A Medicare Part B excess charge is when a physician charges the patient more than the Medicare approved amount for an outpatient service. Only medicare providers with a non-participating contract with Medicare are allowed to charge an excess charge, and they are limited to no more than 15% of the Medicare approved amount.
How Common Are Excess Medicare Charges?
Medicare Part B excess charges are rare. Only 4% of doctors contracted with Medicare are allowed to charge an excess charge and more than 40% of those are in the mental health industry. Most people go through their entire Medicare experience without ever encountering a doctor that can charge an excess charge.
The thought of doctors charging Medicare beneficiaries more than the Medicare approved amount is frightening for some. However, as we will detail in this article, Medicare excess charges are rare, easily avoidable, and typically minimal in size. Keep in mind that original Medicare insurance does not cover excess charges. Still, with very little effort, you can avoid unwanted charges.
Medicare Balance Billing
Medicare excess charges are also referred to as Balance Billing. While Medicare beneficiaries typically use the term “excess charges,” Medical providers are more familiar with the term “Balance Billing.” They are the same thing.
Medicare Participating Provider
When doctors decide to accept the federal Medicare program as insurance payments for their services, they are required to sign a contract with the Department of Health and Human Services, which manages the federal Medicare program. The contract is online and can be found by searching for form “OMB No. 0938-0373”. In that contract, doctors must choose between being a Medicare Participating Provider or a Non-Participating Provider.
The Medicare Participating Provider accepts Medicare assignment. Medicare assignment simply means that the doctors allow insurance payments directly from Medicare, and Medicare sets the rates for every service provided. The medical provider is contractually obligated to accept the Medicare assignment as full payment for their service. They cannot charge more.
In return, Medicare will provide an extra service to doctors that accept Medicare assignment. Medicare becomes their one-stop biller. The doctor that accepts Medicare assignment will only bill Medicare. Medicare pays their portion, then electronically communicates to the Medicare supplement plan, if there is one, and dictates to the supplement plan what to pay, to whom, and when.
To accept Medicare assignment means the doctor is paid on a timely basis by both your Medicare plan and the Medigap plans and only needs to bill Medicare. Medicare takes care of everything else for them. For the doctor, this contract provides better cash flow with quick payments and less billing frustration with Medicare handling the details.
Non Participating Medicare Provider
Some doctors decide they want to charge more than the Medicare assignment rates. In that case, they can choose to be a non-participating provider with Medicare. The non-participating provider contract allows doctors to accept original Medicare but also allows them to charge more for their services. They are allowed to charge up to 15% more than doctors that accept Medicare assignment.
Discouraging Non Participating Contracts
However, Medicare discourages doctors from becoming non-participating providers. To discourage them from becoming a non-participating provider and charging Part B excess charges, Medicare will reduce their benefits.
First, Medicare will only pay the non-participating doctor 95% of what they pay a participating provider. As a result, when they charge an excess charge for their medical services, they can only charge 15% more than the 95% they receive. When we go over an example below, you will see how this reduces the full payment plus excess charges to only 9.25% more than what the participating provider receives.
Second, Medicare will not be the one-stop biller for the non-participating provider. This is huge and has significant consequences for the provider who decides not to accept Medicare assignment. The doctor is required to submit a claim to Medicare but cannot submit a claim to the supplement. As a result, the non-participating provider must ask the patient to pay for their services upfront. The patient is required to pay upfront and then submit the payment to Medicare and their supplement insurance for reimbursement.
How Do Medicare Excess Charges Work?
When a patient visits a doctor’s office, they can easily tell if the doctors charge the Medicare approved amount (accept Medicare assignment) or charge Medicare Part B Excess charges. The first sign is when they ask you to pay for all or part of your services upfront and request you seek reimbursement from your Medicare supplement plan.
Why would this be? As mentioned above, Medicare will not be the one-stop biller for the doctor who decides to charge more than the Medicare approved amount. The doctor’s office must still bill Medicare, but they cannot bill your Medigap Plan. The doctor has no contract with the insurance company managing the Medigap plans, so they can’t bill directly. Instead, they ask the patient to pay upfront and seek reimbursement on their own.
Obviously, paying upfront and seeking reimbursement would be very inconvenient for most patients. This is why most doctors accept Medicare assignment and, therefore, cannot charge Part B excess charges. If your medical provider simply accepts your original Medicare card and supplement and sees you without requiring upfront payment, then you can be assured they accept assignment and cannot charge Medicare Part B excess charges.
You can also look up your medical provider ahead of time using a physician & hospital search tool on Medicare.gov here: https://www.medicare.gov/care-compare/ This tool will let you know if the providers you are searching accept assignment or can charge Part B excess charges.
From experience, I strongly encourage people to look up their doctor on the Medicare.gov website first before visiting the office. If you attempt to ask the personnel behind the desk, you will often get a blank stare. They are simply not trained in office billing issues.
How Common Are Medicare Part B Excess Charges?
Because of the rules Medicare created to discourage doctors from becoming a non-participating provider and charging more than the Medicare approved amount, very few medical providers decide to become non-participating and charge Part B excess charges.
In fact, KFF.org (Kaiser Family Foundation) has compiled some very interesting statistics on Medicare providers. According to KFF.org 96% of health care providers accept assignment and cannot charge Part B excess charges.
Medicare’s Participating Provider Program
When Medicare started the participating provider program in 1984, more than 30% of medical providers charged Part B excess charges. But with the incentives provided to participating providers mentioned above, the percentage of providers choosing not to participate has steadily decreased in number. The amount allowed for the excess charge is simply not enough to overcome the extra costs and inconvenience that result from being a non-participating provider.
Currently, the national percentage of healthcare providers who do not accept assignment and can therefore charge a Part B excess charge is 3%. Of those three percent, almost half are mental healthcare professionals who work in a small, often one-person office. Not included in the above is the fact that less than one percent of medical providers opt-out of Medicare entirely.
The bottom line is that most Medicare participants can go through their entire Medicare experience without ever coming across a non-participating provider who can even charge a Medicare Part B excess charge. Virtually all health care providers are participating providers and accept the Medicare approved amount as full payment for their services.
Important Fine Points on Medicare Charges
Just as a picture paints a thousand words, a concrete example of excess charges is the best way to understand how they work. But before we look at an example, here are a few important points that will help increase your understanding and comfort level:
- There are no Part A excess charges. You cannot be charged an excess charge when an inpatient is in a hospital or other medical facility. Excess charges are allowed for select outpatient services only.
- There are no excess charges for emergency and related services.
- Medicare uses an “all-or-none” rule regarding medical offices and hospitals. Simply put, in any medical organization (i.e. hospital, doctor’s office, etc.), either all providers can charge an excess charge or none.
- Just because a doctor can charge an excess charge doesn’t mean they must charge one. It is negotiable on a case-by-case basis.
- Medicare Advantage Plans do not allow excess charges.
An Example of Medicare Part B Excess Charges
Now for an example. Let’s say you visit a doctor who is non-participating and will charge more than the Medicare assigned rate. Your medical procedure has a standard Medicare assignment rate of $1,000. How much would the excess charge be?
- First, Medicare will reduce the amount paid to the provider to 95% of the assignment rate. Thus Medicare’s approved rate is $950.
- Second, the doctor can charge up to 15% more than the reduced rate. 15% of $950 = $142.50
- Lastly, you will be responsible for the $142.50 excess charge unless you have one of the two Medigap plans that pay excess charges.
- The $950 Medicare discounted rate plus the $142.50 balance bill =$109 2.50, just $9.25 more than what a participating provider would receive.
Medicare Supplement Insurance Plans
A Medicare supplement, also called Medigap Plan, can pay your balance due from an excess charge. Of the plans available to you, only Medigap Plan F and Plan G covers excess charges billed. The high deductible versions of these plans will credit the amount you pay toward extra charges as part of your high deductible.
Medigap policies are private insurance products that are designed to pay some of all of the deductibles, copays, coinsurance left as your responsibility. They work with your original Medicare to increase your overall health insurance coverage. These plans have a monthly premium
Medicare supplement plans are usually offered by a licensed insurance agent. We advise that you seek out an independent licensed Medicare agent; an independent insurance agent specializing in Medicare. An independent insurance agent can show you all the Medicare plans available to you. The right agent can provide complete details on all the plans, show you all your Medicare options and help you purchase the plan. The right plan should lower costs associated with your healthcare.
Understanding Medigap Plans
To be clear, Original Medicare is a federal government health insurance program. A Medigap plan is offered by a private insurance company designed to supplement your Medicare health insurance. With the right Medigap plan, it will not matter to you whether or not your doctor will accept assignment. Adding the right supplement plan to your Medicare plan can result in the entire amount of your medical bills paid by the combination of Part B and your Medigap plan. The result may be a total bill of zero. you don’t have to know how Medicare Part A & B works because your supplement pays the deductibles and copay.
Benefit Chart of Medicare Supplement Plans
|Benefits||Medicare Supplement Insurance (Medigap) Plans|
|Part A coinsurance and hospital costs (up to an additional 365 days after Medicare benefits are used)||100%||100%||100%||100%||100%||100%||100%||100%||100%||100%|
|Part B coinsurance or copayment||100%||100%||100%||100%||100%||100%||50%||75%||100%||**100%|
|Blood (first 3 pints)||100%||100%||100%||100%||100%||100%||50%||75%||100%||100%|
|Part A hospice care coinsurance /copayment||100%||100%||100%||100%||100%||100%||50%||75%||100%||100%|
|Skilled nursing facility coinsurance||-||-||100%||100%||100%||100%||50%||75%||100%||100%|
|Part A deductible||-||100%||100%||100%||100%||100%||50%||75%||50%||100%|
|Part B deductible||-||-||100%||-||100%||-||-||-||-||-|
|Part B excess charge||-||-||-||-||100%||100%||-||-||-||-|
|Foreign travel (up to plan limits)||-||-||80%||80%||80%||80%||-||-||80%||80%|
|Out-of-pocket max limit||NA||NA||##||##||##||##||$6,620||$3,310||NA||##|
Do Medicare Supplements Pay Part B Excess Charges?
Only Plan G and Plan F pay Medicare Part B excess charges. The high deductible versions of these two plans will credit excess charges to the plan deductible. However, there are eight states that ban medical providers from charging an excess charge.
Which States Allow Medicare Part B Excess Charges
There are eight states who have adopted laws that override Medicare for the benefit of the consumer. These eight states are Connecticut, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, and Vermont. Residents of these states cannot be charged a Medicare Part B excess charge when visiting a medical provider in their state. In all other states, the consumer is responsible if they wish to avoid Medicare Part B balance billing.
Medicare Override Measure
State laws that override Medicare to the benefit of the consumer are referred to as Medicare Override Measures (MOM). This term is commonly used to refer to the state laws that forbid excess charges. They have no impact on medical care but impact the amount Medicare patients can be charged for services.
Does Medicare Advantage Cover Excess Charges?
Medicare Advantage Plans do not allow Part B excess charges. If you have an Advantage plan, you will not be charged a Part B excess charge.
Matthew Claassen, CMT