The term “allowable rate” refers to the highest amount that Medicare will pay doctors for their services, regardless of whether the healthcare professional or clinic might otherwise bill the insurer.

You might also hear this referred to as the reimbursement rate, but it’s important not to mix this up with the money you get back from Medicare if you pay a healthcare professional upfront for your care.

Since 1992, Medicare has used the physician fee schedule (PFS) to outline and record the allowable rates for doctors and other healthcare professionals.

Terms to know

  • Fee: how much the healthcare professional charges Medicare per service
  • Allowable limit: the maximum Medicare will pay a provider per service
  • Limiting charge: the extra amount that nonparticipating providers may bill above the allowable limit

The Centers for Medicare & Medicaid Services (CMS) reviews and updates the allowable rates for Original Medicare (parts A and B) every year and gathers these rates in PFS.

These rates may differ depending on whether you visit a participating or opt-out provider. If you visit a nonparticipating provider that agrees to accept your Medicare insurance, they won’t be bound by these rates and could charge you up to 15% more. Some states may set a lower limit.

CMS updates the specific rates annually based on various factors, such as the type of medical service, the service’s cost, malpractice expenses, geographic location, and any legal considerations. In 2025, CMS has overall lowered these rates by 2.93% from 2024.

Parts C and D

Private insurance companies manage Medicare Advantage (Part C) and Part D plans. These insurers set their own allowable rates, which vary by plan.

The amount your doctor or hospital determines as the cost of your care is often called the fee, while the maximum Medicare pays is known as the limit. These amounts are often different.

Usually, after you meet your Part B deductible, Medicare steps in to cover 80% of the allowable limit, and you pay the rest as coinsurance. Your coinsurance is the percentage of your treatment cost you must pay after you meet your annual deductible.

For Medicare Part A, Original Medicare covers 100% of the cost for the first 60 days of a hospital stay or 20 days at a skilled nursing facility after you meet your deducible.

Note that although the allowable rates for Parts C and Part D plans differ, they generally work similarly because the insurer pays the provider up to the allowable limit.