Part B Medical Insurance: What You Pay

Medicare's Part B medical insurance pays for doctors' bills, but you have to pay premiums, deductibles, and co-pays for most services.

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Medicare Part B is medical insurance that is intended to help pay doctor bills for treatment either in or out of the hospital, as well as many of the other medical expenses you incur when you are not in the hospital. The other main parts of Medicare are Part A (hospital insurance) and Part D (prescription drug coverage).

Eligibility for Medicare Part B

If you are age 65 or older and are either a U.S. citizen or a resident of the United States who has been here lawfully for five consecutive years, you are eligible to enroll in Medicare Part B medical insurance. This is true whether or not you are eligible for Part A hospital insurance.

Monthly Premiums

Everyone who enrolls in the program must pay a monthly premium. The premium is raised each year on January 1. For 2013, the basic monthly Part B premium for most people—about 75% of all Part B enrollees—is $104.90. This includes everyone:

  • who is already enrolled in Medicare Part B
  • who has their Part B premium deducted from their monthly Social Security benefit check, and
  • whose adjusted gross income is less than $85,000 ($170,000 for a couple filing jointly).

Those with higher income pay an additional monthly surcharge, as shown on the following chart.

Filing Status

Yearly Income

Surcharge

Single

$85,000–$107,000

$42.00

 

107,000-160,000

$104.90

 

160,000-$214,000

$167.80

 

above 214,000

$230.80

Married

$170,001–$214,000

$42.00

 

214,000-320,000

$104.90

 

320,000-$428,000

$167.80

 

above $428,000

$230.80

If, in the prior two years, you have become widowed or divorced, or had a significant drop in income because of retirement or reduced work, you may contact Medicare and request an adjustment of the surcharge on your premium.

Deductible Amounts

Before Medicare pays anything under Part B medical insurance, you must pay a deductible amount of your covered medical bills for the year. The Part B deductible amount is currently $147 per year (in 2013). Medicare keeps track of how much of the deductible you have paid in a given year. It generally does a good job of keeping track, but it is always a good idea to keep your own records and double-check the accounting.

How Much Medicare Part B Pays

When all medical bills are added up, on average Medicare pays for only about half the total. There are three reasons for this. First, Medicare does not cover all major medical expenses; for example, it doesn’t cover routine physical examinations, some medication, glasses, hearing aids, dentures, and some other costly medical services.

Second, Medicare pays only a portion of what it decides is the proper amount—called the approved charges—for medical services. In addition, when Medicare decides that a particular service is covered and determines the approved charges for it, Part B medical insurance usually pays only 80% of those approved charges; you are responsible for the remaining 20%.

Third, the approved amount may seem reasonable to Medicare, but it is often considerably less than what the doctor actually charges. If your doctor or other medical provider does not accept assignment of the Medicare charges, you are personally responsible for the difference.

80% of Approved Charges

For most services, Part B medical insurance pays only 80% of what Medicare decides is the approved charge for a particular service or treatment. You are responsible for paying the other 20% of the approved charge, called your coinsurance amount. And unless your doctor or other medical provider accepts assignment, you are also responsible for the difference between the Medicare-approved charge and the amount the doctor or other provider actually charges, subject to the legal limit discussed below.

Assignment of Medicare-Approved Amount

In most instances, Medicare pays 80% of the approved amount of doctor bills; you or your medigap plan pay the remaining 20%, if your doctor accepts assignment of that amount as the full amount of your bill. Most doctors who treat Medicare patients will accept assignment. Some have signed up in advance with Medicare, agreeing to accept assignment on all Medicare patients. They are called Medicare participating doctors and are paid slightly higher amounts by Medicare than nonparticipating doctors.

Other doctors have not agreed to accept assignment on all patients but will do so on some claims, on a case-by-case basis. Unfortunately, many doctors—particularly specialists who have to compete less for patients—do not accept assignment at all. When deciding on a doctor, find out in advance whether the doctor always takes assignment of the Medicare-approved amount, or if he or she is willing to take assignment on your bills.

Medicare has a lower approved fee schedule for doctors, clinics, and outpatient hospital departments who are not participating Medicare providers (it pays those doctors 5% less for the same services). However, if a doctor (or clinic) does not accept assignment, the doctor can charge you an additional amount about the Medicare-approved amount (15%).

Legal Limit on Amounts Charged

By law, a doctor or other medical provider can bill you no more than what is called the “limiting charge,” which is set at 15% more than the amount Medicare decides is the approved charge for a treatment or service. That means you may be personally responsible—either out of pocket or through supplemental insurance—for the 20% of the approved charges Medicare does not pay, plus any amount the doctor charges up to the 15% limiting charge. Regardless of how much the doctor or other medical provider charges non-Medicare patients for the same service, you can be charged no more than 15% over the amount Medicare approves for that service.

But remember, Medicare pays non-participating doctors, clinics, and outpatient hospital department only 95% of the Medicare-approved amount for a participating Medicare provider, so the limiting charge is based on this amount. Because of this, it works out that a non-participating doctor's total fee can actually be no more than 9.25% of what a participating Medicare provider would charge.

Note that this legal limit does not apply to outpatient hospital charges (see our article on Medicare payments for outpatient hospital services).

100% of Approved Charges for Some Services

There are several types of treatments and medical providers for which Medicare Part B pays 100% of the approved charges rather than the usual 80%, and to which the yearly Part B deductible does not apply. In these categories, you are not required to pay the regular 20% coinsurance amount. In most of the categories, the provider accepts assignment of the Medicare-approved charges as the full amount, so you actually pay nothing at all.

Home Health Care

Whether you receive home health care under Part A or Part B, Medicare pays 100% of the charges, and you are not responsible for your yearly deductible. However, if you receive medical equipment—wheelchair, chair lift, special bed—from the home health care agency, you must pay the 20% coinsurance amount.

Clinical Laboratory Services

Medicare pays 100% of its approved amount for such laboratory services as blood tests, urinalyses, and biopsies. And the laboratory must accept assignment, except in Maryland where a hospital lab can bill you, as an outpatient, for a 20% coinsurance amount.

Preventive Care Screenings

Medicare Part B pays 100% of the Medicare-approved amount for any covered preventive screening examination appropriately prescribed by a physician.

Flu and Pneumonia Vaccines

Medicare pays the full 100% of its approved charges for these vaccinations, and the yearly deductible does not apply. However, the provider is not required to accept assignment, so there may be an additional 15% charge on top of the amount Medicare approves.

For a list of all services covered by Medicare, see our article on Part B Medicare coverage.

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