Medicare 101: Understanding your preferences

Understanding Insurance Lingo

Understanding your health insurance benefits can seem like learning a new language.  Below are some of the most common terms you'll encounter.  


Insurance Agent, Broker, or Producer

To the customer, these three titles all signify someone who guides you through insurance plans and helps you with the enrollment process and receives a commission if you enroll with them. 

There’s never an obligation to enroll even if you’re meeting an agent face to face.  However, it’s common courtesy to enroll with an agent who has guided you through the process unless the plans do not fit you.


Independent Agent, Broker, or Producer

An independent agent is someone who isn’t tied to a particular insurance company and has the ability of talk about plans from multiple companies.  Your costs are the same whether you go through an independent agent or directly to the insurance company. 



A set amount you pay, usually monthly, to be enrolled in an insurance plan.

For example: your premium is $100 a month



A set amount that you pay out of pocket when you use services

For example: your co-pay is $20 each time you go to the primary care office



A percentage that you pay out of pocket when you use services

For example: your co-insurance is 20% of the total cost of the medical office visit.



An amount you must pay out of pocket before your insurance kicks in.  A deductible can be general (all medical services), specific (certain services), yearly, or per event. 

For example: You have a $500 deductible per hospital visit. This means that every time you visit the hospital, you’re responsible for the first $500 dollars of the total cost.  Insurance picks up the rest. 



Someone who is enrolled in a Health Maintenance Organization (HMO), which usually contracts with a network of providers and hospitals to provide care.  To most individuals, it basically means someone who is enrolled in a health insurance plan.



A limited list of providers, hospitals, and ancillary services that your insurance will pay for.  If you receive services from someone who is not on the list (except for emergencies), you may have to pay a higher out of pocket or may be responsible for the entire amount depending on your plan. 


Basic Medicare Terms

Don’t get caught up in the little details of Medicare and health insurance terminology, let’s start by understanding the core terms.


Medicare is health insurance for individuals 65 and over as well as individuals who have been medically disabled for 24 months.


Medicare is divided into many parts.  These parts can be combined to form a comprehensive health insurance plan depending on your needs. 


Healthcare costs under Medicare is paid for by a combination of:

The federal government

Private health insurance companies, funded by monthly premiums or government contracts depending on the plan

Your out of pocket expenses


Let’s get to the different parts.  Don’t worry if this seems like a lot at first, this is just building a basis for you to have a conversation with your health insurance agent.


Part A

Pays for hospital costs

Doesn’t pay 100%, you have an out of pocket deductible when you use the hospital

No monthly cost for individuals who are U.S. Citizens, permanent residents for 5 years, and have paid 40 quarters into Medicare 


Part B

Pays for doctor and outpatient costs

Pays for 80%, you’re responsible for 20% of the cost and there's an annual deductible 

There is a monthly premium for most individuals


Parts A and B are from the federal government.  You can apply for benefits through the Social Security administration.  Parts A and B are what is referred to as “Original Medicare”


Supplemental plan (Medigap)

Depending on the plan, covers part or all of hospital out of pocket and Part B out of pocket costs

Offered by private insurance companies and comes with a monthly premium


Part D (Prescription Drug Plan)

Covers drugs

Comes with co-pays, deductibles (some plans), and a coverage gap, also known as the donut hole.

Offered by private insurance companies and comes with a monthly premium


Part C (Advantage Plan)

Groups Part A (hospital), Part B (doctor/outpatient) and often times Part D (drug) into a managed plan through a private insurance company with set co-pays, co-insurances, deductibles.

May not have additional monthly premiums depending on the plan

Usually limits you to a network of providers and hospitals

May include additional benefits that Original Medicare doesn’t cover.

You’re still responsible for paying your Part B premiums.