Medicare Glossary

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Term Definition
Relative Value Unit

Medicare uses a physician fee schedule to determine payments for physician services. The fee for each service depends on its relative value units (RVUs), which rank on a common scale the resources used to provide each service. These resources include the physician's work, the expenses of the physician's practice, and professional liability insurance. To determine the Medicare fee, a service's RVUs are multiplied by a dollar conversion factor.

Resource-Based Relative Value Scale

A payment classification system for provider services that assigns unit values to various medical services based upon the training and skill required to perform the service, and then applies dollar amounts to each unit of service.

Risk Adjustment Data Validation (RADV)

CMS conducts Medicare Advantage (MA) risk adjustment data validation activities for the purpose of ensuring the accuracy and integrity of risk adjustment data and MA risk adjusted payments. Risk adjustment data validation (RADV) is the process of verifying that diagnosis codes submitted for payment by an MA organization are supported by medical record documentation for an enrollee.

Senior Plan

Refers to a given Medicare Supplement or Medicare + Choice plan

Service Area

A health plan’s state approved geographic area to provide health care services for its members.


See Special Need Plan

Social Health Maintenance Organization

(SHMO) A special type of health plan that provides the full range of Medicare benefits offered by standard Medicare HMOs, plus other services that include the following: prescription drug and chronic care benefits, respite care, and short-term nursing home care; homemaker, personal care services, and medical transportation; eyeglasses, hearing aids, and dental benefits.

Special Need Plan

The Special Need Plan (SNP) option allows a Medicare Advantage organization to offer benefit plans targeted to "special needs" populations and limit enrollment in those plans to only the special needs populations. Many existing Medicare Advantage organizations and Medicaid health plans have or are entering the market targeting dual (Medicare and Medicaid) eligible beneficiaries. Additionally, several organizations are targeting Medicare populations with special needs defined by the presence of particular chronic disease

Star Rating System

CMS rates the relative quality of the private plans that are offered to beneficiaries through the Medicare Advantage program, on a one to five-star scale, with five stars representing the highest quality. The five-star quality scores for Medicare Advantage plans are derived from four sources: (1) CMS administrative data on plan quality and member satisfaction, (2) the Consumer Assessment of Healthcare Providers and Systems (CAHPS®), (3) the Healthcare Effectiveness Data and Information Set (HEDIS®), and (4) the Health Outcomes Survey (HOS). Under the Affordable Care Act, Under the Affordable Care Act, Medicare Advantage Plan payments are being adjusted based upon their Star Rating.

Value Based Insurance Design (VBID)

Value Based Insurance Design involves designing benefit cost sharing requirements and coverage based on the ultimate evidence-based value of clinical services as opposed to strictly cost considerations. The objective is for the level of patient cost sharing to be a function of the value that the specific service provides to the specific patient. Under Value Based Insurance Design, cost sharing requirements would be delineated by specific types of recommended medications, procedures, treatment plans or even specific providers for specific conditions, as opposed to more traditional tiering of benefits solely based upon costs, such as generic vs. brand name drugs, or network vs. out of network providers.