Should I Worry About Medicare Excess Charges?

Medicare provides health insurance coverage for millions of Americans, primarily those aged 65 or older, and certain younger individuals with disabilities. While this federal program covers a significant portion of healthcare costs, beneficiaries can still encounter various out-of-pocket expenses. One potential cost is a Medicare excess charge. Understanding these charges is important for managing healthcare expenses and making informed decisions about care. This article explains what Medicare excess charges are and how they might affect your costs.

What Are Medicare Excess Charges?

Medicare excess charges occur when a healthcare provider does not accept the Medicare-approved amount as full payment for a covered service. Medicare establishes a specific “Medicare-approved amount” for each service, which is the maximum amount the program will pay. Providers can choose whether to “accept Medicare Assignment,” meaning they agree to accept this Medicare-approved amount as full payment and will only bill you for your deductible and coinsurance.

A provider who does not accept Medicare Assignment is a “non-participating provider.” These providers are permitted by federal law to charge up to 15% above the Medicare-approved amount for a service. This additional charge is the Medicare excess charge. For example, if the Medicare-approved amount for a service is $100, a non-participating provider could charge up to $115.

When a non-participating provider bills for a service, Medicare pays 80% of the Medicare-approved amount directly to the provider. The beneficiary is then responsible for the remaining 20% of the Medicare-approved amount, plus any excess charge imposed by the provider, up to the 15% limit. In the previous example, Medicare would pay $80. The beneficiary would owe the remaining $20 plus the excess charge, which could be up to $15, totaling up to $35 out-of-pocket for that service. This 15% limit on excess charges is set by federal regulations, specifically Section 1842 of the Social Security Act.

When Excess Charges May Apply

Medicare excess charges are specific to certain parts of the Medicare program and particular provider billing practices. These charges can only arise from services covered under Medicare Part B, which includes doctor visits, outpatient care, durable medical equipment, and certain preventive services. The rules allowing excess charges do not apply to services covered by Medicare Part A, which primarily covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services.

Individuals enrolled in Medicare Part C, also known as Medicare Advantage plans, generally do not encounter Medicare excess charges. Medicare Advantage plans are offered by private companies approved by Medicare and have their own specific cost-sharing structures, network rules, and billing arrangements with providers.

It is important to distinguish between “non-participating” providers and those who have “opted out” of Medicare entirely. A non-participating provider can still bill Medicare, but they may impose the excess charge. In contrast, a provider who has completely opted out of Medicare has no agreement with the program; they can bill patients directly for their full fee, and Medicare will not pay anything for their services. Beneficiaries must pay the entire cost of care provided by an opted-out provider.

Beneficiaries residing in certain states are protected from Medicare excess charges due to specific state laws. These states include Connecticut, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, Vermont, and Wisconsin. In these locations, providers are generally prohibited from charging more than the Medicare-approved amount for Part B services.

Protecting Yourself from Excess Charges

Understanding how to identify and choose providers is a primary strategy for avoiding Medicare excess charges. Before receiving services, beneficiaries can directly ask their doctor or healthcare provider if they “accept Medicare Assignment.” Providers who accept assignment agree to accept the Medicare-approved amount as full payment, ensuring you will only be responsible for your deductible and coinsurance. The Medicare.gov website also offers a “Physician Compare” tool, which allows beneficiaries to search for doctors and other healthcare professionals and see if they accept Medicare Assignment.

Certain Medicare Supplement Insurance plans, often called Medigap policies, can help cover Medicare excess charges. These plans work alongside Original Medicare and are sold by private insurance companies. Specifically, Medigap Plan F and Plan G are designed to cover 100% of Medicare Part B excess charges. Plan F is only available to individuals who were eligible for Medicare before January 1, 2020, while Plan G is available to all new Medicare beneficiaries and covers everything Plan F does except the Part B deductible.

Medigap Plan N also covers a significant portion of Part B costs, including 100% of the Part B coinsurance, but it does not cover excess charges unless the provider accepts assignment and charges only the approved amount. Beneficiaries should also remain aware of their state’s regulations regarding excess charges. In states that have laws prohibiting Medicare excess charges, providers cannot legally impose them. After receiving services, reviewing the Explanation of Benefits (EOB) statements sent by Medicare is a good practice. The EOB details what Medicare was billed, the approved amount, what Medicare paid, and what you may owe, allowing you to identify any excess charges that might have been applied.