First, let's talk about the various parts of Medicare, the federal health insurance program for people 65 and older. So-called "Original Medicare" includes Part A and Part B, but Part C and Part D also are available:

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Part A. Covers hospital stays

Part B. Covers medically necessary services, like doctor visits and preventive health care services.

Part C. Medicare Advantage plan (see below)

Part D. Covers prescription drugs.

When you sign up for Medicare you can choose among parts A, B and D, or select a Medicare Advantage plan (Part C).

A Medicare Advantage plan operates like a health maintenance organization or preferred provider organization. It covers Part A and Part B – hospitalization, outpatient and preventive services – and usually includes prescription drug benefits. Many plans also provide extras, such as vision, dental and hearing coverage. Medicare Advantage plans are sold by private companies approved by Medicare.

Another health insurance option

Another option is to purchase a Medigap policy, to fill any gaps in coverage from Original Medicare, such as copayments, deductibles and coinsurance. You don't need a Medigap policy if you purchase a Medicare Advantage plan. Private insurance companies sell Medigap policies. There are 12 standard policies from which to choose.

Your best bet is to visit the Medicare website and review the various insurance options and see which one best meets your needs.

Thanks to health reform, Medicare coverage has improved. Before reform, you could run out of your annual Part D prescription drug benefits if your drug costs were relatively high. This coverage gap was known as the Medicare "donut hole."

Now under health reform, if you get caught in the "donut hole," you receive a 50 percent discount when buying Part D-covered prescription drugs covered by Part D. You'll get additional savings over the next decade until the hole is completely closed in 2020.

You also get free preventive care, including mammograms and screenings for colorectal cancer as well as annual well visits.

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