Traditional Medicare - Physician Balance Billing and Private Contracting

The overwhelming majority of physicians and other clinicians take Medicare: among non-pediatric physicians, a 2022 survey found that 96 percent took new Medicare patients. Of the physicians and other clinicians who take Medicare, about 98 percent are Medicare participating providers, which means they have agreed to accept Medicare’s payment amount as full payment for the services they provide to Medicare beneficiaries. This practice is known as accepting assignment. Medicare beneficiaries are responsible for paying any deductible and coinsurance amounts that may apply.

In contrast, nonparticipating providers who take Medicare are allowed to “balance-bill” Medicare patients up to a certain limit. Specifically, a nonparticipating provider can bill patients up to 15 percent more than the Medicare-approved payment amount for nonparticipating providers for covered services. (The Medicare payment amount for nonparticipating providers is 95 percent of the amount for participating providers.) The Medicare beneficiary is responsible for paying the balance-bill amount up to this 15 percent limit (in addition to any deductible and standard coinsurance amounts that may apply). Medicare does not restrict billing for non-Medicare-covered services, such as cosmetic surgery.

Additional financial protections apply to Medicare beneficiaries with low incomes and limited savings who are enrolled in the Qualified Medicare Beneficiary program. Beneficiaries enrolled in this program do not have to pay Medicare cost-sharing (deductibles, copayments, and coinsurance). In addition, Medicare participating and nonparticipating physicians are not allowed to bill them for Medicare cost-sharing or balance-billing amounts. The Medicaid program in the beneficiary’s state is responsible for paying cost-sharing expenses. The amount paid for cost-sharing, however, may be limited according to state rules. If it is, the physician is not allowed to bill the beneficiary for the difference.

The Centers for Medicare & Medicaid Services has the authority to sanction any physician who knowingly, willfully, and repeatedly charges patients in excess of the balance-billing limit. 

The only way for physicians and other practitioners to bill Medicare beneficiaries more than the allowed amounts described above is if they completely opt out of Medicare. About 1 percent of non-pediatric doctors do so. They then enter into private contracts with beneficiaries for services. Physicians who opt out forgo all payments from Medicare for at least two years. Under a private contract, the beneficiary agrees to pay all of the physician’s charges for contract services. Physicians who enter into private contracts must do so for all Medicare beneficiaries they treat. And they must do it for all covered services. They may not pick and choose the patients or services for which they will bill Medicare. When these physicians refer beneficiaries for outside services, such as lab tests, specialists, or hospital stays, Medicare pays for these services (from providers who accept Medicare). These restrictions reduce the chance of fraudulent billing and prevent doctors from choosing patients based on the severity of their illness.