Balance billing describes a medical provider charging a patient for the difference between the provider’s standard charge for a service and the amount Medicare agrees to pay. While common in commercial insurance, this practice is largely restricted or prohibited under Medicare rules. Understanding when a provider is allowed to balance bill is essential for a beneficiary to manage healthcare costs, as the rules depend primarily on the provider’s contractual relationship with Medicare.
What Balance Billing Means
The concept of balance billing is rooted in the “Medicare-Approved Amount,” which is the maximum fee Medicare determines is reasonable for a specific medical service. This amount is calculated using a national fee schedule, adjusted for geographic location and other factors. A provider who accepts Medicare agrees to accept this approved amount as the full payment for a covered service.
When a provider “accepts assignment,” they agree not to charge the patient more than the Medicare deductible and coinsurance amount. This means they accept the Medicare-Approved Amount as payment in full, minus the beneficiary’s cost-sharing responsibilities. Balance billing is the act of charging a patient for the remaining amount above this approved rate, a practice generally prohibited by federal law when assignment is accepted.
A provider’s standard charge for a service is often higher than the Medicare-Approved Amount. Billing the patient for this difference constitutes balance billing. Exceptions to this prohibition depend on the provider’s status with Medicare, which dictates the total amount they are legally permitted to charge the beneficiary. Even when permitted, strict limits are placed on the maximum charge a provider can legally impose.
How Provider Status Affects Billing
The ability of a healthcare provider to balance bill a patient under Original Medicare is determined by their enrollment status, which falls into one of three categories. The majority are “Participating Providers,” who have signed an agreement to always accept assignment for all Medicare-covered services. These providers are strictly prohibited from balance billing beneficiaries and can only collect the required deductible and coinsurance.
“Non-Participating Providers” are enrolled in Medicare but have not signed the agreement to accept assignment for all services. These providers may bill patients for a limited amount above the Medicare-Approved Amount. This maximum is known as the “Limiting Charge,” set at 15% above the amount Medicare pays. Charging the patient anything beyond this 15% limit is illegal balance billing.
The third category consists of “Opt-Out Providers,” who have formally chosen to leave the Medicare program entirely. These providers have no contract with Medicare and are not reimbursed by the program. An Opt-Out Provider is legally allowed to bill the patient any amount they choose. However, they must first enter into a private contract with the beneficiary stipulating that Medicare will not cover the services and the patient is responsible for the full cost.
For beneficiaries enrolled in a Medicare Advantage (Part C) plan, balance billing is generally prohibited if the service is received from an in-network provider. The plan’s contract mandates that the provider accept the plan’s payment as payment in full. If the plan is a PPO and the beneficiary uses an out-of-network provider for non-emergency services, the provider may be able to balance bill depending on the plan’s specific rules.
Patient Rights and Recourse
Beneficiaries have specific rights if they suspect they have been illegally balance billed. The first step involves carefully reviewing the paperwork received after a service, such as the Medicare Summary Notice (MSN) or the Explanation of Benefits (EOB) from an Advantage plan. These documents detail the Medicare-Approved Amount and the portion the patient is responsible for paying.
If an illegal balance bill is identified, the patient should first contact the provider’s billing department to explain that the charge exceeds the Limiting Charge or is from a Participating Provider. Providers must take immediate action to correct the error, including refunding any amounts already paid and ceasing collection efforts. If the provider refuses to resolve the issue, the patient should not pay the balance bill.
The next step is to file a complaint with the appropriate government or assistance agency. Beneficiaries can contact 1-800-MEDICARE or their State Health Insurance Assistance Program (SHIP) for guidance on reporting the violation. These programs provide counseling and can help initiate the formal complaint process against a provider.
Federal protections offer safeguards against unexpected medical bills. Specifically, balance billing is prohibited for emergency services, even if received at an out-of-network hospital, ensuring patients are not penalized during urgent medical situations. These protections ensure that the patient’s financial liability is limited.