Medicare terms

Learn more about Medicare. Start with these definitions.

C

catastrophic coverage

Catastrophic coverage refers to the point when your total prescription drug costs for a calendar year have reached a set maximum level ($5,000 in 2018, and $5,100 in 2019). At this point, you are out of the prescription drug “donut hole” and your prescription drug coverage begins paying for most of your drug expenses.

Once you’ve reached the catastrophic coverage threshold for 2018, you’ll pay at least $3.35 for generic drugs and $8.35 for brand names, or 5 percent of the total drug cost, whichever is higher. The dollar amounts are adjusted for inflation each year; in 2019, if you reach the catastrophic coverage threshold, you’ll pay at least $3.40 for generic drugs and at least $8.50 for brand names.

certificate of medical necessity (CMN)

A doctor must sign and submit a certificate of medical necessity before a Medicare enrollee can receive coverage for certain medical equipment.

claim

A claim is an application for benefits provided by your health plan. You must file a claim before funds will be reimbursed to your medical provider. A claim may be denied based on the carrier’s assessment of the circumstance.

coinsurance

Coinsurance refers to a percentage of the Medicare-approved cost of your health care services that you’re expected to pay after you’ve paid your plan deductibles.

For Medicare Part A (inpatient coverage), there’s no coinsurance until you’ve been hospitalized for more than 60 days in a benefit period. At that point, in 2018, you’d pay $355/day for days 61-90 if you remain in the hospital for that long. After that, you’d start to use your lifetime reserve days, paying $670/day for up to 60 days in your lifetime. [Note that although coinsurance is usually a percentage of the cost, it’s a flat dollar amount for Medicare Part A.]

For Medicare Part B (outpatient coverage), you pay 20 percent of the Medicare-approved cost, after you’ve paid your deductible ($183 in 2018).

For Medicare Part D (prescription coverage), it depends on your policy’s plan design. But a typical plan has a deductible (no more than $405 in 2018), and then you pay 25 percent of the cost of your drugs (this is your coinsurance) until you reach the donut hole. While in the donut hole, you pay 35 percent coinsurance for brand name drugs, and 44 percent coinsurance for generics. If you reach the upper edge of the donut hole, you’ll be in the catastrophic coverage range for the rest of the year. Coinsurance at this point won’t exceed 5 percent of the cost of your drugs.

If you have a Medigap plan, it will cover some or all of the coinsurance that you’d otherwise have to pay for Medicare Part A and B, although Medigap plans will not cover your out-of-pocket costs for medications.

If you enroll in Medicare Advantage, your plan will wrap inpatient, outpatient, and in most cases, prescription coverage, into one plan. There will generally be a deductible and then coinsurance that you’ll have to pay until you reach the plan’s out-of-pocket limit for the year.

copayment

Your copayment is a set out-of-pocket dollar amount you are obligated to pay for each medical service you receive, including visits to your doctor and prescriptions.

Copayments are a type of cost-sharing (which means the part of your medical care that you have to pay). The other types are coinsurance and deductibles.

Original Medicare does not use copayments in the same way as other health plans. Instead, enrollees pay a deductible (per year for Medicare Part B, and per benefit period for Medicare Part A), and then coinsurance. For Medicare Part B, the coinsurance is 20 percent of the cost of care. But under Medicare Part A, a patient who is hospitalized for more than 60 days would begin paying a flat-dollar “coinsurance” for each additional day in the hospital. In other types of health coverage, coinsurance refers to a percentage of the claim, whereas copay refers to a flat dollar amount. But with Medicare Part A, the term coinsurance is used to describe a flat-dollar amount — don’t let that confuse you!

Medicare Part D plans can either use coinsurance or copays for prescription drugs. And Medicare Advantage plans can also be designed to cover things like doctor visits and prescription drugs with copays, making them similar to the sort of private plans to which many people are accustomed to prior to enrolling in Medicare.

cost tiers

Medicare Part D plans typically use a system of cost tiers to rank prescription drugs according to their cost. Out-of-pocket costs for the enrollee are generally higher for higher-tier drugs.

Generic drugs are typically in the lowest (cheapest) tier, while brand-name drugs will be in a higher tier, and specialty drugs will be in the highest tier.

But each insurer designs its own formulary (covered drug list). Plans can have varying amounts of tiers, and the drugs in those tiers will be different from one plan to another.

Instead of having to wade through the formularies of all the Part D plans available in your area, you can use Medicare’s drug finder tool, which allows you to type in your medications and see how each plan will cover them. You’ll need to repeat this process each year, during open enrollment, as the plans can change from year to year.

coverage gap

Under Medicare Part D prescription drug coverage, policy holders with significant drug expenses often encounter a coverage gap – or “donut hole” – the point where their prescription drug expenses exceed the initial coverage limit of their Part D coverage but have not yet reached the “catastrophic” level of coverage.

Prior to 2011, enrollees were responsible for all drug costs while in the coverage gap, and didn’t begin receiving drug benefits again until they reached the catastrophic coverage level. But the Affordable Care Act is slowly closing the coverage gap, and by 2020, Medicare Part D enrollees will only pay 25 percent of the plan’s cost for drugs prior to reaching the catastrophic coverage level. In 2018, enrollees pay 35 percent of the cost of brand name drugs and 44 percent of the cost of generic drugs while in the coverage gap.

critical access hospital

Critical access hospitals are typically located in rural areas and provide limited inpatient and outpatient services.

cross-over

A Medicare cross-over is a claim for a dual eligible – someone who is covered by both Medicare and Medicaid. The claims have been approved for payment by Medicare and then sent on to Medicaid, which then pays toward the Medicare deductible and coinsurance.

curative care

Curative care refers to health care practices that treat patients with the intent of curing them, not just reducing their pain or stress. An example is chemotherapy, which seeks to cure cancer patients.

The issue of curative care comes up when a patient has a terminal illness and is considering hospice care. Medicare covers hospice care, but a patient who has switched to Medicare’s hospice benefit will only have palliative care coverage for their terminal illness — curative care would not be covered. So a patient with terminal cancer can opt for Medicare’s hospice benefit, but would have to cease chemotherapy and instead receive care designed to provide comfort and alleviate pain.

But that doesn’t mean they won’t have coverage for any curative care. If they experience a medical problem that’s not related to the terminal illness, Medicare will cover curative care for that issue, subject to the applicable deductible and/or coinsurance.

And Medicare beneficiaries have the option to stop their hospice benefit at any point and return to regular Medicare coverage. So if a patient decides that they’d rather continue to seek curative care instead of palliative care, they have that choice.

custodial care

Medicare as a general policy does not cover custodial care (activities of daily living like getting in and out of bed, using the toilet facilities, getting dressed, etc.).