Understanding Medicare Costs

How Medicare sets payment rates, what billed charges really mean, and why the gap between them can be thousands of dollars.

What Is the Medicare Fee Schedule?

Medicare does not negotiate prices with individual providers the way private insurers do. Instead, Congress authorizes the Centers for Medicare & Medicaid Services (CMS) to publish a national fee schedule updated each year. This schedule sets a maximum "allowed amount" for every covered procedure identified by a Healthcare Common Procedure Coding System (HCPCS) or Current Procedural Terminology (CPT) code.

The 2023 fee schedule covers more than 10,000 service codes — from a simple office visit (99213) to complex cardiac surgery. Providers who accept Medicare agree to accept these amounts as payment in full, minus patient cost-sharing.

The RBRVS System: How Rates Are Calculated

Since 1992, Medicare has used the Resource-Based Relative Value Scale (RBRVS) to price physician services. Every procedure receives a number of Relative Value Units (RVUs) across three components:

Physician Work RVUs — time, skill, and intensity of the service (about 50% of total)
Practice Expense RVUs — overhead costs like staff, equipment, and office space (about 44%)
Malpractice RVUs — professional liability insurance costs (about 4%)

Total RVUs are multiplied by a national conversion factor — $33.89 in 2023 — and then adjusted by a Geographic Practice Cost Index (GPCI) that accounts for regional cost differences. A procedure valued at 10 RVUs would yield a base payment of approximately $338.90 before geographic adjustment.

Medicare Payment vs. Billed Charge: The Gap

Providers are required to submit a "billed charge" or "submitted charge" when billing Medicare — but this is not what Medicare pays. The billed charge comes from the provider's internal chargemaster, a price list that often bears no relationship to what anyone actually pays. Medicare's allowed amount is typically a fraction of the billed charge.

Procedure	CPT Code	Medicare Pays	Avg Billed	Markup
Office Visit, Established Patient (moderate)	99213	$77	$198	2.6x
Echocardiogram with Doppler	93306	$209	$1,140	5.5x
Colonoscopy with Biopsy	45380	$356	$2,890	8.1x
Total Knee Replacement	27447	$1,620	$18,200	11.2x
Cataract Surgery with IOL	66984	$622	$3,740	6.0x
MRI Brain without Contrast	70553	$232	$2,100	9.1x
Cardiac Catheterization	93458	$511	$5,380	10.5x

Source: CMS Medicare Physician & Other Practitioners dataset, 2023 CMS Medicare Physician & Other Practitioners dataset, 2023 National averages

Compiled by the " research team.

What Patients Actually Pay

For most Medicare beneficiaries, out-of-pocket costs are structured as follows under traditional Medicare (Parts A and B):

Annual Part B deductible: $226 (2023) — you pay this first each year
Coinsurance: 20% of the Medicare-approved amount after the deductible
Part A inpatient deductible: $1,600 per benefit period for hospital stays
No out-of-pocket maximum under traditional Medicare (Medigap can cap this)

For a $1,620 knee replacement payment, your 20% coinsurance would be approximately $324. However, the hospital may also bill for facility fees, anesthesia, and implant costs separately — each with its own 20% coinsurance.

Medicare Assignment: Participating vs. Non-Participating Providers

Whether your provider "accepts assignment" has significant financial implications:

Participating providers accept Medicare assignment on all claims. They agree to accept Medicare's allowed amount as payment in full and cannot bill you for the difference between the billed charge and the allowed amount.
Non-participating providers may accept assignment on a case-by-case basis. If they don't accept assignment, they can charge up to 115% of the Medicare fee schedule — but Medicare will still only pay 80% of the standard allowed amount, leaving you with a higher balance.
Opt-out providers have entirely opted out of Medicare. They can charge any amount, and Medicare pays nothing. These include some concierge physicians and specialists.

Why This Data Matters for Non-Medicare Patients

Medicare payment rates are a useful benchmark even if you're not on Medicare. Private insurers often negotiate rates at a multiple of the Medicare rate (typically 110–250% of Medicare). The billed charge figures in our database reveal the ceiling — what an uninsured or out-of-network patient might be billed before any negotiation.

If you receive a large bill, the Medicare rate provides a strong negotiating anchor. Many hospitals will settle uninsured bills at or near the Medicare rate if asked, and some states require hospitals to offer charity care or financial assistance for patients below certain income thresholds.

Exploring the Data

PlainProcedure lets you look up any of 9,297 procedures to see the national average Medicare payment, average billed charge, and the markup ratio. You can also compare costs across all 56 states and territories to understand geographic variation.

Start by browsing all procedures, or use the search tool to find a specific CPT code or procedure name. Each procedure page shows you the full breakdown of costs across states.

Frequently Asked Questions

What is Medicare and who does it cover?

Medicare is a federal health insurance program that primarily covers Americans aged 65 and older, as well as younger people with certain disabilities or end-stage renal disease. Over 65 million Americans are enrolled in Medicare, making it one of the largest health insurance programs in the world.

How does Medicare decide what to pay for a procedure?

Medicare uses the Resource-Based Relative Value Scale (RBRVS) to set payment rates. Each procedure gets a Relative Value Unit (RVU) based on physician work, practice expenses, and malpractice costs. These RVUs are multiplied by a national conversion factor (approximately $33.89 in 2023) and adjusted for geographic location.

What is the difference between Medicare payment and billed charge?

The billed charge (or submitted charge) is the full price a provider lists for a service — often called the chargemaster rate. Medicare's allowed amount is typically 20–50% of the billed charge. Medicare then pays 80% of its allowed amount; the patient is responsible for the remaining 20% (the coinsurance).

Can providers charge me more than the Medicare rate?

Providers who accept Medicare assignment cannot charge more than Medicare's allowed amount. However, providers who do not accept assignment (non-participating providers) can charge up to 15% above the Medicare allowed amount — a practice called balance billing. In most situations, Medicare patients are protected from paying the full billed charge.

Does Medicare cover 100% of procedure costs?

No. Medicare Part B (which covers outpatient and physician services) typically pays 80% of the Medicare-approved amount after you've met your annual deductible ($226 in 2023). You are responsible for the remaining 20% coinsurance, unless you have supplemental insurance (Medigap) or a Medicare Advantage plan.

Where does PlainProcedure's data come from?

All data comes from the CMS Medicare Physician & Other Practitioners by Provider and Service dataset for 2023, published by the Centers for Medicare & Medicaid Services. This public dataset contains actual payment amounts, submitted charges, and service utilization counts for every procedure billed to Medicare nationwide.

Sources

CMS Medicare Physician & Other Practitioners by Provider and Service, 2023. data.cms.gov
CMS Physician Fee Schedule, 2023. Centers for Medicare & Medicaid Services.
CMS RBRVS Overview. Centers for Medicare & Medicaid Services, 2023.
Medicare Part B Costs, 2023. Medicare.gov.

This guide is for informational and educational purposes only. It does not constitute medical, legal, or financial advice. Medicare rules, payment rates, and coverage change annually. Always verify costs with your provider and insurer before receiving care.

Understanding the Data

The information presented throughout this guide is informed by publicly available public records published by federal and state government agencies. Our database aggregates and standardizes these records to make them more accessible and easier to interpret for general audiences. When we reference specific statistics or trends, they are drawn directly from these authoritative sources unless explicitly noted otherwise.

It is important to understand the limitations of any large-scale data dataset. Records may contain errors from the original data collection process, some fields may be incomplete for older entries, and classification systems may have changed over time. Our analysis accounts for these factors by clearly labeling data vintage, flagging records with missing critical fields, and noting when temporal comparisons span methodology changes in the source data.

For readers who want to conduct their own research, we recommend going directly to the source whenever possible. federal and state government agencies provides detailed documentation on collection methodology, sampling frames, and known data quality issues. Our goal is not to replace primary sources but to make them more approachable and to highlight patterns that may not be immediately obvious when browsing raw records.

How We Analyze Data Records

Our analytical approach involves several steps designed to surface meaningful insights from large datasets. First, we clean and standardize the raw data, handling variations in naming conventions, date formats, and categorical labels. Then we compute summary statistics, distributions, and comparative benchmarks across relevant dimensions such as geography, time period, and category type.

Key metrics we examine include statistical records, geographic distributions, temporal trends. These indicators provide a multi-dimensional view of each entity in our database, allowing users to understand not just individual records but how they compare to peers, regional averages, and national benchmarks. We believe this contextual approach is far more valuable than presenting raw numbers in isolation.