What Medicare actually covers and pays

Medicare pays different amounts depending on what type of care you receive and which part of Medicare covers it. Part A (hospital insurance) pays for inpatient hospital stays, skilled nursing facility care, and hospice. Part B (medical insurance) pays for doctor visits, outpatient care, and medical equipment. Part D covers prescription drugs. The amount Medicare pays is set by federal law and does not change based on your income — it is the same for every beneficiary in the same situation.

You do not pay Medicare directly for these services. Instead, Medicare pays the provider (hospital, doctor, pharmacy) a set amount, and you pay your share through deductibles, copayments, or coinsurance. The provider cannot bill you for the difference between what Medicare pays and what they charge, with rare exceptions.

Key Takeaways

  • Medicare Part A pays for hospital stays after you meet your deductible, and the amount changes each year based on federal rates.
  • Part B pays 80 percent of approved doctor and outpatient services after you meet your deductible; you pay the other 20 percent.
  • Part D prescription drug coverage varies by plan, and you pay a monthly premium plus copayments at the pharmacy.
  • Medigap or Medicare Advantage plans can reduce your out-of-pocket costs by covering some or all of the amounts Medicare does not pay.
  • The exact amounts Medicare pays change every January and depend on the type of service, the provider's location, and whether the provider accepts Medicare.

How much Medicare Part A pays for hospital and facility care

Part A covers inpatient hospital stays, and Medicare pays the hospital a set amount per stay, not per day. This amount is called the diagnosis-related group (DRG) payment. You pay a deductible for each benefit period (the amount changes yearly), and then Medicare covers the rest for days 1 through 60. From day 61 to day 90, you pay a daily coinsurance amount. After day 90, you enter "lifetime reserve days" and pay a higher daily amount; you have only 60 of these days total in your lifetime.

For skilled nursing facility (SNF) care — rehabilitation or long-term care after a hospital stay — Medicare Part A pays the full approved amount for days 1 through 20. From day 21 to day 100, you pay a daily coinsurance amount (roughly one-eighth of the Part A deductible). Medicare covers nothing after day 100 in a benefit period.

Hospice care is covered at no cost to you if you are enrolled in Medicare and your doctor certifies you are terminally ill. Medicare pays the hospice provider directly.

How much Medicare Part B pays for doctor visits and outpatient services

Part B pays 80 percent of the approved amount for most doctor visits, lab tests, imaging, and outpatient procedures. You pay 20 percent after you meet your annual deductible. The approved amount is what Medicare decides is reasonable for that service in your area — it is not necessarily what the doctor charges.

Some services have different payment rules. Mental health visits, for example, are now covered at 80 percent like other services. Preventive care (annual wellness visits, cancer screenings, vaccines) is covered at 100 percent with no deductible or copayment. Physical therapy and occupational therapy are covered at 80 percent, but Medicare limits the number of visits per year.

If your doctor does not accept Medicare, you may have to pay the full bill upfront and request reimbursement, or the doctor may charge you more than Medicare's approved amount. Always ask whether your doctor accepts Medicare assignment before your visit.

What Part D prescription drug coverage pays

Part D is run by private insurance companies approved by Medicare, and the amount they pay varies by plan and by drug. You choose a plan during the annual enrollment period (October 15 to December 7), and the plan's formulary (list of covered drugs) determines what is covered and at what cost.

Most Part D plans have a monthly premium, an annual deductible, and copayments or coinsurance at the pharmacy. After you and your plan spend a certain amount on drugs in a year, you enter the "coverage gap" (also called the "donut hole"), where you pay a higher percentage of the drug cost. Once your out-of-pocket spending reaches a yearly limit, catastrophic coverage kicks in and you pay only a small copayment for the rest of the year.

The drugs covered, the copayment amounts, and the deductible all differ between plans, so comparing plans each year can lower your costs. You can change plans once a year during open enrollment.

Medicare Advantage and Medigap: how they change what you pay

Medicare Advantage (Part C) is an alternative to Original Medicare run by private insurers. Instead of paying 20 percent coinsurance for Part B services, you typically pay a copayment (for example, $25 for a doctor visit). Many Advantage plans include Part D drug coverage and dental or vision benefits. You pay a monthly premium to the insurance company, and you must use doctors and hospitals in the plan's network.

Medigap is supplemental insurance sold by private companies that pays some or all of the costs Medicare does not cover — your deductible, coinsurance, and copayments. There are ten standardized Medigap plans (labeled A through N), and each covers a different combination of costs. You pay a monthly premium to the Medigap insurer on top of your Part B premium. Medigap does not include drug coverage; you still need Part D.

Choosing between Original Medicare with Medigap, Original Medicare alone, or Medicare Advantage depends on your health, your doctors, and your budget. Neither Medigap nor Advantage is "better" — they are different ways to manage your out-of-pocket costs.

How the amounts Medicare pays change year to year

Every January, Medicare updates the amounts it pays for services. Part A deductibles and coinsurance amounts change based on the average cost of hospital care. Part B deductibles and the 20 percent coinsurance you pay stay the same, but the approved amounts for individual services may shift. Part D premiums, deductibles, and copayments change by plan.

These changes are announced in the fall, and you receive a notice in the mail. If you are in a Medicare Advantage or Part D plan, you can switch plans during the annual open enrollment period (October 15 to December 7) if the new costs do not work for your budget.

What Medicare does not pay for

Medicare does not pay for routine dental care, eyeglasses, hearing aids, or most routine foot care. It does not cover long-term custodial care (help with bathing, dressing, eating) unless it is part of skilled nursing or home health care after a hospital stay. Cosmetic surgery, weight loss programs, and most acupuncture are not covered. Some services require prior authorization from Medicare before the provider performs them, or Medicare will not pay.

If you receive a service Medicare does not cover, you pay the full cost. This is why many people buy Medigap or choose Medicare Advantage — to cover gaps in Original Medicare's coverage.

Frequently Asked Questions

Does Medicare pay the same amount in every state?

No. Medicare pays different approved amounts for the same service depending on where you live. A doctor visit in New York may have a different approved amount than the same visit in Texas. This is based on regional differences in the cost of living and healthcare delivery.

What happens if I go to a doctor who does not accept Medicare?

If the doctor is "non-participating," they can charge you up to 15 percent more than Medicare's approved amount. You pay the full bill and can request reimbursement from Medicare for 80 percent of the approved amount (after your deductible). If the doctor is "opted out" of Medicare entirely, Medicare will not pay anything, and you are responsible for the full charge.

Do I pay Medicare directly, or do I pay the provider?

You pay the provider (doctor, hospital, pharmacy) your share of the cost. Medicare pays the provider directly for their share. You do not send money to Medicare. Your costs are deductibles, copayments, and coinsurance — the amounts the provider bills you for.

Can I find out in advance how much Medicare will pay for a specific service?

Yes. You can call your doctor's office and ask for the CPT code of the service, then search the Medicare Physician Fee Schedule on Medicare.gov to see the approved amount in your area. Your doctor's office can also tell you what your out-of-pocket cost will be based on whether you have met your deductible.

What if Medicare pays less than I expected?

If you believe Medicare made an error in what it paid, you can file an appeal. You have 120 days from the date on the Explanation of Benefits (EOB) notice to request a review. Contact Medicare at 1-800-MEDICARE or visit Medicare.gov to learn how to appeal.