Approved Charge (or allowable charge): The amount Medicare determines to be reasonable payment for a provider or service covered under Part B. The approved charge is the amount before co-pays or co-insurance are paid. During the deductible period, the approved charge applies toward the deductible.

Assignment: Assignment is an agreement between the beneficiary and Medicare, and doctors, other healthcare suppliers, or providers to pay a supplier or provider directly for services. Most doctors, suppliers, and providers accept assignment, which is a process in which a doctor or supplier agrees to accept the Medicare-approved charge as payment in full.

Beneficiary: The person eligible to receive, or who is receiving benefits from Medicare, an insurance policy, or a health maintenance organization (HMO).

Benefit Period: Benefit periods are the way that the Original Medicare Plan measures a beneficiary's use of hospital and skilled nursing facility (SNF) services. A benefit period begins the day a beneficiary goes to a hospital or skilled nursing facility and ends when the beneficiary hasn't received any inpatient hospital care (or skilled care in a SNF) for 60 days in a row. If a beneficiary goes into a hospital or a skilled nursing facility after one benefit period has ended, a new benefit period begins. The beneficiary must pay the inpatient hospital deductible for each benefit period. There is no limit to the number of benefit periods, although coverage for inpatient mental healthcare in a psychiatric hospital is limited to 190 days in a lifetime.

Claim Payment Amount: Amount paid to the provider after co-pay and co-insurance are deducted.

Co-insurance: A percentage of the cost of covered service that the beneficiary pays to the provider.

Co-payment: A fixed dollar amount that the beneficiary pays to a provider for a covered service.

Deductible: The amount the beneficiary must pay for healthcare or prescriptions, before the Original Medicare Plan, their prescription drug plan, or other insurance begins to pay. In the Original Medicare Plan, the beneficiary pays a new deductible for each benefit period for Part A and each year for Part B. People who qualify for extra help either pay no deductible or a small deductible for prescription drug coverage.

Excess Charge: The difference between the Medicare-approved amount for a service or supply and the actual charge, if the actual charge is more than the approved amount.

Hospice: A program that provides supportive care for terminally ill patients and their families, either directly or by working with a doctor or another community agency.

Lifetime Reserve Days: In the Original Medicare Plan, these are additional days that Medicare will pay for a beneficiary inpatient stay when they are in a hospital for more than 90 days. Each Medicare enrollee has a total of 60 reserve days that can be used during their lifetime. For each lifetime reserve day, Medicare pays all covered costs except for a daily co-insurance.

Limiting Charge: The Medicare limiting charge is set by law at 115 percent of the payment amount for the service furnished by a nonparticipating physician.  However, the law sets the payment amount for nonparticipating physicians at 95 percent of the payment amount for participating physicians (i.e., the fee schedule amount).  Calculating 95 percent of 115 percent of an amount is equivalent to multiplying the amount by a factor of 1.0925 (or 109.25 percent).   Therefore, to calculate the Medicare limiting charge for a physician service for a locality, multiply the fee schedule amount by a factor of 1.0925.  The result is the Medicare limiting charge for that service for that locality to which the fee schedule amount applies. (Information from the CMS web site).

Medicare Advantage Plan (Part C): A type of Medicare health plan offered by a private company that contracts with Medicare to provide all Medicare Part A and Part B benefits. Also called “Part C,” Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans. Most Medicare Advantage Plans offer prescription drug coverage.

Medicare-approved Amount: In the Original Medicare Plan, this is the amount a doctor or supplier that accepts assignment can be paid. It includes what Medicare pays and any deductible, co-insurance, or copayment that the beneficiary must pay. It may be less than the actual amount a doctor or supplier charges.

Medicare Health Maintenance Organization (HMO): A type of Medicare Advantage Plan (Part C) available in some areas of the country. Plans must cover all Part A and Part B healthcare. Many HMOs cover extra benefits, like extra days in the hospital. In most HMOs, the beneficiary can only go to doctors, specialists, or hospitals on the plan’s list except in an emergency. The costs of care to the beneficiary may be lower than in the Original Medicare Plan.

Medicare Part D Prescription Drug Coverage: A stand-alone drug plan that adds prescription drug coverage to the Original Medicare Plan, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans. These plans are offered by insurance companies and other private companies approved by Medicare. Medicare Advantage Plans may also offer prescription drug coverage that must follow the same rules as Medicare Prescription Drug Plans.

Medicare Supplement Insurance (Medigap or Medsupp): Healthcare insurance that pays certain costs not covered by Medicare and meets minimum standards set by state and federal law.

Service Area: The area where a plan accepts members. For plans that require members to use their doctors and hospitals, it’s also the area where services are provided. The plan may disenroll a beneficiary if they move out of the plan’s service area.

Skilled Nursing Care: Twenty-four hours-a-day supervision and medical treatment by a registered nurse, under the direction of a doctor.

Skilled Nursing Facility (SNF) Care: This is a level of care that requires the daily involvement of skilled nursing or rehabilitation staff. Examples of skilled nursing facility care include intravenous injections and physical therapy. The need for custodial care (such as help with activities of daily living, like bathing and dressing) does not qualify for Medicare coverage in a skilled nursing facility if that is the only care needed.

Taken in part from Medicare and You 2008: Definition of Terms