What the Medicare-approved amount means

The Medicare-approved amount is the maximum price Medicare will pay a mental health provider for a specific service. It is not what you pay — it is what Medicare decides that service is worth. If a therapist, psychiatrist, or counselor charges more than the approved amount, you may owe the difference, depending on whether they accept Medicare's payment as final.

Medicare sets these amounts using a formula based on the type of service, how long it takes, and what it costs to provide in your geographic area. A 30-minute therapy session in rural Montana has a different approved amount than the same session in New York City. The approved amount also changes slightly each year.

Understanding this number matters because it affects what you actually pay out of pocket and whether you can see the provider you want without extra cost.

Key Takeaways

  • The Medicare-approved amount is what Medicare will pay for a mental health service, not what you owe.
  • Providers who accept Medicare assignment can only charge you your share of the approved amount, not the difference if they charge more.
  • Providers who do not accept assignment can charge you the full difference between their fee and the approved amount.
  • The approved amount varies by location, service type, and provider credentials, and Medicare publishes these amounts in a searchable database.
  • Your actual cost depends on your deductible, coinsurance, and whether the provider accepts Medicare assignment.

How Medicare calculates the approved amount

Medicare uses a system called the Relative Value Unit (RVU) to set approved amounts. Each mental health service gets a code — for example, a 30-minute individual psychotherapy session has code 90834. Medicare assigns that code a value based on the work involved, the practice expenses, and malpractice insurance costs.

That value is then multiplied by a geographic adjustment factor that reflects the cost of living and doing business in your area. A psychiatrist in San Francisco will have a higher approved amount for the same service than one in a small town, because rent, staff wages, and overhead are higher.

Medicare updates these amounts every January. You can find the current approved amount for any service code on the Medicare Physician Fee Schedule, which is published online and searchable by location and service code. Your mental health provider's office can also tell you the approved amount for your specific service.

The difference between accepting assignment and balance billing

A provider who accepts Medicare assignment agrees to take the approved amount as payment in full (minus your share). They cannot bill you for the difference between their usual fee and what Medicare pays. You pay only your coinsurance (usually 20 percent of the approved amount after you meet your deductible) and any deductible you still owe.

A provider who does not accept assignment can charge you their full fee. If their fee is $200 and the approved amount is $120, Medicare pays its share of $120, and you owe the remaining $80 plus your coinsurance on the approved amount. This is called balance billing, and it can add up quickly.

Before your first appointment, ask the provider whether they accept Medicare assignment. If they do not, ask them to give you their fee in writing and the Medicare-approved amount so you can calculate your total cost. Some providers accept assignment for some patients but not others, so confirm your own situation.

What you actually pay out of pocket

Your out-of-pocket cost for a mental health visit depends on three things: whether you have met your deductible, whether the provider accepts assignment, and what your coinsurance rate is.

If the provider accepts assignment and you have met your deductible, you pay 20 percent of the approved amount. If the approved amount is $100, you pay $20. If you have not met your deductible, you pay the full approved amount until the deductible is satisfied, then 20 percent after that.

If the provider does not accept assignment, you pay 20 percent of the approved amount to Medicare, plus the full balance bill from the provider. Using the earlier example: approved amount $120, provider fee $200. You pay $24 (20 percent of $120) plus $80 (the difference), for a total of $104.

Some mental health services have different coinsurance rates. For example, services provided in a hospital outpatient department may have a different rate than those in a private office. Ask your provider which setting they use and what your coinsurance will be.

Finding the approved amount for your service

You can look up the Medicare-approved amount yourself using the Medicare Physician Fee Schedule Look-Up Tool on the Centers for Medicare & Medicaid Services (CMS) website. You will need the service code (your provider can give you this), your state, and your ZIP code.

The search will show you the approved amount for that service in your area. It will also tell you whether the service is subject to the therapy cap — a limit on how much Medicare will pay for outpatient mental health and rehabilitation services in a calendar year. The cap amount changes yearly, so check the current year's limit.

Your provider's billing office can also look this up for you and tell you what your share will be based on your deductible status. Many providers do this automatically when you schedule an appointment.

How the therapy cap affects your costs

Medicare has an annual therapy cap that limits how much it will pay for outpatient mental health services combined with other rehabilitation services. Once you and your providers together reach that limit in a calendar year, Medicare stops paying, though you may still owe coinsurance on services you receive after the cap is met.

The cap applies to the approved amount, not to what you pay. If you have met the cap, the provider can still see you, but Medicare will not pay its share. You would owe your full coinsurance on the approved amount, plus any balance bill if the provider does not accept assignment.

Your provider should track your progress toward the cap and let you know when you are approaching it. If you are close to the cap and need more sessions, ask your provider whether they recommend continuing before the year ends or waiting until January when the cap resets.

Approved amounts for different types of mental health providers

The approved amount varies depending on the provider's credentials and the type of service. A psychiatrist (a medical doctor) typically has a higher approved amount than a licensed clinical social worker or counselor for the same service code, because the RVU calculation accounts for their training and credentials.

Group therapy, family therapy, and psychiatric medication management each have their own service codes and approved amounts. A 60-minute individual therapy session has a different code and approved amount than a 30-minute session. Make sure you know which code your provider is billing so you can look up the correct approved amount.

If your provider is a nurse practitioner or physician assistant, their approved amount may be 85 percent of what a physician would receive for the same service. This is a Medicare rule, not a choice by the provider.

Frequently Asked Questions

Can I see a mental health provider who does not accept Medicare?

Yes, but you will pay the full fee out of pocket. Medicare will not pay anything toward a provider who is not enrolled in Medicare. Some people choose this route because they want a provider Medicare does not cover or because they prefer not to have mental health visits on their Medicare record.

What happens if my provider charges less than the approved amount?

You pay their actual fee, not the approved amount. The approved amount is a ceiling, not a floor. If a provider charges $80 and the approved amount is $120, you pay 20 percent of $80, not $120. This is rare but does happen with some providers.

Does the approved amount include medication?

No. The approved amount is for the visit or service only. Medications are covered under Medicare Part D (prescription drug coverage) and have their own costs and rules. Ask your provider what medications they prescribe and check your Part D formulary to see what you will pay.

Can I appeal if I think the approved amount is wrong?

The approved amount itself is set by Medicare and is the same for all providers in your area with the same credentials. You cannot appeal the approved amount. However, you can appeal if Medicare denies payment for a service you received, or if you believe you were balance-billed incorrectly.

How often does the approved amount change?

Medicare updates the approved amounts every January. The changes are usually small — a few percent up or down. Your provider should have the current amounts, but you can also check the Medicare Physician Fee Schedule Look-Up Tool anytime to see the current approved amount for your service.