A big part of planning for retirement is getting a handle on medical expenses. And a major part of that is knowing what Medicare can or cannot do for you -- physically and financially.

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

First of all, understand clearly that Medicare is not free 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 will depend on the type of Medicare plan you choose: whether you'll have additional health insurance coverage from a former employer; whether you purchase so-called "supplemental coverage"; and how often you make use of the medical services your doctor or hospital offer.

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

4 major options 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

Medicare summary
Listing here everything that Medicare covers and doesn't cover would take volumes. But following is a brief overview to provide a basic understanding. For more details, visit the Medicare Web site and download the 'Medicare & You 2008' handbook

The original plan: Parts A & B
The original plan helps pay for many medical services and supplies provided in hospitals, doctors' offices and other health care settings. 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 10 years or more are eligible for both Part A and Part B coverage upon reaching age 65.

Part A helps with the cost of 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. Medicare Part A will completely cover some of the costs associated with these services and procedures. Others will require out-of-pocket co-payments or the satisfaction of annual deductibles.