Part A of Medicare, or Hospital Insurance, covers inpatient services provided by hospitals and skilled nursing facilities as well as hospice care. Part A provides coverage for inpatient hospital services, up to 100 days of post hospital skilled nursing facility (SNF) care, some home health services, and hospice care. Patients must pay a deductible each time their hospital admission begins a benefit period. (A benefit period begins when a patient enters a hospital and ends when she has not been in a hospital or SNF for 60 days.) Medicare pays the remaining costs for the first 60 days of hospital care. Beneficiaries requiring care beyond 60 days are subject to additional charges. Patients requiring SNF care are subject to a daily coinsurance charge for days 21-100. There are no cost-sharing charges for home health care and limited charges for hospice care.

Inpatient hospital care--The first 60 days of inpatient hospital services in a benefit period are subject to a deductible (adjusted annually). A benefit period begins when a patient enters a hospital and ends when he or she has not been in a hospital or SNF for 60 days. For days 61-90 in a benefit period, a daily coinsurance amount (adjusted annually) is imposed. When more than 90 days are required in a benefit period, a patient may elect to draw upon a 60-day lifetime reserve. A coinsurance amount adjusted annually) is imposed for each reserve day. No coverage is provided for stays in excess of 150 days in a benefit period.

Skilled Nursing Facility (SNF) care--The program covers up to 100 days of post-hospital SNF care for persons in need of continued skilled nursing care and/or skilled rehabilitation services on a daily basis. After the first 20 days, there is a daily coinsurance charge (adjusted annually). After 100 days, there is no Medicare coverage for SNF care.

Home health care--Home health visits are provided to persons who need skilled care on an intermittent basis. The Balanced Budget Act (BBA) of 1997 gradually transferred from Part A to Part B home health visits that are not part of the first 100 visits following a beneficiary's stay in a hospital or SNF (i.e., post-institutional visits) and during a home health spell of illness. Beginning January 1, 2003, Part A covers only post-institutional home health services for up to 100 visits during a home health spell of illness, except for those persons with Part A coverage only, who are covered for services without regard to the post-institutional limitation.

Hospice care--Hospice care services are provided to terminally ill Medicare beneficiaries with a life expectancy of 6 months or less for two 90-day periods, followed by an unlimited number of 60-day periods. The medical director or physician member of the hospice interdisciplinary team must recertify, at the beginning of 60-day periods, that the beneficiary is terminally ill.

Medicare Part B is voluntary. All persons over age 65 and all persons enrolled in Part A may enroll in Part B by paying a monthly premium. Part B, or Supplementary Medical Insurance, covers services provided by physicians and other practitioners, hospitals' outpatient departments, laboratories, and suppliers of medical equipment. Part B also covers a limited number of drugs, most of which must be administered by injection in a physician's office. Depending on the circumstances, home health care may be covered by either Part A or Part B. The program generally pays 80 percent of Medicare's fee schedule or other approved amount after the beneficiary has met the annual deductible. The beneficiary is liable for the remaining 20 percent.

Doctor's services--This category includes surgery, consultation, and home, office and institutional visits. Certain limitations apply for services rendered by dentists, podiatrists, and chiropractors and for the treatment of mental illness.

Services of non-physician practitioners--This category includes physician assistants, nurse practitioners, certified registered nurse anesthetists, clinical psychologists, and clinical social workers.

Other medical and health services--This category includes laboratory and services, rural health clinic services, DME, home dialysis supplies and equipment, artificial devices (other than dental), physical and speech therapy, and ambulance services.

Specified preventive services--These services include: an annual screening mammography for all women over age 40; a screening Pap smear and a screening pelvic exam once every 2 years, except for women who are at a high risk of developing cervical cancer; specified colorectal cancer screening procedures; diabetes self-management training services; bone mass measurements for high-risk persons; and prostate cancer screenings.

Drugs and vaccines--Generally Medicare does not pay for outpatient prescription drugs or biologicals. Part B does pay for immunosuppressive drugs following a covered organ transplant, erythropoietin (EPO) for treatment of anemia for persons with chronic kidney failure, and certain oral cancer drugs. The program also covers flu shots, pneumococcal pneumonia vaccines, and hepatitis B vaccines for those at risk.

Home health services--Home health services include those not covered under Part A. Part B also covers all medically necessary home health visits for persons not covered under Part A. The 20-percent coinsurance and deductible do not apply for such benefits.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 added a prescription drug benefit that became available in 2006 under a newly created Part D. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and went into effect on January 1, 2006. The drug benefit is not part of the 'Original' Medicare program, which includes Part A for hospital care Part B for physician, outpatient care and durable medical equipment. The benefit is administered by private insurance plans that are reimbursed by the Centers for Medicare and Medicaid Services.

Enrollment for most beneficiaries is voluntary. Anyone who has Medicare Part A and/or Part B can get Medicare prescription drug coverage. The initial enrollment period took place from November 15, 2005 through May 15, 2006. Potential beneficiaries who did not enroll by the May 15 deadline (or within a given time frame after their initial eligibility date) will incur a late enrollment penalty when they sign-up of 1% per month based on the average cost of the premium until their enrollment. Open enrollment occurs from November 15th through December 31st of each year with coverage beginning on January 1st.
Medicare.gov: Prescription Drug Coverage
AARP: Medicare Prescription Drug Coverage

Nearly 90 percent of beneficiaries who receive care in the fee-for-service program, however, have supplemental insurance that covers many or all of Medicare's cost-sharing requirements. The most common sources of supplemental coverage are plans for retirees offered by former employers (held by 37 percent of beneficiaries in the fee for-service program), individually purchased Medi-gap policies (34 percent), and Medicaid (16 percent). The percentage of Medicare beneficiaries who have coverage as retirees, as well as the generosity of that coverage, is expected to decline in the future as employers respond to the financial stresses of rising health care costs.