How does Medicare work?

Supplementary Insurance (aka Medigap or Medicare Supplement plans) are designed to cover Medicare's deductibles, copays, and coinsurance.  The extent of the coverage depends on the plan chosen.  You typically will not need to track deductibles, although you could.  The most immediate deductibles that you would encounter are for Hospitalization ($1260 for 2015) and Physician Services or Durable Medical Equipment (Medicare Part B Annual deductible of $147, again - for 2015).

"Donut Holes" refers to the gap in coverage for Medicare Part D Prescription drug plans. These plans are designed with several stages of coverage.  Some include a deductible while others don't.  There's an initial coverage phase, a gap coverage phase, and a catastrophic phase of coverage.  In each phase, your net cost of each medication can differ. Due to various regulations that surround Part D plans, it's best that you find an agent that deals with Medicare coverage or find a local SHIP counselor.