- June 2, 2020
Today we’re going to talk about how to cover Medicare excess charges. If you’ve never heard of Medicare excess charges, don’t worry. We’re going to briefly explain what they are, then teach you how to eliminate them for good. Let’s get started.
How Medicare Works: A Brief Background
Statistically speaking, about half of you will make the decision to stay in the original Medicare system, also called Medicare A and B. When you make the choice to stay on Original Medicare (we think this is a great choice, by the way), you’re leaving Medicare in the first payer position.
What this means is that any time you go to the doctor, hospital, or have any other medical service done, Medicare receives the claim and pays first. Now even though Medicare pays pretty well, it never pays 100 percent for anything. In other words, you’ll always be financially responsible for some part of the claim. We call this a gap in your coverage. There are actually six gaps in original Medicare A and B, three gaps in A coverage, and three gaps in B coverage.
The first gap is your Part A and Part B deductibles. Other gaps are co-pays and coinsurance gaps. The final gap you’ll have is the excess charge gap, which is what we’re focusing on today.
What Are Medicare Excess Charges?
As we already mentioned, Medicare excess charges are gaps in Original Medicare coverage. Doctors (like primary care doctors, specialist surgeons, anesthesiologists, etc.) are the only ones allowed to bill for excess charges, meaning you’ll never get an excess charge bill from a hospital or a medical equipment provider.
So what exactly is an excess charge?
Every service Medicare covers has a fixed amount attached to it, called the Medicare-approved amount. Some doctors aren’t happy with this Medicare-approved amount, so they add 15 percent to the bill. You are responsible for covering the extra 15 percent. Keep in mind, this 15 percent excess charge is completely legal and allowed.
One of the biggest problems with excess charges is that they never stop. In other words, there is no annual max amount for excess charges. The doctor can legally add 15 percent to the bill every single time you go in for a visit or a service.
Let’s look at a few examples.
Jim needs surgery so he goes to see his surgeon. Now, the surgeon (and anesthesiologist) will be paid through Medicare Part B. Medicare Part B coverage is always 80-20, meaning Medicare covers 80 percent and you cover 20 percent.
Jim’s surgeon has been approved to do a surgery for $10,000, which is, quite frankly, not a whole lot of money for surgery. But since Medicare has only approved $10,000 for the surgery, that’s what the cost is. In this example, Jim’s surgeon opts to not add any excess charges and accepts Medicare’s approved amount. When the bill comes, Jim is responsible to cover 20 percent (or $2,000), while Medicare will pick up the other 80 percent (or $8,000). As you can see, there are no excess charges in this example.
Now let’s say Jim’s surgeon wasn’t happy with the Medicare-approved amount of $10,000 so he decides to add 15 percent to the bill. Here’s what will happen: The bill will now total $11,500 (an excess of $1,500). But since Medicare only approved $10,000, they will still only cover 80 percent of $10,000.
This leaves Jim to not only pay for the original 20 percent ($2,000) but now he’ll also have to pick up the tab on the excess $1,500. So in this example, Jim is now paying $3,500.
In short, excess charges can add up quickly and you are 100 percent responsible to pay for them.
How to Cover Excess Charges
If you’re like most people, you don’t want the financial risk of paying for excess charges out of your own pocket. So what can you do?
To eliminate the risk of paying for excess charges out of pocket, most people buy a Supplemental plan. While there are 10 different Supplemental plans on the market today, only two Supplemental plans (Plan F and Plan G), pay for excess charges. Meaning if you buy any other Supplemental plan besides F or G, you’ll still be responsible to pay for the excess charges.
Now, just a quick reminder, not everyone can buy a Supplemental plan F. If you were born before January 1st, 1955, and started Medicare before January 1st, 2022, then you are free to buy a Supplemental plan F. However, if you were born after January 1st, 1955, and started Medicare after January 1st, 2022, you will not qualify to buy a Plan F so you’ll have to buy a plan G to cover your excess charges.
Let’s go back to our example. Jim’s surgeon added 15 percent to his $10,000 surgery bill, making the total $11,500. This time, though, Jim has a Supplemental Plan F or G.
Here’s how it will work: Medicare will still cover 80 percent of their approved $10,000, but now Jim’s Supplemental plan will take care of both the 20 percent of $10,000 ($2,000) plus the excess charge amount of $1,500. The Supplemental plan takes care of everything, so Jim doesn’t have to pay for any of it out of his own pocket.
Medicare excess charges occur when a doctor adds 15 percent to the Medicare-approved amount. When this happens, Medicare will still only cover 80 percent of its approved amount, leaving you to cover 20 percent of the approved cost, plus the entire 15 percent excess charge. Excess charges pose a huge financial risk, so most people opt to get a Supplemental plan F or G to transfer the liability of these charges to an insurance company.
We understand how difficult making the right Medicare decisions can be. To take the next step, watch our full course here, or schedule a free one-on-one call with a certified Medicare School Guide who can answer your questions, compare plans options, and even help you enroll. Click here to get started.
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