Medicare Glossary

Capitation

A payment method where a health plan pays a fixed monthly amount per enrolled member to a provider or group, regardless of how many services that member uses. Common in Medicare Advantage HMO plans.

Catastrophic Coverage

The phase of Medicare Part D drug coverage that begins after you and your plan have spent a certain total amount on covered drugs in a year. In this phase, your copays are significantly reduced. In 2025, out-of-pocket costs are capped at $2,000 annually.

CMS (Centers for Medicare & Medicaid Services)

The federal agency within the U.S. Department of Health and Human Services that administers Medicare, Medicaid, and the Children's Health Insurance Program (CHIP). CMS sets Medicare rules, approves plans, and regulates coverage standards.

Also known as: CMS

COBRA Continuation Coverage

A federal law allowing you to temporarily keep employer group health coverage after leaving a job, usually at your own full cost. COBRA is not considered creditable coverage for delaying Medicare enrollment, so missing your Medicare window while on COBRA can trigger a penalty.

Also known as: COBRA

Coinsurance

The percentage of costs you pay for a covered health care service after you have paid your deductible. For example, under Original Medicare Part B, you pay 20% of the Medicare-approved amount for most doctor services.

Coordination of Benefits

The process used to determine which insurance plan pays first when you have more than one health coverage. Medicare has specific rules about whether it pays primary or secondary to other insurance.

Also known as: COB

Copay (Copayment)

A fixed dollar amount you pay for a covered health care service at the time of service. For example, a $20 copay for each doctor's visit. The amount can vary by the type of service and whether you are in-network.

Also known as: Copayment, Fixed cost share

Cost-sharing

The share of costs covered by your insurance that you pay out of your own pocket. This term generally includes deductibles, coinsurance, and copays — but not premiums.

Coverage Gap

A phase in Medicare Part D where you pay a higher share of your drug costs after your total drug spending reaches a certain amount. Sometimes called the "donut hole." In 2025, the coverage gap was effectively eliminated for most beneficiaries due to the Inflation Reduction Act.

Also known as: Donut Hole

Creditable Coverage

Health or prescription drug coverage that is at least as good as Medicare's standard coverage. If you have creditable coverage when you turn 65, you may be able to delay enrolling in Medicare without facing a late enrollment penalty.

Custodial Care

Non-skilled help with everyday activities such as bathing, dressing, eating, and mobility. Medicare generally does not cover custodial care on its own unless it is part of a covered skilled nursing or hospice stay.