Traditional Fee-for-Service Medicare/Advance Beneficiary Notices

On this page: Medicare


Most private insurance contracts allow providers and enrollees to obtain prior assurance that a claim will be covered. This is the case for many higher-cost services, but in some circumstances the health plan may require preauthorization. This, however, is not how Medicare operates. Instead, when a provider believes Medicare will not deem a recommended service “reasonable and necessary” (its standard for coverage), he or she must notify the beneficiary, both verbally and in writing, that the service may not be reimbursable. This “advance beneficiary notice” (ABN) is intended to foster an informed discussion between the doctor and the beneficiary about whether or not to proceed with the service at the beneficiary’s expense. (An ABN is not required for services that are categorically excluded from Medicare coverage, such as cosmetic surgery and experimental procedures.)

An ABN is not considered a private contract, yet some providers have misused them, asking beneficiaries to sign blanket notices far in advance without specifying the service; this holds them financially liable for all charges if Medicare denies coverage for any services. A blanket notice that does not specify the service does not fulfill the purpose of the ABN or enable a beneficiary to make an informed choice each time a service is recommended.

As part of the Medicare Modernization Act of 2003, Congress called for a system of prior determination in Medicare for certain items and services. CMS published final rules for the new system in 2008. They state that beneficiaries or their providers may ask a Medicare administrative contractor about the coverage and cost of certain services and items. Prior-determination requests may be made only for physician services with the highest average allowed charges, and for plastic and dental surgeries with a Medicare Physician Fee Schedule amount of $1,000 or more. Many beneficiaries may not be aware of physician charges or of their right to prior determinations.

Traditional Fee-for-Service Medicare/Advance Beneficiary Notices: Policy

Appropriate use

In this policy: Federal

CMS should ensure that providers and beneficiaries are informed about the appropriate use of ABNs.

ABNs should clearly indicate the item or service for which Medicare payment is in question, the reason why Medicare payment is in question, and why the provider believes the service is necessary. ABNs also should require the signatures of both the provider and the patient.

Routine use of ABNs by providers should be prohibited. CMS should monitor the use of ABNs and sanction providers who use them inappropriately.

CMS should closely monitor the system of prior determination in Medicare to ensure that it is applied as fairly and broadly as feasible.