The Advance Beneficiary Notice of Non-coverage (ABN) is a standardized document from the Centers for Medicare & Medicaid Services (CMS) designed to protect individuals with Original Medicare from unexpected financial liability. Officially designated as Form CMS-R-131, this notice is issued by healthcare providers, physicians, and suppliers to beneficiaries enrolled in Medicare Part A or Part B. The ABN is not used for Medicare Advantage (Part C) or Part D prescription drug services. Its function is to serve as a formal warning that Medicare may not cover a specific item or service the provider recommends, transferring the potential financial risk to the beneficiary before the service is delivered.
The Purpose and Structure of the ABN
The primary reason a beneficiary receives an ABN is that the provider anticipates Medicare will deny payment for a service that is typically covered under the program. This anticipated denial is usually based on the service not being considered medically reasonable or necessary for the specific patient’s condition. Medicare coverage rules establish limits, such as how often a test can be performed or whether a particular service is appropriate for a given diagnosis. When the recommended care exceeds these established parameters, the provider is required to issue the ABN.
The ABN is structured to ensure transparency and informed consent regarding the potential out-of-pocket cost. It clearly identifies the specific item or service in question, such as a particular lab test or a course of therapy. A separate section of the form must provide a clear explanation, in patient-friendly language, of why the provider believes Medicare will not pay, such as “Medicare does not pay for this test as often as this” or “Not indicated for the diagnosis.” Crucially, the form also includes an estimate of the cost for the item or service, which represents the financial liability the beneficiary will assume if Medicare denies the claim. Providing this estimated cost allows the beneficiary to make a fully informed decision before proceeding with the care.
The Three Main Options Available to the Beneficiary
Upon receiving the ABN, the beneficiary must choose one of three distinct options, which determines the next steps for billing and financial responsibility. The act of signing the ABN simply acknowledges that the notice was received and the patient has made a selection; it does not automatically obligate them to pay.
Option 1: Receive Service and Submit Claim
The first choice, Option 1, is for the beneficiary to receive the item or service and instruct the provider to submit a claim to Medicare for an official decision. Selecting Option 1 means the beneficiary accepts financial responsibility if Medicare ultimately denies the claim, but they retain their right to appeal that denial. The provider may ask for payment upfront, with the understanding that a refund will be issued if Medicare covers the service. This is the only option that preserves the beneficiary’s right to enter the formal Medicare appeals process.
Option 2: Receive Service and Pay Out-of-Pocket
The second choice, Option 2, is for the beneficiary to receive the item or service but agree to pay for it entirely out of pocket, instructing the provider not to submit a claim to Medicare. By choosing this route, the beneficiary immediately accepts financial liability for the full estimated cost. Since no claim is submitted to Medicare, the patient waives all rights to a formal Medicare denial or subsequent appeal of the coverage decision.
Option 3: Refuse Service
The third option is the simplest: Option 3 allows the beneficiary to refuse the item or service entirely. If this option is chosen, the patient is not financially responsible for the service listed on the ABN.
Understanding Financial Responsibility and the Appeal Process
A beneficiary’s financial responsibility is not confirmed until Medicare processes the claim and issues a denial, assuming Option 1 was selected. If Medicare denies the claim after the service is rendered, the beneficiary will receive a Medicare Summary Notice (MSN) that formally communicates the payment decision. The MSN is the necessary document to begin the process of challenging the denial.
The first level of the official Medicare appeals process is called Redetermination, which is an independent review of the claim by the Medicare Administrative Contractor. The beneficiary must submit a written request for this review, typically within 120 days of receiving the MSN. The ABN serves as proof that the provider informed the patient of the non-coverage risk, which is a required step for the provider to legally bill the patient if the denial is upheld.
The beneficiary is only ultimately responsible for payment if the service remains uncovered after all levels of the administrative appeal process are exhausted, or if they initially chose Option 2 on the ABN. If the appeal is successful at any stage, the provider must refund any payments the beneficiary made, minus applicable copayments or deductibles. This entire ABN and appeal framework ensures that beneficiaries are not held accountable for costs without first being informed of the risk and having the right to challenge the coverage decision.