The Medicare program offers health coverage primarily to people aged 65 or older and certain younger people with disabilities, delivered through two main parts: Part A for hospital services and Part B for medical services like doctor visits. For beneficiaries to receive covered services, healthcare professionals and facilities must establish a formal relationship with Medicare through a provider agreement. This choice by the provider determines their status, which falls into two categories: Participating (PAR) or Non-Participating (Non-PAR). The status a provider chooses is a business decision that dictates their billing practices, reimbursement rates, and most importantly, the financial experience of the Medicare patient.
Defining Participating (PAR) Provider Status
A Participating (PAR) provider is a healthcare professional or facility that has signed an agreement with Medicare to accept the program’s terms for all Medicare-covered services they provide. The core commitment made by a PAR provider is to “accept assignment” for every Medicare claim. Accepting assignment means the provider agrees to accept the Medicare-approved amount as the total payment for the service.
This commitment means the provider cannot charge the patient more than the Medicare-approved amount, protecting the beneficiary from “balance billing.” PAR providers also agree to submit claims directly to Medicare, simplifying the administrative process for the patient. This status is rooted in federal law, specifically the regulations governing provider agreements under Medicare Part B, as outlined in statutes like 42 U.S.C. § 1395u(h).
How PAR Status Affects Beneficiary Costs
When a Medicare beneficiary receives a service from a PAR provider, their out-of-pocket costs are clearly defined and limited. The patient is only responsible for two components: the annual Medicare Part B deductible and the 20% coinsurance of the Medicare-approved amount. Once the deductible is met, the provider receives the payment in two parts.
Medicare pays the provider directly for 80% of the approved amount for the service. The remaining 20% is the patient’s coinsurance responsibility, which they pay to the provider. For example, if the Medicare-approved amount for a procedure is $100, the patient’s maximum financial liability after the deductible is $20, and Medicare pays the remaining $80.
Understanding Non-Participating (Non-PAR) Providers
The alternative choice for a healthcare professional is to become a Non-Participating (Non-PAR) provider; this means they have not signed the formal agreement to accept assignment for all Medicare claims. While Non-PAR providers are still enrolled in the Medicare program, they retain the flexibility to decide, on a case-by-case basis, whether they will accept assignment for a specific service. A Non-PAR provider who chooses not to accept assignment for a service may bill the patient directly for the full charge at the time of service.
Even without a PAR agreement, Non-PAR providers are still required to submit a claim to Medicare for covered services. If the Non-PAR provider does not accept assignment, Medicare will send its portion of the payment directly to the patient, who must then reimburse the provider. This often results in a more complex billing process for the patient, who must manage the reimbursement process themselves. Non-PAR providers are also reimbursed at a lower rate by Medicare, receiving 95% of the Medicare-approved amount compared to PAR providers.
The Medicare Limiting Charge
When a Non-PAR provider chooses not to accept assignment for a service, the Medicare Limiting Charge is the mechanism that protects the beneficiary from excessive billing. The Limiting Charge represents the maximum amount a Non-PAR provider can legally bill a Medicare beneficiary for a covered service. This financial ceiling is set by federal law at 15% above the Medicare-approved amount for that service.
For instance, if Medicare’s approved amount for a service is $100, a Non-PAR provider who does not accept assignment can charge the patient a maximum of $115 (115% of the approved amount). The patient is responsible for paying this full amount, though they will receive a partial reimbursement from Medicare later.