Medicare Definitions That You Should Know

To better understand Medicare, how it works and how it can benefit you, there are certain terms associated with Medicare that you might need to understand. We have provided you with the definitions for some of the more common Medicare terms.

Centers for Medicare & Medicaid Services (CMS):  The Centers for Medicare & Medicaid Services are organized around three centers to clearly reflect the agency's major responsibilities.

1. The Center for Medicare Management focuses on management of the traditional fee-for-service Medicare program. This includes development of payment policy and management of the Medicare fee-for-service contractors. 

2. The Center for Beneficiary Choices focuses on providing beneficiaries with information on Medicare, Medicare Select, Medicare Advantage and Medigap options. It also includes management of the Medicare Advantage plans, consumer research and demonstrations, and grievance and appeals functions. 

3. The Center for Medicaid and State Operations focuses on programs administered by states. This includes Medicaid, the State Children's Health Insurance Program (SCHIP), insurance regulation functions, survey and certification, and the Clinical Laboratory Improvements Act (CLIA).

Coinsurance: The percent of the Medicare-approved amount that you as a  Medicare beneficiary has to pay in addition to the deductible for Medicare Part A and/or Medicare Part B. In the Original Medicare Plan, the coinsurance payment is a percentage of the cost of the service (for example, 30%).  In this example, coinsurance for a $100 medical exam would be $30.

Co-payment: With some Medicare health plans, this is the amount that you as a Medicare beneficiary must pay for each medical service that you receive. In the Medicare program, a co-payment is usually a set amount that you would pay for a service, for example, $10 or $15 for a doctor visit.

Deductible: The amount that you as a Medicare beneficiary must pay before Medicare begins to pay. There is a deductible for each benefit period for Medicare Part A and each year for Medicare Part B.  These amounts can change each year.

Disproportionate Share Adjustment:  This is an additional Medicare payment to hospitals that treat a high percentage of low-income patients. The factors that are used to calculate this adjustment are the sum of the ratios of Medicare Part A Supplemental Security Income (SSI) patient days to total Medicare patient days, and Medicaid patient days to total patient days in the hospital.  In order to qualify for the 340B Program, a hospital must have a disproportionate share adjustment greater than 11.75%.

Disproportionate Share Hospital (DSH):   This is a hospital that has a disproportionately large share of low-income patients.  Under Medicaid, States provide additional payments to these hospitals.  Medicare inpatient hospital payments are also adjusted for this added burden.

DSH Payment: This is an additional payment in the Medicaid and Medicare programs that, in conjunction with local tax appropriations, help hospitals finance care to low income and uninsured patients.

Dual Eligibles: Are people that are entitled to Medicare (Part A and/or Part B) and who are also eligible for some form of Medicaid benefit.

Extra Help: A Medicare program that helps people with limited financial resources pay Medicare prescription drug costs including premiums, deductibles, and coinsurance.

Formulary: A list of prescription drugs covered by a prescription drug plan.

Institution: A facility that provides either short or long-term care. These include nursing homes, rehabilitation hospital, or skilled nursing facility.

Long-term Care Hospital: Acute care hospitals that provide treatment for patients that stay more than 25 days, on average.

Medicaid: A joint Federal and State program that helps with medical costs for some people with low incomes and limited resources. Medicaid programs vary by State, but most health care costs are covered if a beneficiary qualifies. The name of the program varies by State but is typically called the medical assistance program.

Medicare: The Federal health insurance program for people 65 years of age and older; certain younger people with disabilities; and people with End-Stage Renal Disease (those with permanent kidney failure who need dialysis or a transplant), sometimes called ESRD.

Premium: This is the monthly payment for health care coverage to Medicare, an insurance company or a health care plan.

Preventive Services: Health care that can prevent illness or detect illness at an early stage.

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The official U.S. Government Medicare Web site is Medicare.gov.