Medicare Allowance: What the Medicare-Approved Amount Means for You

Updated October 28, 2026. The Medicare allowance, officially the Medicare-approved amount, is the most Original Medicare will count toward a covered service or item. Medicare.gov defines it as “the payment amount that Original Medicare sets for a covered service or item.” When your doctor accepts assignment, Medicare pays its share of that amount and you pay the rest, usually 20% after the Part B deductible ($283 in 2026).

Quick answer: The approved amount comes from Medicare fee schedules, not from the provider’s bill. A doctor who accepts assignment can charge you only the deductible and coinsurance. A doctor who doesn’t accept assignment can charge up to 15% more (the “limiting charge”). A doctor who opts out of Medicare can charge anything, and Medicare pays nothing.

How the Medicare-approved amount works

Say a doctor’s usual fee for a visit is $200 and the Medicare-approved amount is $100. If the doctor accepts assignment and you’ve met your Part B deductible:

The doctor can’t bill you for the $100 difference between the usual charge and the approved amount.

Who sets the Medicare allowance?

CMS sets approved amounts through fee schedules:

• Physician Fee Schedule: each service gets relative value units for work, practice expense and malpractice cost, adjusted for local costs and multiplied by a conversion factor. For 2026, CMS set the conversion factor at $33.40 (or $33.57 for clinicians in qualifying alternative payment models).
• Durable medical equipment (DMEPOS) fee schedule: equipment like wheelchairs and oxygen is paid “using a fee schedule payment methodology with specific rules mandated by statute,” or competitive bidding amounts in some areas.
• Hospitals, labs, ambulances and other providers have their own payment systems.

CMS updates the fee schedules every year, so approved amounts change on January 1.

Assignment: participating, non-participating and opt-out providers

Medicare.gov explains that providers who accept assignment “agree to charge you only the Medicare deductible and coinsurance amount.” Non-participating providers “accept the Medicare-approved amount for services on a case-by-case basis,” and their charge “can’t be more than 15% above the Medicare-approved amount.” For an opt-out provider, “Medicare won’t pay for any service you get from this doctor, even if it’s a Medicare-covered service.”

The limiting charge, explained

For non-participating doctors, the approved amount is lower. CMS says “the nonparticipating fee schedule amount is equal to 95% of the Medicare Physician Fee Schedule,” and the “Limiting Charge equals 115% of the nonparticipating fee schedule amount.” So on a service with a $100 fee schedule amount:

Medigap Plans F and G pay Part B excess charges; Plan N doesn’t. See Plan N excess charges explained.

2026 and 2027 Medicare costs that affect what you pay

More detail: Medicare Part B premium 2026 and IRMAA and high-deductible Plan G.

How to see what Medicare approved and paid

• Your Medicare account: sign in at Medicare.gov to see claims, usually within 24 hours after they’re processed.
• Medicare Summary Notice (MSN): mailed to you, or sent electronically if you opt in. The “Max You May Be Billed” column shows the most a provider can bill you.
• If a bill is higher than your MSN shows, call the provider’s billing office first, then 1-800-MEDICARE.

Not sure which coverage you have? Read how to check if you have Medicare.

Medicare allowance and Medicare Advantage

Medicare Advantage plans set their own network payment rates and cost sharing, so the approved-amount rules above apply to Original Medicare. If you use an out-of-network provider in a PPO, the plan’s Evidence of Coverage explains what you’ll pay. Some Medicare Advantage plans also offer an OTC or flex “allowance,” which is a different thing; see what OTC benefits are.

If you’d like help comparing Medicare Supplement and Medicare Advantage options for 2027, Medicare365 can walk you through them.

Contact Medicare365 to schedule a free Medicare consultation.

Frequently asked questions

What does Medicare allowance mean?

It’s the Medicare-approved amount, the fee Original Medicare sets for a covered service. Your 20% coinsurance is based on it, not on the provider’s full charge.

Can a doctor charge more than the Medicare-approved amount?

Only if the doctor doesn’t accept assignment, and then by no more than 15% (the limiting charge). Opt-out doctors can charge any amount under a private contract.

What is a Medicare excess charge?

The difference between the limiting charge and the Medicare-approved amount. Medigap Plans F and G cover it.

Is the Part B deductible based on the approved amount?

Yes. Approved amounts for covered services count toward the $283 Part B deductible in 2026.

Where can I find the Medicare-approved amount for a service?

On your Medicare Summary Notice or in your Medicare.gov account after a claim, or by asking the provider before the service.

This article is general information. Medicare365 is not affiliated with or endorsed by Medicare, CMS or any U.S. government agency.

Sources

• Medicare.gov: Medicare-approved amount (glossary)
• Medicare.gov: Does your provider accept Medicare as full payment?
• Medicare.gov: Medicare costs
• CMS: How to use the Medicare Physician Fee Schedule (MLN901344)
• CMS: CY 2026 Physician Fee Schedule final rule
• CMS: DMEPOS payment policies
• CMS: 2026 Medicare Parts A and B premiums and deductibles
• CMS: CY 2027 Medigap high-deductible options
• Medicare.gov: Compare Medigap plan benefits
• Medicare.gov: Check the status of a claim