The Medicare program provides coverage for millions of Americans, but its financial rules can be complex. For services covered under Medicare Part B, which addresses outpatient care and doctor visits, the amount a provider can charge is regulated to protect beneficiaries from excessive billing. When a healthcare provider does not fully agree to Medicare’s payment terms, the Limiting Charge rule comes into effect. This regulation sets a maximum cap on the amount a patient can be billed, controlling the beneficiary’s out-of-pocket costs even when a provider does not accept the standard rate.
Defining the Medicare Limiting Charge
The Limiting Charge represents the maximum amount a healthcare professional enrolled in Medicare, but who does not accept assignment, can legally bill a beneficiary for a covered service. This federal regulation protects patients from being charged significantly higher amounts than the standard rate approved by Medicare. The rule is defined by law, specifically referenced in 42 U.S.C. § 1395u(b)(3)(B).
The maximum permissible charge is set at 115% of the Medicare Approved Amount. Non-participating providers are paid 5% less than the standard Approved Amount, and the Limiting Charge is calculated as 115% of that reduced rate. For example, if the Medicare Approved Amount is $100, the Limiting Charge is $109.25 (115% of $95).
This 15% increase above the Medicare rate is the extra amount the provider can charge the patient directly. The provider is legally prohibited from billing any amount that exceeds this 115% cap, ensuring a predictable upper limit on patient financial responsibility.
The Distinction of Non-Participating Providers
The Limiting Charge applies only when a Medicare beneficiary receives care from a Non-Participating Provider. Participating Providers agree to “accept assignment,” meaning they accept the Medicare Approved Amount as payment in full for all covered services, billing the patient only for the deductible and 20% coinsurance.
Non-Participating Providers are enrolled in Medicare but do not agree to accept assignment for all services. They can choose whether to accept the Medicare Approved Amount on a case-by-case basis. When a Non-Participating Provider does not accept assignment, they are permitted to charge the patient up to the Limiting Charge.
Non-Participating Providers should not be confused with “Opt-Out Providers,” who are formally excluded from the Medicare program entirely. Opt-Out Providers are not bound by the Limiting Charge and can charge any fee, provided they have a private contract with the patient. Medicare provides no reimbursement for these services, making the patient solely responsible for the entire bill.
Scope of Services Subject to the Limiting Charge
The Limiting Charge primarily applies to services covered under Medicare Part B, which includes outpatient physician services and other professional fees. This encompasses a range of common medical care, such as doctor visits, certain diagnostic tests, and outpatient physical therapy. The rule acts as a ceiling for the charges imposed by non-participating physicians for these covered procedures.
The Limiting Charge does not apply universally to all items or services covered by Medicare. Notably, it generally excludes Durable Medical Equipment (DME), such as wheelchairs and oxygen tanks, and certain laboratory services. Furthermore, practitioners like physician assistants and nurse practitioners are subject to mandatory assignment, meaning they must always accept the Medicare Approved Amount as full payment.
Patient Payment Responsibilities and Recourse
When a patient sees a Non-Participating Provider who applies the Limiting Charge, the patient’s financial responsibility is composed of several parts. The beneficiary must first meet their annual Medicare Part B deductible. After the deductible is met, they are responsible for the standard 20% coinsurance based on the Medicare Approved Amount. Finally, the patient is also responsible for the additional amount the provider is allowed to charge, which is the difference between the Medicare Approved Amount and the Limiting Charge, up to the maximum 15%.
The Non-Participating Provider is still required to submit the claim to Medicare, even if they do not accept assignment. This process is necessary for the beneficiary to receive their Explanation of Benefits (EOB), which details the Medicare Approved Amount and the amount the patient owes. Medicare will then send its portion of the payment directly to the patient, who is then responsible for paying the entire Limiting Charge amount to the provider.
If a provider attempts to bill the patient an amount that exceeds the Limiting Charge, this is considered a violation of federal law. Beneficiaries have the right to seek recourse by reporting any such overcharges. Violations can be reported to the Centers for Medicare and Medicaid Services (CMS) or to their State Health Insurance Assistance Program (SHIP). Providers who violate the Limiting Charge rule may face civil monetary penalties of up to $10,000 per violation, plus triple the amount of the overcharge, and potential exclusion from the Medicare program.