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You have known for a while that once you turn 65, you will be eligible for Medicare. As the time gets closer, you start paying more attention when people talk about Medicare options. You keep hearing about Medicare, Medicare Advantage Plans and Medicare supplement policies, and now you are confused as to which one you need, and which one you are eligible for, and which one you get for free. These are all good questions.

Traditional Medicare has been around since the 60s. It is a federal government insurance program. American workers who have paid FICA (Federal Insurance Contributions Act) or self-employed taxes have been contributing to the Medicare program already. These persons, once they reach the age of 65 and become Medicare eligible, will be permitted to enroll in what is referred to as traditional Medicare Part A, which are hospital benefits. Part A typically covers 80% of major medical hospital charges, after the deductible has been met. Members will no t have to pay premiums for Medicare Part A. However, members will have to meet their deductible, and then be responsible for 20% of the medical hospital charges.

That is when Medicare supplement policies come in. A Medicare supplement policy is designed to fill in the gap in traditional Medicare coverage. There are many different types of Medicare supplement policies. At this time they are identified by the letters A through L, although M through P will be introduced in the coming years. Each of these Medicare supplement policy has a different combination of benefits, included services, premiums, deductibles, etc. Therefore, it is important that consumers shop around carefully to find which Medicare supplement policy will best meet their needs. Many of these Medicare supplement policies will also help cover prescription costs, which is Part D of traditional Medicare.

Different from a Medicare Supplement policy is a Medicare Advantage Plan. A Medicare Advantage Plan is a policy that serves just like traditional Medicare Parts A and B, but is purchased from a private health insurance provider, not directly from Medicare. It does not merely cover the gap, like a Medicare supplement policy, but serves the same purpose as a traditional Medicare policy. However, Medicare Advantage Plans will have additional extra benefits to members. Their costs are somewhat higher, between $40 and $75 more per month, which is why they offer additional benefits.

Those individuals who purchase Medicare Advantage Plans are not permitted to also purchase a Medicare supplement policy. This is because the Medicare Advantage Plan already includes extra benefits, and will already be helping members pay things that traditional Medicare does not cover. Therefore, only those older adults who are enrolled in traditional Medicare Parts A and B will need to purchase a Medicare supplement policy to help them pay their medical expenses.

It is recommended that if you have a serious health problem, travel a lot, or split time between two homes, you are better off with traditional Medicare and a Medicare supplement policy. This is because there are no network restrictions with traditional Medicare, and the Medicare Supplement policy will help you pay off the deductible and coinsurance. Medicare Advantage Plans do require members to see in-network physicians.

Health insurance carriers are dropping their Medicare Advantage Private Fee-for-Service (PFFS) plans, according to recent announcements by some health insurance providers, including Coventry and WellCare. A PFFS is a Medicare Advantage (MA) plan that is available through a state licensed, risk-bearing entity, or a PFFS Medicare Advantage Organization (MAO).

As a result of PFFS coverage drops by Coventry and WellCare alone, more than 500,000 Medicare plan holders will have to find new coverage.

At this point, Medicare Advantage plans receive government subsidies so that they can offer beneficiaries more benefits than simple Medicare plans. Medicare Advantage plans are offered to Medicare-eligible individuals by private health insurers. However, analysts are expecting the reimbursement rates for these PFFS programs to fall by approximately 5%, making them less profitable for insurance carriers.

How PFFS Currently Work

PFFS are popular amongst consumer s because they allow Medicare beneficiaries to choose their own healthcare providers, rather than having to select their providers from a limited number of in-network of Medicare-approved providers. Beneficiaries can see any provider, as long as the provider agrees to charge based on the PFFS fee schedule. This fee schedule is the same as the Medicare schedule.

PFFS MAOs have yearly contracts with the Centers for Medicare and Medicaid Services to provide Medicare beneficiaries with their Medicare benefits as well as additional benefits that a company opts to provide. A PFFS provider pays for healthcare instead of Medicare when a beneficiary has such a plan.

The main benefit (which makes PFFS so popular) is that individuals who join PFFS MAOs are not required to use providers within a network and can, therefore, see any provider as long as the provider is able to receive payment from Medicare and the PFFS MAO.

More Changes to PFFS Plans

In addition to the decreased government reimbursement amount for PFFS plans, PFFS plans will be required to develop healthcare provider networks beginning in 2011. The change will force PFFS plan holders to select their healthcare providers from within the plan network, limiting their freedom to see providers that they prefer.

Experts predict that more healthcare insurance providers will follow Coventry and WellCare by dropping their PFFS plans in coming months. Individuals should contact their healthcare insurance providers if they are currently enrolled in a PFFS or are considering enrolling in a PFFS to get more information about how their provider will respond to the upcoming PFFS changes.

More Information About Medicare Advantage Plans

Medicare Advantage plans are specific types of Medicare plans that are in place to cover the cost of healthcare related expenses for Medicare participants. These plans are similar to traditional Medicare plans in that they provide financial support for individuals seeking medical or health-related services. However, Medicare Advantage plans generally have more benefits and lower copayments than other types of Medicare plans. In order to have a Medicare Advantage plan, Medicare participants need to have Medicare Part A and Medicare Part B plans.

One major difference between Medicare Advantage plans and other types of Medicare plans is that Medicare Advantage participants may need to see only doctors that are members of the Medicare Advantage provider plan. However, plans may allow participants to use a wide variety of services, including Medicare Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service providers, and Medicare Special Needs providers.

Medicare participants should be aware that Medigap policies do not provide gap coverage for individuals that participate in the Medicare Advantage program.

More than 45 million Americans are currently enrolled in Medicare and many of them are paying for a plan that is either too expensive or doesn't have the coverage they need. Each year, Medicare provides a window of opportunity for enrollees to reevaluate their healthcare coverage and to make any necessary changes or adjustments to their coverage. Each year that enrollment period starts on Nov. 15 and ends Dec. 31.

It is crucial that Medicare enrollees use this time to evaluate their coverage to ensure they are getting what they need at a price they can afford. Many people avoid this crucial step, fearing they will be unable to understand the legal and insurance industry jargon. Medicare plan selection services are available for these people. A Medicare plan selection service helps people find the best and most affordable Medicare plan based on their specific needs and circumstances. This service will help you evaluate your healthcare needs using expert knowledge of recent program changes and criteria that include the following 9 questions.

Do I need Medicare if I have private healthcare insurance?

You will use the same factors of cost and coverage when comparing private health insurance with Medicare. It is important that you speak with your private plan administrator before making any changes.

Should I use Traditional Medicare or a Medicare Advantage Plan?

A Medicare Advantage plan (Part C) is ideal if you require frequent doctor visits and take prescription drugs. If your current medical condition only requires that you make routine medical visits and take few or no prescriptions, traditional Medicare (Parts A and B) with a prescription drug plan (Part D) may be a better choice.

Does my current plan cover prescription drugs?

Traditional Medicare (Parts A and B) generally does not cover medications unless they're administered in a doctor's office or a hospital. If you require regular prescription medications, you will need to purchase a Part D plan for that coverage. If, however, you are enrolled in a Medicare Advantage plan, you may already receive prescription drug coverage.

How do I know if my prescription drugs are covered?

Every plan that offers prescription drug coverage has a list of covered medications called a formulary. This list can change each year, which makes it crucial that you or a professional Medicare plan selection service evaluate your coverage during the annual enrollment period. Failure to do so may cost you thousands of dollars in uncovered prescription medications.

What about gaps in coverage between different prescription medication plans?

For many individuals-whether in a Medicare Advantage plan with prescription drug coverage or a stand-alone prescription drug plan-there is a gap in coverage once they reach a certain out-of-pocket threshold. This is referred to as the donut hole.

A Medicare Advantage plan that offers prescription drug coverage provides a combination of services found in Parts A, B and D-your hospital, medical and prescription drug coverage. As far as traditional Medicare is concerned, the Part D coverage is separate-it can even have a separate deductible. So the rules Part D follows (including the donut hole) may be slightly different from the medical portion (Part B) of coverage.

For example, after your plan has paid a certain amount for your prescriptions, you will have to pay the full cost, up to $3,453.75 in 2009, before the plan will pay for your prescription costs again. That cost is prohibitive for many people on Medicare and makes the annual evaluation of your coverage much more important.

Can I keep seeing the same doctors?

Most doctors, hospitals, physical therapists and other healthcare providers accept traditional Medicare, which will allow you to continue seeing the same doctors if you choose to stick with traditional Medicare and a Part D plan. But, as with any other insurance, Medicare Advantage plans have a network of providers. If a doctor is outside that network, you may have to pay more. Before you join a Medicare plan, particularly a Medicare Advantage plan, you should determine if the doctors you see are part of that plan's network.

Will the plan cover dental and vision services?

Traditional Medicare does not cover dental, vision or health and wellness programs, but some Medicare Advantage plans do. To receive this type of coverage, you must evaluate the available Medicare Advantage plans for your needed dental and vision services. Again, the use of a Medicare plan selection service will provide further assurance that you will get the coverage you need.

How much is it going to cost me?

Traditional Medicare premiums are relatively inexpensive, but your deductibles and copayments or coinsurance costs may be higher than what you would pay with a Medicare Advantage plan. Medicare Advantage plans may offer zero-dollar premiums and low copays. Some plans may even put a cap on total out-of-pocket costs. Your Medicare plan selection service can give you specific dollar amount and coverage information.

Will I be covered when traveling?

Traditional Medicare provides coverage throughout most of the country. Some Medicare Advantage plans are restricted to certain areas, but many offer out-of-network coverage in the event of an emergency while traveling. If you travel frequently or reside in different areas depending upon the time of year, it is important to find a Medicare Advantage plan that will provide coverage in both areas.

How do I know if I need a supplemental plan?

Traditional Medicare (Parts A and B) may not provide all of the coverage you require. Before paying for a supplemental plan, it is important to determine if you qualify for the Qualified Medicare Beneficiary program, have adequate coverage through an employer, or if you are already enrolled in a Medicare Advantage plan.

With medical costs skyrocketing and your own healthcare needs changing, it is imperative that you take advantage of the upcoming annual enrollment period offered by Medicare to determine whether you are receiving the coverage best suited to your needs and budget. This process is made easier with the professional expertise of independent Medicare plan selection services. Their knowledge and experience will ensure that you get exactly what you need at a price you can afford.

Jim Allsup writes for Allsup, a provider of Social Security disability and Medicare services, including Allsup Medicare Advisor, a Medicare plan selection service for people with disabilities and seniors.