What does Medicare really pay?

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.

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

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.