Medicare Basics

Medicare Basics: Terms to Know

Here is a list of terms providing basic information about Medicare.

Medicare Part A

This is hospital insurance that pays for inpatient hospital stays, care in a skilled nursing facility for a limited period of time, hospice care, and some home health care.

Medicare Part B

This is medical insurance that helps pay for doctor's services, outpatient hospital care, durable medical equipment, and some medical services that aren't covered by Part A.

Medicare Advantage Plan (Part C)

This is a type of Medicare Plan offered by a private company that provides a person with all Medicare Part A and Part B benefits. Also called Part C, Medicare Advantage Plans are HMOs (health maintenance organizations), PPOs (preferred provider organizations), Private Fee-for-Service Plans, and Medical Savings Account Plans. If a person is enrolled in a Medicare Advantage Plan, Medicare services are covered through the plan and aren't paid for under Original Medicare. Some Medicare Advantage Plans offer prescription drug coverage that must follow the same rules as Medicare Prescription Drug Plans. Medicare Advantage Plans may also offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs.

Medicare Prescription Drug Plan (Part D)

This is a stand-alone drug plan, offered by insurers and other private companies to people who get benefits through Original Medicare, a Medicare Private Fee-for-Service Plan, a Medicare Cost Plan, or a Medicare Medical Savings Account Plan. (Descriptions of these last three plans follow.)

Medicare Health Maintenance Organization (HMO) Plan

This is a type of Medicare Advantage Plan that is available in some areas of the country. Plans must cover all Medicare Part A and Part B health care. Some HMOs cover extra benefits, like extra days in the hospital. In most HMOs, a person can only go to doctors, specialists, or hospitals on the plan's list except in an emergency. The person's costs may be lower than in Original Medicare.

Medicare Preferred Provider Organization (PPO) Plan

This is a type of Medicare Advantage Plan available in a local or regional area in which people pay less if they use doctors, hospitals, and providers that belong to the network. People can use doctors, hospitals, and providers outside of the network for an additional cost. Many Medicare Advantage Plans are PPOs.

Medicare-approved Amount

In Original Medicare, this is the amount a doctor or supplier that accepts assignment can be paid. (Assignment is an agreement between Medicare doctors, health care providers, and suppliers to accept the Medicare-approved amount as payment in full.)

The Medicare-approved amount includes what Medicare pays and any deductible, co-insurance, or co-payment that a patient pays. It may be less than the actual amount a doctor or supplier charges. If a doctor or supplier does accept assignment, Medicare will pay 80 percent of the cost, and the patient pays the rest.

Medicare Cost Plan

A Medicare Cost Plan is a type of HMO, or health maintenance organization. In a Medicare Cost Plan, if people get services outside of the plan's network without a referral, their Medicare-covered services will be paid for under Original Medicare. (The Cost Plan pays for emergency services or urgently needed services.)

Medicare Private Fee-for-Service (PFFS) Plan

This is a type of Medicare Advantage Plan in which people may go to any Medicare-approved doctor or hospital that accepts the plan's payment. The insurance plan, rather than the Medicare Program, decides how much it will pay and what people will pay for the services they get. People may pay more or less for Medicare-covered benefits. They may have extra benefits that Original Medicare doesn't cover.

Medigap Policy

This is Medicare Supplement Insurance sold by private insurance companies to fill "gaps" in Original Medicare Plan coverage.

Medicare Medical Savings Account (MSA) Plan

MSA Plans combine a high-deductible Medicare Advantage Plan like a health maintenance organization (HMO) or preferred provider organization (PPO) with a Medical Savings Account for medical expenses.

Medicare Special Needs Plan

This is a special type of Medicare Advantage Plan that provides more focused and specialized health care for specific groups of people, such as those who have both Medicare and Medicaid, who reside in a nursing home, or have certain chronic medical conditions.


This is the periodic payment to Medicare, an insurance company, or a health plan for health care or prescription drug coverage.