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Medicare Deductibles & Copayments


     I am sure you are all familiar with the policies and procedures relating to Medicare deductibles and copayments and I certainly don’t want to teach anyone how to suck eggs!  However, there has been the use of improper waivers and a Fraud Alert has been issued, so a quick recap may be in order.


     The routine waiver of deductibles and copayments is unlawful for the following reasons:


  • It results in false claims.
  • It violates the antikickback statute.
  • It results in excessive utilization of Medicare items and services.


     The provider or supplier who routinely waives Medicare deductibles and copayments is misrepresenting the actual charge of that service or supply.  For instance, if the provider claims that the charge for a specific service is $100.00, but routinely waives the copayment, the actual charge is really $80.00.  Medicare should be paying 80% of $80.00, which is $64.00 rather than 80% of $100.00.  Each time this service is billed, and the copayment waived, Medicare is paying $16.00 more for the service than it should be.

     Some indications of the practice of improper waiver of deductibles and copayments include the following:

  • Advertising that promises discounts to Medicare beneficiaries, or making statements such as “Medicare accepted as payment in full” or “No out-of-pocket expenses.”
  • Deductibles and copayments are collected only when the patient has Medicare supplemental insurance (Medigap) coverage, which means the items or services are “free” for the patient.
  • “Financial Hardship” forms stating that the patient is unable to pay the deductible or coinsurance are routinely used without a good faith attempt to determine the patient’s actual financial status.
  • Higher fees are charged to Medicare beneficiaries than to patients receiving similar items and services – with the intent of offsetting the waiver of the coinsurance.


  • The provider fails to collect deductibles and copayments from a specific group of Medicare beneficiaries for the reasons unrelated to indigence.  For instance, the deductible or coinsurance is waived for all patients from a specific hospital in order to obtain referrals.
  • A sham “insurance program” covers deductibles or copayments only for items or services provided by the entity offering the insurance.  “Premiums” may be as low as $1.00 a month and are used to disguise the routine waiver of deductibles and copayments.

    For an indigent patient, it may be allowable to accept less than the usual charge.  In this situation, the physician or supplier – not the patient – must determine the patient’s indigence, and must determine whether any other source is legally responsible for the patient’s bill, such as other insurance or a guardian.  The physician or supplier must also provide a satisfactory explanation to the carrier that the cost of billing for and/or collecting the coinsurance or deductible for a specific service exceeds or is out of proportion to the amount to be collected.

     It is not considered to be a reduction in the provider’s charge when a reasonable effort is made to collect payment of the deductible or copayment.  A reasonable effort is one that meets the following criteria:

  • The effort to collect the Medicare deductible or copayment is similar to efforts made to collect comparable amounts form the non-Medicare patients in the practice.
  • A bill is sent to the patient or the party responsible for the patient’s financial obligations.
  • Subsequent billings, collection letters, telephone calls or personal contact, as appropriate, are genuine collection efforts.

     The use of a collection agency is considered to be appropriate as long as all uncollected patient charges of a similar amount and for patients in similar circumstances are referred to the collection agency without regard to whether they have Medicare coverage or not.  This means that if a practice refers its non-collected non-Medicare patients to a collection agency, but not its Medicare patients, the reduced amount is considered to be the actual charge.       

Newsletter References:

Medicare Carriers Manual, secs. 2450, 2460, 2462, 4480, 5220

Office of Inspector General, Fraud Alert 92-18

Federal Register, January 25, 1996; October 31, 1997; April 7, 2000 Balanced Budget Act of 1997