Medicare Part B excess charges are unexpected costs beneficiaries may encounter when receiving medical services covered by Part B (doctor visits, outpatient care, durable medical equipment, and certain preventive services). These charges occur when a healthcare provider does not agree to accept the standard payment rate established by Medicare. Instead, they charge the beneficiary an amount above this rate. Understanding how these charges arise is important for managing out-of-pocket healthcare expenses under Original Medicare.
How Excess Charges Relate to Provider Assignment
The possibility of incurring an excess charge is directly linked to a provider’s decision regarding Medicare assignment. Providers who treat Medicare beneficiaries fall into one of three categories based on their billing agreement with the program. The majority of doctors are “Participating Providers,” meaning they sign an agreement to accept the Medicare-Approved Amount (MAA) as payment in full for all covered services.
When a provider accepts assignment, Medicare pays 80% of the MAA, and the beneficiary pays the remaining 20% coinsurance after meeting the annual Part B deductible. These providers cannot charge the beneficiary any amount beyond the deductible and coinsurance. Excess charges only originate from “Non-Participating Providers,” who have not signed the full agreement to accept assignment for every service. Non-participating providers still bill Medicare, but they retain the option to charge the beneficiary more than the MAA for a specific service. The beneficiary must then pay the standard coinsurance plus the additional excess charge directly to the non-participating provider.
The Maximum Permitted Charge Rule
Federal law establishes a precise limit on how much a non-participating provider can charge above the Medicare-Approved Amount, a restriction commonly referred to as the Limiting Charge Rule. This rule dictates that a provider who does not accept assignment can charge a maximum of 15% over the MAA for the service.
The calculation of this limiting charge is based on the MAA that would have been paid to a non-participating provider, which is already slightly lower than the rate for participating providers. For example, if the MAA for a procedure is $500, the highest amount a non-participating provider can legally charge is \(575 (\)500 MAA plus the 15% excess charge of $75). The beneficiary is responsible for paying this excess charge out-of-pocket, in addition to their standard 20% coinsurance share of the MAA.
Strategies for Avoiding Excess Charges
The most straightforward method for beneficiaries to ensure they never face a Part B excess charge is to seek care exclusively from providers who accept Medicare assignment. Before scheduling an appointment or undergoing a procedure, a beneficiary should always ask the provider directly if they accept Medicare assignment. Medicare also maintains online directories that allow users to search for doctors who are participating providers in their area. Confirming this status proactively eliminates the possibility of receiving a bill with an excess charge.
Another effective way to manage or avoid these costs is through specific types of Medicare Supplement Insurance, also known as Medigap plans. Medigap plans are designed to fill in the “gaps” of Original Medicare, including out-of-pocket expenses like deductibles and coinsurance. Two standardized Medigap plans offer coverage for the Part B excess charge, transferring the financial burden from the beneficiary to the insurance company.
Medigap Plan G provides coverage for 100% of the Part B excess charges. If a non-participating provider imposes an excess charge, the Plan G policy will pay that entire amount. Medigap Plan F also covers 100% of the Part B excess charges, but it is only available to individuals eligible for Medicare before January 1, 2020. Individuals newly eligible must choose Plan G for complete protection, as many other plans, like Plan N, do not include this specific benefit.
State Restrictions on Part B Excess Charges
A layer of protection against Part B excess charges exists for beneficiaries living in certain states that have passed specific legislation. These state laws go beyond the federal Limiting Charge Rule by prohibiting Part B excess charges entirely. They require all providers who treat Medicare beneficiaries within their borders to accept the Medicare-Approved Amount as full payment. In these areas, a provider is legally prevented from imposing the 15% excess charge, providing greater financial certainty for beneficiaries.
States Banning Excess Charges
The states that currently ban these charges are:
- Connecticut
- Massachusetts
- Minnesota
- New York
- Ohio
- Pennsylvania
- Rhode Island
- Vermont
The state ban only applies when the medical service is performed within that state’s geographical boundaries. If a beneficiary receives care from a non-participating provider while traveling in a state that allows excess charges, they may still be responsible for the extra fee. Beneficiaries should confirm provider status when traveling out of state.