Medicare Part A is basically the serious care side of Medicare coverage. It covers expenses associated with inpatient hospital stays, skilled nursing facilities, and some home health care. Medicare Part B covers approved outpatient physician services, outpatient hospital services, certain home health services, and durable medical supplies and equipment. Under both plans, Medicare reimburses providers based on its chart of allowed amounts--or the amount the federal government has deemed it considers fair and reasonable for a given service or item. The allowed amounts are derived based on national averages. You are responsible for the co-pay, which is the difference between the allowed amount and what Medicare actually ends up paying your provider, which is a percentage of the allowed amount.