Unexpected medical bills are frustrating under any circumstances, but they’re especially confusing when you have Medicare. Many beneficiaries assume that if Medicare covers a service, they can only be charged their deductible, copay, or coinsurance. While that’s often true, there are situations where you may be charged more than the Medicare-approved amount.
This practice is known as balance billing.
Understanding how balance billing works can help you avoid surprise healthcare costs and make more informed decisions about where you receive care. Fortunately, Medicare includes several protections that limit when and how balance billing can occur.
What Is Balance Billing?
Balance billing occurs when a healthcare provider charges a patient for the difference between the provider’s charge and the amount an insurance company is willing to pay.
For example, imagine a provider charges $150 for a service, but the insurance company only approves $100. If the provider bills the patient for the remaining $50, that’s balance billing.
In many types of health insurance, balance billing can result in significant unexpected expenses. However, Medicare has rules that limit balance billing in most situations. That doesn’t mean it never happens. The key is understanding when it can occur and how to protect yourself.
How Medicare-Approved Amounts Work
To understand balance billing, it helps to first understand Medicare-approved amounts.
When Medicare covers a service, it establishes a price that it considers reasonable for that service. This is known as the Medicare-approved amount.
If a provider accepts Medicare assignment, they agree to accept that approved amount as full payment for covered services. Medicare pays its share, and you pay your share, but the provider cannot bill you beyond those amounts. This arrangement protects beneficiaries from most balance billing situations. Problems typically arise when a provider does not accept Medicare assignment.
Providers Who Accept Assignment
Most doctors and healthcare providers who work with Medicare patients accept assignment.
When a provider accepts assignment, they agree to:
- Accept Medicare’s approved amount as payment in full for covered services
- Submit claims directly to Medicare
- Charge beneficiaries only the applicable deductible, copay, or coinsurance
For Medicare beneficiaries, this is generally the most predictable and cost-effective arrangement. Because the provider has agreed to Medicare’s payment terms, balance billing is not permitted for covered services.
Providers Who Do Not Accept Assignment
Some providers participate in Medicare but do not accept assignment for every service. These providers are known as non-participating providers.
A non-participating provider can choose on a case-by-case basis whether to accept Medicare assignment. If they choose not to accept assignment, they may charge more than the Medicare-approved amount.
However, Medicare places limits on how much additional money these providers can charge. This extra amount is often referred to as an excess charge, and it’s one of the most common forms of balance billing that Medicare beneficiaries encounter.
Understanding the Medicare Limiting Charge
Fortunately, Medicare does not allow non-participating providers to charge whatever they want.
Most states impose what’s known as a limiting charge, which restricts how much a provider can bill above the Medicare-approved amount. In many cases, the maximum additional charge is 15% above the Medicare-approved amount.
For example, if Medicare approves $100 for a service, a provider who does not accept assignment may be able to charge up to $115. While that may not seem like a large difference, excess charges can add up over time, especially for beneficiaries who require frequent medical care or expensive treatments. This is one reason it’s important to understand a provider’s Medicare participation status before receiving care.
What About Doctors Who Opt Out of Medicare?
There’s an important distinction between non-participating providers and providers who have completely opted out of Medicare.
A provider who opts out of Medicare enters into private contracts with patients and generally does not submit claims to Medicare at all. When you receive care from an opted-out provider, Medicare typically will not pay for the service. In most cases, you’ll be responsible for the full cost.
This isn’t balance billing in the traditional sense because Medicare isn’t involved in the payment process. However, it can result in significantly higher out-of-pocket costs.
How Medicare Advantage Handles Balance Billing
If you’re enrolled in a Medicare Advantage plan, balance billing rules work somewhat differently.
Medicare Advantage plans operate through private insurance companies and often use provider networks. When you receive care from in-network providers, your costs are generally limited to the plan’s copays, coinsurance, and deductibles.
In most situations, in-network providers cannot balance bill you beyond the plan’s approved cost-sharing amounts.
However, receiving care outside the network may lead to higher costs, depending on the type of Medicare Advantage plan you have. Some plans offer out-of-network coverage, while others do not.
How Medigap Plans Can Help
For beneficiaries with Original Medicare, certain Medigap plans can provide protection against excess charges.
Historically, Medigap Plan F and Plan G have covered Medicare Part B excess charges. This means that if a provider charges above the Medicare-approved amount within the limits allowed by Medicare, the Medigap plan may pay those additional costs.
As a result, beneficiaries with these plans may have little or no financial exposure to excess charges. Not all Medigap plans provide this benefit, however, so it’s important to understand what your specific plan covers.
How to Avoid Balance Billing
The easiest way to avoid balance billing is to verify that your provider accepts Medicare assignment before receiving care. A simple phone call to the provider’s office can often provide the answer. You can also use Medicare’s online provider directory to confirm participation status.
When choosing healthcare providers, it’s generally wise to ask questions such as:
- Do you accept Medicare assignment?
- Are you participating in Medicare?
- Will I be responsible for any excess charges?
Taking a few minutes to ask these questions can help prevent unpleasant surprises later.
It’s also important to review your Medicare Summary Notice (MSN) or Explanation of Benefits (EOB) after receiving care. These documents can help you identify unexpected charges and determine whether they were billed correctly.
What Should You Do If You Think You’ve Been Balance Billed?
If you receive a bill that seems higher than expected, don’t assume it’s correct. Start by reviewing your Medicare Summary Notice or Explanation of Benefits. Compare the services listed with the charges on the provider’s bill.
If something doesn’t make sense, contact the provider’s billing office and ask for an explanation. In many cases, what appears to be balance billing may actually be a billing error that can be corrected.
If you still believe you’ve been improperly charged, you can contact Medicare or your Medicare Advantage plan for assistance. They can help determine whether the charges comply with Medicare rules.
If you have questions about Medicare costs, provider billing practices, or your coverage options, the team at Carolina Senior Benefits is here to help you better understand your Medicare benefits and avoid costly surprises.
