Understanding Medicare Coverage Basics and Supplemental Coverage

Medicare health benefits seem confusing to many people, so it is helpful to learn what is available and what to expect. People who think they may be eligible can obtain benefits several different ways. One of the most common options is to apply for original Medicare, which is the fee-for-service coverage traditionally provided by the government. Another option is to look for supplemental insurance along with original Medicare. Medigap, retiree plans and Medicare Advantage plans are also popular choices. Advantage plans are usually offered in the form of the following plans:

  • Preferred Provider Organization
  • Health Maintenance Organization
  • Medicare Medical Savings Account
  • Point of Service
  • Private Fee-for-Service
  • Special Needs
  • Provider Sponsored Organization

The majority of Medicare beneficiaries have the original type of coverage. It gives them the option to visit nearly any physician or hospital throughout the United States. As long as a provider accepts Medicare coverage, services at that location will be covered as outlined in the terms of original Medicare.

Most people purchase supplemental coverage to fill the gaps that Medicare leaves. It is possible to buy this coverage independently or from an employer if the employer offers it. Medigap policies are specifically designed to fill common Medicare gaps, and they are offered by most insurance companies. Some people choose Advantage plans instead, and these options provide the same benefits as original Medicare. However, they differ in their costs, coverage restrictions and rules.

People who already have coverage from a current employer, former employer or union at the time they gain Medicare eligibility can automatically change their plans into Medicare Advantage plans. At the time of Medicare eligibility, insured individuals will have the option to choose original Medicare, stay with their existing plans or select another type of plan. If a person chooses to switch to another type of Advantage plan or original Medicare, the union or employer sponsoring existing coverage could reduce benefits or terminate coverage at that time. They can also change or cancel dependents’ health benefits. Before switching any employer-sponsored plan, talk to an agent to see what to expect and what options are available.

People who want the Medicare Part D prescription drug benefit must choose an option that will work with Medicare benefits. If a person prefers to keep original Medicare, it is best to select a drug plan that is a standalone policy offering strictly drug coverage. These are also known as PDPs. With Medicare Advantage plans, beneficiaries are usually required to obtain drug coverage as part of the package. A standalone drug plan is available for people who join PFFS, Cost Plans or MSAs without drug coverage.