Medicare Part B basically covers "outpatient" care: office visits to medical specialists, ambulance transportation, diagnostic tests performed in a doctor's office or in a hospital on an outpatient basis, physician visits while the patient is in the hospital, and various outpatient therapies that are prescribed by a physician. Part B also covers a number of preventive services. In addition, Part B covers home health services if the beneficiary is not enrolled in Medicare Part A.
Medicare recipients who are eligible for Part A are automatically enrolled in Part B unless they opt out. Part B enrollees pay a monthly premium that is adjusted annually. This premium, which is $144.60 a month in 2020, pays for about one-quarter of Part B's actual costs; the federal government pays for the other 75 percent through general tax revenues. This cost-sharing makes Part B something of a bargain, and many Medicare recipients buy it unless their present or former employer provides comparable coverage.
Higher income beneficiaries pay higher Part B premiums. Following are the higher premium rates:
- Individuals with annual incomes between $87,000 and $109,000 and married couples with annual incomes between $174,000 and $218,000 in 2020 will pay a monthly premium of $202.40.
- Individuals with annual incomes between $109,000 and $136,000 and married couples with annual incomes between $218,000 and $272,000 in 2020 will pay a monthly premium of $289.20.
- Individuals with annual incomes between $136,000 and $163,000 and married couples with annual incomes between $272,000 and $326,000 in 2020 will pay a monthly premium of $376.00.
- Individuals with annual incomes of $163,000 or more and married couples with annual incomes above $326,000 in 2020 will pay a monthly premium of $462.70.
- Individuals with annual incomes above $500,000 and married couples with annual incomes above $750,000 in 2020 will pay a monthly premium of $491.60.
Moreover, there is a financial incentive not to delay enrollment; those who wait to enroll in Part B after they become eligible for Medicare will pay a penalty. For each year that an individual puts off enrolling, his or her monthly premium increases by 10 percent -- permanently. Thus, a person who waits five years to enroll in Part B will pay premiums 50 percent higher than she otherwise would. (This penalty does not apply if the individual is covered by an employer group plan that is available only to current employees.)
The specifics of what is covered and what is not covered under Part B are complex and change periodically in response to efforts to contain health care costs. Following are some of the items that are excluded from coverage:
- prescription drugs that are not administered by a physician
- routine physical checkups
- eye glasses or contact lenses (in most cases)
- hearing aids
- orthopedic shoes, except for diabetics
- custodial care
- cosmetic surgery
- immunizations except pneumococcal vaccines
- most dental services
- routine foot care
Medicare Part B recipients must satisfy an annual deductible of $198 (in 2020). Once the deductible has been met, Medicare pays 80 percent of what Medicare considers a "reasonable charge" for the item or service. The beneficiary is responsible for the other 20 percent.
However, in most cases what Medicare calls a "reasonable charge" is less than what a doctor or other medical provider normally charges for a service. Whether a Medicare beneficiary must pay part of the difference between the Medicare-approved charge and the provider's normal charge depends on whether or not the provider has agreed to participate in the Medicare program.
If the provider participates in Medicare, he or she "accepts assignment," which means that the provider agrees that the total charge for the covered service will be the amount approved by Medicare. Medicare then pays the provider 80 percent of its approved amount, after subtracting any part of the beneficiary's annual deductible that has not already been met. The provider then charges the beneficiary the remaining 20 percent of the approved "reasonable" charge, plus any part of the deductible that has not been satisfied.
Some states either require all licensed physicians to participate in the Medicare program or require even non-participating providers to accept the Medicare-approved rate as full payment.
But many states have no such requirements. If a Medicare beneficiary in one of these states is treated by a non-participating provider who is charging more than the Medicare-approved rate, the beneficiary must pay the usual 20 percent of the Medicare-approved charge plus an additional 15 percent of the Medicare-approved amount (called a "limiting charge"). It is against the law for providers in any state to charge Medicare patients more than an additional 15 percent of the Medicare-approved charge.
Example: Doctor Jones bills Sally Smith $150 for an office visit that Medicare says should cost only $100. Ms. Smith must pay Dr. Jones $35 -- 20 percent of the approved charge ($20) plus an additional 15 percent of the approved charge ($15).
In such "non-assignment" cases, Medicare pays the beneficiary 80 percent of the approved amount and the beneficiary must pay the provider the entire charge that is due. In the above example, however, not all of the charge is due: Doctor Jones is taking a loss (compared to his standard rate) of $35 in treating Ms. Smith. Doctor Jones must accept this loss as the price of treating a Medicare patient.
Other physician practices that violate Medicare Part B's rules include the following:
- Requiring patients to waive their right to Medicare benefits and making them pay privately for Medicare-covered services.
- Requiring beneficiaries to pay for services such as telephone conversations with the doctor, prescription refills, and medical conferences with other professionals for which they were never previously charged.
- Requiring beneficiaries to sign a paper agreeing to pay privately for all services that Medicare will not cover and then using this waiver to make beneficiaries pay for a service that Medicare covers as part of a package of related procedures.
- Suing beneficiaries in small claims court for amounts above the 15 percent "limiting charge."
- Billing for services that do not have a set fee and claiming that no charge limits apply to these services.
Medicare patients do not have to share the cost of all services under Medicare Part B. Medicare pays for certain services in full, including diagnostic laboratory tests, home health services, second opinions on surgery (or third opinions if the two earlier opinions disagree), expenses for pneumococcal vaccine, and costs to kidney transplant donors. In all these cases, the $198 (in 2020) deductible does not apply and the 20 percent copayment is waived. On the other hand, Medicare will pay only 50 percent of the "approved" rate for the treatment of mental disorders on an outpatient basis.