How Medicare Pays Doctors, Hospitals, and Other Providers

What Medicare Pays and How It Works

Medicare sends money directly to doctors, hospitals, and other healthcare providers when you receive care. You do not pay the provider first and then wait for reimbursement — the provider bills Medicare, Medicare reviews the claim, and if it is approved, Medicare pays the provider. The amount Medicare pays depends on the type of provider, the service given, and which part of Medicare covers it.

Understanding how these payments work helps you know what you might owe out of pocket and why your bill might differ from what you expected. Medicare does not pay 100 percent of all costs, and providers can only bill you for amounts Medicare allows them to charge.

Key Takeaways

Medicare Part A covers hospital stays, skilled nursing, hospice, and home health; Medicare Part B covers doctor visits and outpatient services; Part D covers prescription drugs.
Providers must accept Medicare's approved amount as payment in full for most services, though you pay your deductible, copay, or coinsurance first.
Medicare pays based on a fee schedule that varies by service and location, not based on what a provider charges.
If a provider is not in-network or does not accept Medicare, you may owe significantly more out of pocket.
You can check what Medicare paid for your care by reviewing your Explanation of Benefits (EOB) or logging into your Medicare account online.

How Much Medicare Pays for Different Services

Medicare uses a fee schedule — a list of approved amounts for each service — to decide what it will pay. The fee schedule is set by the Centers for Medicare & Medicaid Services (CMS) and is based on the type of service, your location, and the provider's specialty. A doctor visit in rural Montana costs Medicare a different amount than the same visit in New York City.

For hospital stays under Part A, Medicare pays a fixed amount per hospital stay based on your diagnosis, not on how many days you stay or how many tests you receive. This is called a diagnosis-related group (DRG) payment. For example, Medicare pays one set amount for a hip replacement, whether you stay two days or five days. The hospital absorbs the cost if you stay longer than the average.

For doctor visits and outpatient services under Part B, Medicare pays based on a Relative Value Unit (RVU) system that accounts for the time, skill, and resources the service requires. A complex surgery is assigned a higher RVU than a routine office visit.

What You Pay Out of Pocket

Even though Medicare pays the provider, you are responsible for certain costs. These include your deductible (the amount you pay before Medicare starts paying), your copay (a fixed amount per visit or service), and your coinsurance (a percentage of the cost after Medicare pays its share).

Part A has a deductible of $1,676 per hospital stay in 2024, though this amount changes yearly. After you meet the deductible, you pay coinsurance for days 61 through 90 of a hospital stay. Part B has an annual deductible of $240 in 2024, and then you typically pay 20 percent coinsurance for most services after that. Part D (prescription drug coverage) has its own deductible, copays, and coverage limits that vary by plan.

If you have a Medigap or Medicare Advantage plan, that plan may cover some or all of these out-of-pocket costs, depending on which plan you chose.

In-Network and Out-of-Network Providers

Most doctors and hospitals accept Medicare and are considered in-network. They agree to accept Medicare's approved amount as full payment (except for your deductible, copay, or coinsurance). You can search for in-network providers using the Medicare Provider Search tool on Medicare.gov.

Some providers do not accept Medicare at all, or they accept it but do not accept the approved amount. If a provider is out-of-network or does not accept Medicare, you may owe the full bill or a much larger share. A provider who does not accept Medicare but treats you anyway can bill you for the full charge, and Medicare will not reimburse you. Before scheduling care with a new provider, always confirm they accept Medicare.

How to Track What Medicare Paid

After you receive care, the provider sends a claim to Medicare. Medicare reviews it, decides whether to pay, and sends you an Explanation of Benefits (EOB) — a statement showing what was billed, what Medicare approved, what Medicare paid, and what you owe. You receive an EOB for Part A and Part B services separately.

You can also view your claims and payments online by logging into your Medicare account at Medicare.gov. Go to "Claims" and select the date range you want to review. You will see each service, the provider, the approved amount, what Medicare paid, and your out-of-pocket cost. Keeping track of these records helps you catch billing errors and understand your healthcare costs.

If you notice a claim you do not recognize or believe Medicare was billed incorrectly, you can file an appeal. The EOB includes instructions on how to do this, and you typically have 120 days from the date on the EOB to appeal.

Special Payment Rules for Certain Services

Some services have payment rules that differ from the standard fee schedule. Preventive services — like annual wellness visits, cancer screenings, and vaccinations — are covered at 100 percent with no copay or coinsurance if you see an in-network provider. You still pay your Part B deductible for some preventive services, but not all.

Emergency room visits are paid at the in-network rate even if the hospital is out-of-network, as long as it is a true emergency. However, if you are admitted to the hospital, the hospital itself must be in-network to avoid higher costs. Telehealth visits are covered the same way as in-person visits, though some plans may have different copays for virtual care.

If you receive care from a teaching hospital or a hospital that trains medical residents, Medicare may pay differently than at a standard hospital. Ask your provider or hospital if your care will be billed under special rules.

Medicare Advantage and Medigap Payment Differences

If you have a Medicare Advantage plan (Part C), the plan, not Medicare directly, pays providers. Medicare Advantage plans have their own networks, copays, and deductibles, which may be lower or higher than Original Medicare. You must use in-network providers (except in emergencies) or pay out of pocket.

If you have a Medigap policy, Medicare still pays first, and then Medigap pays your share of the approved amount. Medigap does not change how much Medicare pays; it only reduces what you owe. You can use any provider who accepts Medicare.

Frequently Asked Questions

Why did Medicare pay less than what the provider charged?

Medicare has an approved amount for each service based on its fee schedule. Providers who accept Medicare agree to accept this amount as full payment. The difference between what they charge and what Medicare approves is written off. If a provider does not accept Medicare, they can charge you the full amount.

Can I see the Medicare fee schedule before I have a procedure?

Yes. You can search the Medicare Physician Fee Schedule on the CMS website or ask your provider what the approved amount is for your procedure. This helps you estimate your out-of-pocket cost when combined with your deductible and coinsurance.

What happens if Medicare denies a claim?

If Medicare denies a claim, you receive an EOB explaining why. Common reasons include the service not being covered, the provider being out-of-network, or the claim being submitted incorrectly. You have the right to appeal within 120 days. Contact your provider or Medicare for help filing an appeal.

Do I have to pay the provider before Medicare pays them?

No. Providers bill Medicare directly. You pay your deductible, copay, or coinsurance at the time of service or when you receive a bill afterward. You should never have to pay the full bill upfront and then wait for Medicare reimbursement.

How long does it take Medicare to pay a claim?

Medicare typically processes claims within 30 days, though it can take longer if the claim needs review. You should receive your EOB within a few weeks of the service date. If you do not receive an EOB after a month, contact Medicare or your provider to check the status.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.