Medicare Terms to Know

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As you explore your Medicare coverage options, understanding health insurance terminology can help you choose a plan with confidence.

Original Medicare

Administered by the Social Security Administration, Original Medicare includes Medicare Part A and Part B. It is a fee-for-service health plan, which means you can go to any doctor or hospital that accepts Medicare, and Medicare will cover the costs, excluding the standard Part A and Part B cost sharing.

Original Medicare does not have an out-of-pocket maximum or cover everything. As a result, most people choose to purchase additional coverage, such as a supplement or Medicare Advantage plan, to help cover out-of-pocket costs.

Medicare Part C

Also called Medicare Advantage (MA), these plans are offered by private health insurance companies who contract with the federal government to administer the benefits of Original Medicare. Most MA plans also offer additional coverage that is not provided through Original Medicare, such as vision, hearing and dental as well as prescription drug coverage.

Cost sharing

Cost sharing is the amount you pay out of pocket, including your deductible, coinsurances and copayments. This amount does not include your monthly premium or out-of-pocket costs for uncovered services. Your out-of-pocket maximum is the maximum amount you are expected to pay in cost sharing each plan year.

Coverage gap

The coverage gap, sometimes called the “donut hole,” is a phase of your prescription drug plan (Part D) that follows the initial coverage period. During this phase, there’s a temporary limit on what your plan will pay and you’ll be required to pay a maximum of 25% of the cost of your prescription drugs covered under the plan. 

Once you’ve spent $6,550 (in 2021) in out-of-pocket costs, the coverage gap ends and you move into the catastrophic coverage phase. Then, you won’t pay more than 5% of the cost of your covered drugs.


Also called a drug list, this is the list of prescription drugs covered by your plan. The formulary is often divided into tiers. Most MA plans with a prescription drug plan have five tiers: preferred generic, non-preferred generic, preferred brand, non-preferred brand and specialty medications.


A health insurance network is a group of doctors and medical providers who agree to provide services to members of a health insurance plan, usually at a negotiated rate. It’s important to review the network before choosing a plan to ensure the doctors you want to see are in-network.

Primary care provider (PCP)

Primary care providers are physicians, nurse practitioners, clinical nurse specialists or physician assistants who care for people of all ages and provide a range of health care services.

Tip: View more health insurance terms here.

Download your free guide to Medicare Advantage plans from Align powered by Sanford Health Plan here. To learn more, contact one of our licensed agents at (888) 535-4831 from 8 a.m. to 8 p.m. CST, Monday through Friday, excluding holidays.


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CMS ID Number: H8385_HP-4005-PY2022-ND-SD_M, H3186_HP-4005-PY2022-MN_M

Last Updated On: 4.29.22 at 10:30 AM


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