What Are Medicare Part B Excess Charges?

Medicare Balance Billing

Medicare Part B excess charges are also referred to as Balance Billing. While Medicare beneficiaries typically use the term “excess charges,” medical providers, particularly nonparticipating 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, ensuring that only medicare approved charges are billed to patients . 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, ensuring that the patient receives timely medicare reimbursement 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 for medical care 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 medical treatment services. They are allowed to charge up to 15% more than doctors that accept Medicare assignment, which can be considered as an additional fee .

However, the Medicare assigned rate for non-Participating providers is only 95% of the rate allowed for medical services provided by Participating providers.

Discouraging Non Participating Contracts

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, which makes it essential to compare Medigap policies.

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, leading to confusion about Medicare coverage . The patient is required to pay upfront for services, including emergency care, 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 for medicare recipients to avoid medicare excess charges 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.

To be clear, this is not just the Medicare deductible they ask for, but the entire Medicare bill. Also, Part B excess charges can not be added to every part of your Medicare bill.  Only select covered services can have an excess charge.  There are never excess charges, for example, tacked on to the cost of durable medical equipment like walkers or crutches.  

Why does the non-Participating medical provider ask for upfront payment?

When a doctor chooses to have a Participating Provider contract, accepting Medicare assignement, with Medicare, Medicare becomes their one stop biller. The doctor bills Medicare, then Medicare informs the supplement what to pay and to whom. The doctor does not bill the Medicare supplement insurance company. Medicare becomes the one-stop biller for the medical proivider so the doctor only needs to bill Medicare.

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 or other services like prescription drugs , so they can’t bill directly. Instead, they ask the patient to pay upfront and seek reimbursement on their own.

Patient Inconvenience

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 during doctor visits and sees you without requiring upfront payment, then you can be assured they accept assignment and cannot charge Medicare 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 about how to compare plans , 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 providers decide to become non-participating and charge Part B excess charges.  According to KFF.org more than 98% of health care providers accept assignment and cannot charge Part B excess charges.

Medicare’s Participating Provider Program

Currently, the national percentage of healthcare providers who do not accept assignment and can therefore charge a Part B excess charge under 2%. Of that two percent, almost half are mental healthcare professionals who work in a small, often one-person office, which may not accept a medigap policy for reimbursement . 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 Part B excess charges for emergency and related services. See our blog on Medicare ambulance 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 whose office are non-participating healthcare providers 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?

1. First, Medicare will reduce the amount paid to the provider to 95% of the assignment rate. Thus Medicare’s approved rate is $950.

2. Second, the doctor can charge up to 15% more than the reduced rate. 15% of $950 = $142.50

3. Lastly, you will be responsible for the $142.50 excess charge unless you have one of the two Medigap plans that pay excess charges.

4. 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.

The very popular Medicare supplement Plan N does NOT pay your Part B excess charges.  

Private Plans

Medicare supplement plans are usually offered by a licensed insurance agent. We advise that you seek out an independent licensed 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 Medicare Supplement Insurance Plans

To be clear, Original Medicare is a federal government health insurance program. A Medicare supplemental insurance policy is offered by a private insurance company designed to supplement your Medicare health insurance.  Adding the right Medicare supplement  insurance plan to your Medigap 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