The lowdown on Medicare coverage
By Kamil Skawinski • Bankrate.com

For most Americans, Medicare is on the distant horizon. But as you approach retirement age, knowing about Medicare and what it can or cannot do for you could be important to your physical and financial well-being.

You'll be automatically enrolled in the program if you're already collecting Social Security or receiving benefits from the Railroad Retirement Board when you turn 65 -- or if you've been collecting disability for more than two years. But if you're working and not collecting government pension benefits, you need to sign up three months before your 65th birthday.

The Medicare program isn't exactly "free" government-sponsored health care. You'll have to pay deductibles and co-payments out of pocket, and certain services aren't covered at all.

What you'll ultimately pay for your future medical care will depend on the type of Medicare plan you choose, whether you'll have additional health insurance coverage from a former employer, whether you've purchased "supplemental coverage" and how often you make use of the medical services offered by your doctor or hospital.

Medicare ABCs You have several options, and they're not cut-and-dry. Here's what you need to know to make intelligent decisions about your insurance coverage.

The ins and outs of Medicare 1. The original Medicare plan: parts A & B 2. Medicare Part C: Medicare Advantage plans 3. Medicare Part D: Prescription drug benefit 4. Medigap policies 5. Where to get help

"Unfortunately, answering what Medicare does and does not cover ... well, to do that fully and accurately would lead to a very broad and wide-ranging discussion," says Peter Ashkenaz, a spokesman for the Centers for Medicare and Medicaid Services. "So what we recommend is that people access the Medicare Web site and download and read the 'Medicare & You 2008' handbook."

However, if you're not willing to wade through 120 pages of government-issue text just yet, here's a synopsis of what you need to know.

The original Medicare plan: parts A & B
The original Medicare plan is designed to help pay for certain medical services and supplies provided in hospitals, doctors' offices and other health care settings. Medicare Part A focuses on hospital insurance while Part B is the program's medical insurance component. All U.S. citizens and legal residents of the United States who have paid Medicare payroll taxes for a minimum of 10 years will be eligible for Part A and Part B coverage upon reaching age 65.

Part A basically helps people better absorb the costs associated with inpatient care in hospitals (including inpatient rehabilitation facilities), inpatient stays in a skilled nursing facility (but not custodial or long-term care), inpatient mental health care in a psychiatric hospital (limited to 190 days in a lifetime), as well as hospice care services and home health care services. Some of the costs associated with these services and procedures will be covered completely by Medicare Part A. Others will require out-of-pocket co-payments or the satisfaction of annual deductibles.

Part B coverage helps pay for "medically necessary" services such as doctors' services, outpatient care and other medical services not covered by Part A. Part B also helps pay for some preventive care services that are designed to prevent or detect illness at an early stage, when treatment is likely to work best. (For a list, see pages 18 to 25 of the Medicare handbook).