Part A (hospital insurance) and Part B (medical insurance), administered directly by the federal government. Original Medicare is accepted by any doctor or hospital nationwide that accepts Medicare. There is no annual out-of-pocket maximum under Original Medicare.
Out-of-Network
Doctors, hospitals, or other providers that have not contracted with your Medicare Advantage plan. Using out-of-network providers typically results in higher costs, and HMO plans may not cover out-of-network care at all (except in emergencies).
Out-of-Pocket Costs
The amount you pay for healthcare that isn't reimbursed by insurance, including deductibles, copays, and coinsurance. Does not include monthly premiums.
P
Part A (Hospital Insurance)
Covers inpatient hospital stays, care in a skilled nursing facility after a qualifying hospital stay, hospice care, and some home health care. Most people pay $0 per month for Part A if they or their spouse worked and paid Medicare taxes for at least 10 years. The Part A deductible is $1,736 per benefit period in 2026.
Part B (Medical Insurance)
Covers doctor visits, outpatient care, preventive services, lab work, medical equipment, and some home health care. The standard monthly premium in 2026 is $202.90. After the $283 annual deductible, Medicare covers 80% of approved costs; you pay 20% with no annual cap.
Part C
See Medicare Advantage.
Part D (Prescription Drug Coverage)
Optional coverage for prescription medications offered through private insurance companies approved by Medicare. Plans have formularies (covered drug lists), organized into tiers that determine your cost. In 2026, once you spend $2,100 out of pocket on covered drugs, you pay $0 for the rest of the year. The average national premium is $64.96/month.
Plan Finder
Medicare's official online tool at Medicare.gov/plan-compare that allows beneficiaries to compare Medicare Advantage and Part D plans available in their area. You can enter your ZIP code and your specific medications to see plans ranked by estimated annual cost.
Preferred Provider Organization (PPO)
A type of Medicare Advantage plan that allows you to see both in-network and out-of-network providers. You do not need a referral to see specialists. Out-of-network care is covered but at a higher cost. PPOs typically have higher premiums than HMOs.
Premium
The monthly amount you pay for Medicare coverage, regardless of whether you use any services. Part B and most Part D plans charge a monthly premium. Many Medicare Advantage plans in California have $0 premiums — though you still pay your Part B premium regardless of which plan you choose.
Prescription Drug Plan (PDP)
A standalone Part D prescription drug plan that works alongside Original Medicare (Parts A and B). PDPs are offered by private insurers and provide drug coverage without bundling in medical benefits. An alternative to getting drug coverage through a Medicare Advantage plan.
Primary Care Physician (PCP)
The doctor who serves as your main healthcare provider and coordinates your overall care. HMO-type Medicare Advantage plans typically require you to choose a PCP and get referrals from them before seeing specialists.
Prior Authorization
Approval from your Medicare Advantage or Part D plan that must be obtained before certain services, drugs, or equipment are covered. If you receive care without required prior authorization, your plan may deny the claim and leave you responsible for the full cost.
Q
Qualified Medicare Beneficiary (QMB)
A Medicare Savings Program for people with limited income and resources. QMB participants have their Part A and Part B premiums, deductibles, and coinsurance paid by Medicaid. Providers who accept Medicare cannot bill QMB participants for Medicare cost-sharing.
R
Referral
A recommendation from your primary care physician to see a specialist. HMO Medicare Advantage plans typically require referrals for specialist visits. PPO plans and Original Medicare do not require referrals.
Rollover
Not a standard Medicare term, but sometimes used informally to describe automatic plan renewal. If you do not make a new choice during the Annual Enrollment Period, you are automatically renewed in your current plan (if it continues to be offered in your area). Your premiums and benefits may change from year to year even if you stay in the same plan.
S
Scope of Appointment (SOA)
A required form that must be signed before a licensed Medicare agent can discuss plan options with you. The SOA confirms what type of Medicare plan you agreed to discuss and protects you from unsolicited sales pitches. Agents are required by CMS to obtain a signed SOA before meeting with you about plan options.
Service Area
The geographic region where a Medicare Advantage plan is authorized to operate and enroll members. If you move outside your plan's service area, you may need to switch plans. Moving within California to a different county may trigger a Special Enrollment Period.
Skilled Nursing Facility (SNF)
A facility that provides skilled nursing or rehabilitation services. Medicare Part A covers SNF stays after a qualifying 3-day inpatient hospital stay. Coverage includes up to 20 days with no coinsurance, then days 21–100 with $217.50/day coinsurance in 2026. Medicare does not cover long-term custodial care in a nursing facility.
Special Enrollment Period (SEP)
A time outside the standard enrollment periods when you can join, switch, or drop a Medicare plan due to a qualifying life event. Common SEP triggers include: losing employer coverage, moving to a new service area, returning from overseas, aging out of a parent's plan, or your current plan leaving your area.
Special Needs Plan (SNP)
A type of Medicare Advantage plan designed for people with specific diseases or characteristics. The three types are: Dual Eligible SNPs (D-SNPs) for those eligible for both Medicare and Medicaid, Chronic Condition SNPs (C-SNPs) for those with specific chronic conditions, and Institutional SNPs (I-SNPs) for those living in institutions.
Star Rating
See CMS Star Rating.
Summary of Benefits
A brief, standardized document that Medicare Advantage and Part D plans must provide annually. It summarizes your plan's coverage, costs, and key benefits for the upcoming year. Review it each fall alongside your Evidence of Coverage to spot any changes.
T
Tier
A level in a Part D plan's formulary that determines your cost-sharing for drugs. Plans typically have 4–6 tiers: Tier 1 for low-cost generics, through Tier 5 for high-cost specialty drugs. A drug's tier — and therefore your cost — can change from year to year, even if the drug itself hasn't changed.
U
Underwriting
The process insurance companies use to evaluate a person's health history to decide whether to offer them a policy and at what price. Medigap plans can medically underwrite applicants who apply outside their guaranteed-issue window, meaning they can charge more or deny coverage based on pre-existing conditions. Medicare Advantage plans cannot use underwriting.
W
Waiver of Liability
See Advance Beneficiary Notice (ABN).
Welcome to Medicare Preventive Visit
A one-time visit covered by Medicare Part B during the first 12 months of Part B enrollment. Your doctor reviews your medical history, assesses your health risks, and creates a personalized prevention plan. There is no cost to you for this visit as long as your doctor accepts Medicare assignment.
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