Medicare Part B functions as medical insurance, covering a wide range of outpatient services, including doctor visits, preventive care, lab tests, and durable medical equipment. After meeting an annual deductible, Medicare Part B generally pays 80% of the cost for covered services, leaving the beneficiary responsible for the remaining 20% as a coinsurance. This 20% coinsurance is the standard out-of-pocket expense. However, beneficiaries may face additional costs, known as Part B excess charges, if their healthcare provider does not accept Medicare’s payment terms.
What Part B Excess Charges Are
Part B excess charges are additional amounts a healthcare provider can bill a Medicare beneficiary that exceed the amount Medicare approves for a service. Medicare establishes a specific rate for every covered service, known as the Medicare-Approved Amount (MAA). This MAA is the total dollar amount Medicare and the patient are expected to pay for a service.
An excess charge occurs when a provider does not agree to accept the MAA as payment in full. The provider can then bill the patient for an amount greater than the MAA, which Medicare will not cover. Federal law places a limit on this extra charge, establishing a statutory cap known as the Limiting Charge.
The maximum a provider can charge in excess of the MAA is strictly limited to 15% of the MAA. For example, if the MAA for a procedure is $500, a provider can charge up to an additional $75 (15% of $500). The beneficiary is responsible for paying this amount directly. Excess charges are separate from the standard 20% coinsurance and do not count toward the Part B deductible.
Understanding Non-Participating Providers
The mechanism that allows for Part B excess charges involves a provider’s billing arrangement with Medicare. Healthcare providers who treat Medicare beneficiaries fall into one of three categories: participating, non-participating, or opted-out. Excess charges are only possible with “non-participating providers” who choose not to accept assignment.
“Accepting assignment” means the provider agrees to accept the Medicare-Approved Amount as their full payment for a covered service. These providers are called “participating providers,” and they cannot charge the beneficiary more than the deductible and the 20% coinsurance. Conversely, a “non-participating provider” is enrolled in Medicare but has not signed an agreement to accept assignment for all services.
Non-participating providers reserve the right to bill the patient the difference between their actual charge and the MAA, which constitutes the excess charge. This ability to charge up to 15% more than the MAA is established by the Limiting Charge Rule. This rule limits the maximum amount a non-participating provider can legally bill a Medicare patient for covered services.
When a non-participating provider does not accept assignment, Medicare will send its payment—which is 5% less than what it would pay a participating provider—directly to the patient. The patient is then responsible for submitting the total payment to the provider, including the standard 20% coinsurance and any excess charge. This process can be a complex administrative burden. Excess charges are most commonly encountered with specific specialists, certain laboratory services, or suppliers of durable medical equipment.
How to Avoid Excess Charges
A beneficiary can eliminate the risk of Part B excess charges by proactively choosing healthcare providers who always accept assignment. These participating providers agree to accept the Medicare-Approved Amount as full payment. Before scheduling an appointment or receiving a service, beneficiaries should confirm the provider’s participation status by directly asking if they “accept Medicare assignment.”
Medicare also provides an online search tool, called Physician Compare, which allows beneficiaries to verify a provider’s status before receiving care. This tool helps to identify providers who are enrolled in Medicare and their assignment status. Taking this step ensures that the only out-of-pocket expense will be the standard deductible and 20% coinsurance.
Another effective strategy for mitigating these charges is to purchase a Medicare Supplement Insurance, or Medigap, policy. Medigap plans are standardized policies sold by private insurers to cover the “gaps” in Original Medicare, such as deductibles and coinsurance.
Among the standardized plans, only Medigap Plans F and G provide coverage for 100% of Part B excess charges. Plan G covers all Part B excess charges and is available to all beneficiaries eligible for Medicare. Plan F also covers these charges, but it is only available to individuals who were eligible for Medicare before January 1, 2020. Purchasing one of these two comprehensive Medigap policies transfers the financial responsibility for any excess charges from the beneficiary to the private insurer.