Medicare glossary: the words on your plan papers

Plan documents use a small set of words over and over. Once you know them, the paperwork gets much shorter. Here they are in plain English, grouped by what they're about.

What you pay

Premium

The amount you pay every month to have the coverage, whether or not you use it.

Deductible

The amount you pay for covered care before your plan starts paying its share. It resets every year.

Copayment (copay)

A fixed amount you pay for a service or prescription, such as a set fee per doctor visit.

Coinsurance

A percentage of the cost you pay for a service, instead of a fixed amount.

Out-of-pocket maximum

In a Medicare Advantage plan, the most you'll pay in a year for covered Part A and Part B services. After you reach it, the plan pays in full for the rest of the year.

Drugs

Formulary

The plan's list of covered prescription drugs.

Tier

The level a drug sits at on the formulary. Lower tiers usually cost you less.

Prior authorization

Approval the plan requires before it will cover a particular drug or service.

Step therapy

A rule that you try a different, usually lower-cost drug first before the plan covers the one prescribed.

Creditable drug coverage

Drug coverage, for example from an employer, that's expected to pay at least as much as standard Part D coverage. Having it can protect you from the Part D late enrollment penalty.

Extra Help

A federal program that helps people with limited income and resources pay Part D costs.

Doctors and networks

Network

The doctors, hospitals and pharmacies a plan has agreements with.

In network / out of network

Whether a provider is part of the plan's network. Out-of-network care may cost more or may not be covered at all, depending on the plan.

HMO

A plan type that generally requires you to use in-network providers and often to get a referral to see a specialist.

PPO

A plan type that lets you see out-of-network providers, usually at a higher cost.

Service area

The geographic area where a plan accepts members and where its network applies.

Documents and programs

Annual Notice of Change (ANOC)

The yearly notice your plan sends by September 30 listing what changes on January 1. How to read it.

Evidence of Coverage (EOC)

The plan's full rulebook: everything it covers and how.

Summary of Benefits

A short overview of a plan's main costs and coverage.

Original Medicare

Part A and Part B, provided directly through the federal program.

Medicare Advantage

Private plans approved by Medicare that provide your Part A and Part B coverage, often with drug coverage included.

Medigap (Medicare Supplement)

Private policies that help pay costs Original Medicare leaves to you. They work only with Original Medicare.

Special Needs Plan (SNP)

A type of Medicare Advantage plan limited to people with specific conditions or circumstances, such as those who have both Medicare and Medicaid.

SHIP

State Health Insurance Assistance Program: free, unbiased Medicare counseling available in every state.