Medicare Terminology: What is the Medicare Approved Amount?

The Medicare-approved amount is a rate that has been negotiated between Medicare and doctors and hospitals for each medical service.  The Medicare approved amount is usually much less than the amount a provider normally charges for their medical services.  

MOST doctors who treat Medicare patients have signed a contract with Medicare; and agree to the reimbursement rates that Medicare deems appropriate for each covered medical service.  The terminology used is the doctor ‘accepts Medicare assignment’.   They are called Medicare Participating Providers.

A Medicare beneficiary who has traditional Medicare and no supplemental insurance will normally be billed for 20% of the Medicare Part B approved amount.

An example:  You go to your doctor for a cold.  The doctor’s office visit fee is normally $100 for people who do not have Medicare.  However, Medicare has negotiated a rate for Medicare beneficiaries for $50.  Medicare will send your doctor 80% of this fee ($40), leaving you with 20%, or $10.  Ten dollars is the amount that the doctor can bill you.

If you have a Medicare supplement, Medicare will send the remaining portion of the bill ($10 in the example above) to the insurance company to process and pay based on the type of plan you have.

There are some doctors though who do not accept Medicare assignment.  If the doctor does not accept assignment, it doesn't mean that they won't treat you, it just means that they are allowed to charge you up to 15% more than what Medicare approves for that service. 

Sometimes, providers will send invoices that show the normal amount that they charge non-Medicare beneficiaries, and use the term ‘write off’ to adjust for the amount that Medicare will approve for that service.  Medicare beneficiaries get confused with this terminology, but it is just a way to show the rate that has been negotiated for ALL people on Medicare. 

It is becoming increasingly important for Medicare beneficiaries to read the statements they receive from Medicare and their supplemental insurance company.  These statements show the amount that was billed for every claim; and what your legal responsibility is according to Medicare rules.  Checking these statements before paying any provider is recommended in order to be sure you are not overpaying.

*The example above is for illustration purposes only; and does not represent current Medicare adjusted rates.