OBJECTIVE: Reform legislation has expanded the U.S. Medicare program for eligible telemedicine services and has required establishment of a process to add or delete covered services on an annual basis. This study explores the current reimbursement status of Medicare telemedicine reimbursement and its potential implications for 2007. METHODS: The Medicare rationale and historic progress of telemedicine coverage and reimbursement was constructed within a worksheet format. Major changes and additions to the program were highlighted and examined. A timeline of legislative and regulatory decisions was prepared. Criteria for coverage and payment were identified and summarized. Current definitions of required equipment and exceptions to these requirements were identified and their evolution tracked. The potential for 2007 reimbursement changes was evaluated. RESULTS: A summary of findings follows. The Medicare telemedicine program contains four major covered types of service that can now be performed by eight categories of specified professionals. Two types of geographic areas are eligible, although certain demonstration programs may be eligible regardless of geographic location. Billing and payment requires the use of stipulated codes. The process to add or delete services annually has been implemented. Each transaction must contain two sites; “distant” and “originating”. There are five types of originating sites. Payment is funded differently for “distant” versus “originating”. The required equipment is primarily represented by interactive telecommunications systems, although asynchronous technology is allowed in restricted instances. An upcoming Medicare report to Congress may recommend further expansion of the telemedicine program in 2007. CONCLUSIONS: Medicare telemedicine coverage and payment has continued to expand but remains restricted to certain geographic areas and to certain service provider sites. Health care decision-makers, including managers and payers, must be made better aware of the multiple benefits and efficiencies that telemedicine offers to both service providers and to patients.