The Medicare-approved amount is the amount that Medicare pays to a healthcare provider who has agreed to participate in the program. The amount varies among different services and items.
This article explains the Medicare-approved amount and how the program calculates it for various services and items. It also looks at the difference between the amounts for participating and nonparticipating providers and explains how to find out the amount for a given service.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare pays an agreed amount of money to healthcare providers for medical items or services.
A person pays a percentage of the Medicare-approved amount after they have paid their Medicare Part B annual deductible, which is $203 in 2021.
The amount varies depending on several factors, including whether the healthcare provider is participating in the Medicare program.
When a healthcare supplier or doctor agrees to accept Medicare assignments, it means that they accept the Medicare-approved amount as full payment. They are then known as a participating provider.
Even though the Medicare-approved amount may be less than the amount the supplier or doctor would regularly charge, they accept it as full payment for covered healthcare items or services.
If the doctor, healthcare provider, or medical supplier accepts assignment, the following conditions may apply:
- A person’s out-of-pocket costs may be lower.
- Healthcare providers and suppliers agree to charge a person for only the Medicare deductible and coinsurance amount. They may also wait for Medicare to pay its share before asking for the remaining payment from the person who received the service or item.
- Healthcare providers and suppliers must submit a claim directly to Medicare and cannot charge a person for submitting the claim.
A nonparticipating provider is a supplier or doctor who has not signed an agreement with Medicare to accept assignment for all Medicare-covered services.
Nonparticipating providers may choose to accept assignment for some but not all services. Medicare still considers these providers to be nonparticipating because they accept Medicare as insurance but do not agree to take the Medicare-approved amount as full payment for services or items.
If a person visits a healthcare provider or supplier who does not accept assignment, the following conditions may apply:
- The person may initially have to pay the bill in full when they receive the item or service.
- The healthcare provider or supplier submits a claim to Medicare for any provided services but cannot charge a person for submitting the claim.
- The person who receives the item or service can ask the provider or supplier to submit the claim. If they do not do so, the person can call 1-800-MEDICARE to report the problem.
- In some instances, a person may be required to submit their claim to Medicare using Form CMS-1490S to get a reimbursement for the payment.
A nonparticipating provider can charge up to 15% more than the Medicare-approved amount, although there is a limit to the charges. A person is then responsible for the difference in cost between the amount that their healthcare provider charges and the Medicare-approved amount. The cost difference is called the Medicare Part B excess charge.
Federally funded Medicare is a health insurance program:
- Part A provides hospital insurance.
- Part B is for medical coverage.
- Part C, known as Medicare Advantage, is an alternative to original Medicare (Part A and Part B) that provides all the same basic coverage with additional benefits.
- Part D covers prescription drugs.
Medicare Part A has an annual deductible, which is $1,484 in 2021, and a fee schedule for hospitalization.
Medicare pays approved costs above a person’s coinsurance amount. These apply as follows for each benefit period in 2021:
- $0 coinsurance for days 1–60
- $371 coinsurance per day for days 61–90
- $742 coinsurance per lifetime reserve day for days 91 and beyond
- 100% of the costs after a person has used their lifetime reserve days
Medicare Part B helps pay for specific services, such as medically necessary doctor’s visits, outpatient hospital visits, and preventive care services. Part B also covers durable medical equipment (DME), such as canes, walkers, scooters, and wheelchairs.
A person must generally pay a monthly premium, which is $148.50 in 2021. They must also meet the annual deductible of $203 before Medicare funds any treatment.
If a person chooses to go to a nonparticipating healthcare provider, they may have to pay an additional amount for the services or items.
For example:
- A person visits their Medicare-participating doctor about a pain in their ankle.
- Medicare Part B covers the appointment.
- The person has already met their annual Part B deductible, so they will pay 20% coinsurance of the Medicare-approved amount.
- The doctor then refers the person to a specialist.
- The specialist does not accept the Medicare-approved amount.
- The specialist may charge an additional maximum amount of 15% for their services.
- The person is responsible for the difference in costs.
Learn more about the differences between Part A and Part B here.
If a person is enrolled in original Medicare, they may be able to get help with costs through Medicare supplement insurance, known as Medigap.
Private insurance companies provide Medigap, which may help with out-of-pocket costs such as coinsurance, copays, and deductibles. However, if a person is enrolled in a Medicare Advantage plan, they cannot also have a Medigap plan.
Although the Centers for Medicare & Medicaid Services state that all Medigap policies must provide the same level of coverage, the costs of different plans may vary. A person can use this online tool to compare plans.
The Medicare-approved amount is the amount that Medicare pays to a healthcare provider or medical supplier who accepts assignment for Medicare-covered services.
If a person visits a healthcare provider or supplier who does not accept assignment, they may have to pay an additional amount for the services or items.
Private insurance companies offer Medicare supplement insurance plans that may come with extra costs.