What Does The Medicare-Approved Amount Mean?
A Medicare-approved amount is the maximum that Original Medicare Part A or Part B pays for a medical service or procedure.
It is the standard amount that Original Medicare health insurance will pay, often lower than the amount the healthcare provider may charge. Medicare only covers a portion of the total payment; the remaining balance is paid by the patient or covered by supplemental insurance. The approved amount differs for each medical service, and Medicare determines it based on location, medical necessity, and other healthcare factors.
An Example of the Medicare-Approved Amount
Let’s say a Medicare beneficiary needs to have a CT scan for a medical diagnosis. To start, the healthcare provider must receive confirmation from Medicare that it will cover the cost of the procedure. Then, based on location and other factors, Medicare determines an approved amount for the service.
For example, if the approved amount for a scan in a specific area is $400, Medicare coverage will only reimburse up to $400 for that service. Providers who accept Medicare assignments are prohibited from charging more than the approved amount.
However, if the provider doesn’t accept Medicare assignment, they may charge up to 15% more than the approved amount. In such cases, the patient or their secondary insurance would cover the difference between the approved and charged amounts. This additional 15% charge is called the Medicare Part B Excess charge.
Why Medicare-Approved Amounts Matter?
A clear understanding of the Medicare-approved amount is crucial as it is often significantly lower than the prices charged by providers without insurance. This understanding directly impacts the amount you must pay from your pocket for medical procedures. Additionally, in cases where you seek care from a healthcare provider who charges more than the Medicare-approved amount, you will be responsible for covering the difference out-of-pocket.
How Are Medicare-Approved Amounts Determined?
The Medicare-approved amount is determined based on location, medical necessity, and other healthcare factors. The Centers for Medicare and Medicaid Services (CMS) sets the Medicare-approved amount for each service. CMS sets the price for a Medicare-covered service based on what it considers reasonable and necessary. Medicare uses a fee schedule to determine the approved amount for each service provided to a Medicare patient.
Healthcare providers must charge the Medicare-approved amount when submitting their claims to Medicare.
Medicare Approved Amount: Part A, Part B and Medigap
As previously mentioned, the Medicare-approved amount for services covered under Medicare is typically determined by a “reasonable charge” for the service. This ensures that the amount is fair and appropriate for the provided service.
The Medicare-approved amount and Part A
The first step when utilizing Medicare Part A (hospital coverage) is establishing the Medicare-approved amount. Once determined, you will be responsible for your deductible if it has not been satisfied. If the amount exceeds your deductible, Medicare will cover 80% of the remaining balance, while you will be responsible for the remaining 20%.
The Medicare-approved amount and Part B
Like Part A, Medicare Part B (outpatient services) follows a comparable process. The Medicare-approved amount is determined, and if your deductible for the year has not been satisfied, you will be responsible for it. Afterward, Medicare will cover 80% of the approved amount, leaving you with 20%.
The Medicare-approved amount and a Medigap Plan
The purpose of purchasing a Medigap plan is to bridge the gaps left by Original Medicare. The Medicare-approved amount is still established initially. However, depending on your level of coverage, a Medigap plan can help cover additional out-of-pocket costs such as deductibles and the remaining 20% balance. Some Medigap plans even cover the Part B excess charges mentioned earlier.
Bottom Line
Understanding the Medicare-approved amount is essential for seniors who wish to minimize their out-of-pocket expenses when it comes to their medical care. By knowing the maximum amount Medicare will pay for each medical service, seniors can make informed decisions about their healthcare coverage.
Make sure to check with your healthcare providers to ensure that they accept Medicare and charge the Medicare-approved amount when submitting their claims to Medicare. If you have any questions or concerns about Medicare-approved amounts, don’t hesitate to contact a Medicare representative or your healthcare provider.
Sources: Medicare.gov – AARP.org – Kaiser Family Foundation – Medicare Interactive
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