Medicare consumer comparing coverage options

Hospital Indemnity vs. Critical Illness Insurance for Medicare

The two policies pay on different triggers. Hospital indemnity insurance pays a set cash amount when you are admitted to the hospital, plus a daily amount for each day you stay. Critical illness insurance pays a single lump sum when a doctor diagnoses a covered condition, such as cancer, heart attack or stroke. If you are new to Medicare, retiring from employer coverage, or unhappy with the plan you have, the right choice depends on which financial gap worries you more: a hospital bill or the months after a serious diagnosis. We help people sort that out every day, and this guide gives you the same framework.

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TL;DR

  • Hospital indemnity pays cash for hospital admission and for each day of confinement. It is tied to the stay, not to the diagnosis.
  • Critical illness pays one lump sum after a covered diagnosis, whether or not you are admitted to the hospital.
  • Both pay cash directly to you. You can spend it on deductibles, travel, prescriptions or bills at home.
  • Neither replaces Medicare, a Medicare Supplement or a Medicare Advantage plan. They add cash on top of your main coverage.
  • You can hold both. If a stroke puts you in the hospital, each policy can pay under its own terms.

Table of Contents

The core difference: what triggers the payment

Think of it as two different alarms.

Hospital indemnity listens for an admission. According to the University of California’s 2026 supplemental health plans guide, this kind of policy pays a predetermined dollar amount when you are admitted, plus a daily benefit for up to 30 days of confinement. The reason for the stay can be a covered sickness or an accident.

Critical illness listens for a diagnosis. The same guide explains that the policy sends a lump-sum payment directly to you when a covered condition such as cancer, heart attack, stroke or kidney failure is diagnosed. You do not have to stay in the hospital to collect, and the payment is not tied to a bill.

That difference shapes everything else: how much you can receive, when the money arrives and what it is good for.

Hospital indemnity Critical illness
Pays when You are admitted and stay in the hospital A doctor diagnoses a covered condition
Payment style Admission amount plus a daily amount One lump sum
Typical sizing Dollars per admission and per day A coverage level, such as $10,000 or $20,000
Can pay more than once Yes, per covered admission, within the policy’s limits Depends on the policy, some include a recurrence benefit
Pays you directly Yes Yes

How Original Medicare leaves gaps in a hospital stay

Hospital indemnity makes more sense once you see what Medicare Part A leaves you to pay. The CMS booklet Your Medicare Benefits lists the 2026 Part A inpatient hospital deductible as $1,736 per benefit period. A benefit period starts when you are admitted and ends after you have been out of the hospital for 60 days in a row. So you can pay that deductible more than once in a year if you have separate stays more than 60 days apart.

Longer stays add daily coinsurance. CMS’s Medicare manual on eligibility and entitlement sets Part A coinsurance at one-fourth of the deductible per day for days 61 to 90 of a benefit period. It is one-half of the deductible per lifetime reserve day, days 91 to 150.

If you are a person who has just turned 65 and is leaving an employer plan, these numbers can come as a surprise. We cover them in more depth in our guides on what you’ll actually pay for Medicare in 2026 and how the Medicare deductible works.

One more detail matters for hospital indemnity. Being in a hospital bed does not always mean you were formally admitted as an inpatient. Observation status is billed differently, which is covered in our article on inpatient vs. observation status. Read how any policy you consider treats observation stays.

What hospital indemnity pays: a worked example

Benefit schedules differ from one policy to the next. To make it concrete, here is the schedule in the University of California’s 2026 guide, which we use as an illustration and not as a quote for any plan:

  • $1,200 per hospital or ICU admission
  • $200 per day of hospital confinement, up to 30 days per confinement
  • $400 per day of ICU confinement, up to 30 days

Say you are admitted for a five-day stay on a plan with that schedule. The math is $1,200 for admission plus five days at $200, which is $1,000. That comes to $2,200 in cash. Compare that with a Part A deductible of $1,736 for the same stay under Original Medicare, and you can see why the cash is aimed at the hospital gap. Your actual costs also depend on your other coverage, so the point is the pattern, not the exact balance.

The guide also notes that the admission benefit can be paid once per covered sickness or accident, up to 10 times per person per calendar year. Your admission must come within 180 days of the covered event. Details like these decide whether a plan works for you, so read them before you enroll.

Schedules in employer benefit guides run from a few hundred dollars up. The University of Arkansas System’s benefits page shows hospital plans paying $500, $1,000 or $1,500 for an initial admission, with separate amounts for confinement and ICU days. That is a good reminder that you choose a level, and the level drives the premium.

What hospital indemnity pays: a worked example

What critical illness pays: a worked example

Critical illness is simpler on paper. You pick a coverage amount, and a covered diagnosis pays it.

The Arkansas page lists maximum coverage options of $10,000 or $20,000. Covered conditions include invasive and non-invasive cancer, heart attack and heart failure, major organ failure, paralysis, Alzheimer’s, and blindness or loss of hearing. An earlier University of California plan guide from 2023 shows how benefits can be tiered. A $10,000 or $30,000 plan paid 100% for cancer, heart attack or sudden cardiac arrest, stroke, kidney failure, severe burn, benign brain tumor and bone marrow transplant. It paid 50% for coronary artery bypass surgery, non-invasive cancer, and advanced Alzheimer’s or Parkinson’s disease.

Critical illness conditions by benefit tier

So with a $20,000 policy and a covered stroke diagnosis paying in full, $20,000 arrives as cash. A partial-benefit condition on a plan like the 2023 one would pay half, or $10,000. Which conditions pay in full, which pay in part, and whether a second diagnosis can pay again are all in the policy. Some plans do include a recurrence benefit. One example plan describes extending coverage to a second covered diagnosis, which can bring total benefits up to 200% of the plan’s value, according to the carrier’s field reference manual.

What you can spend the cash on

Because both policies pay you and not the hospital, you decide where the money goes. The Arkansas benefits page lists copays, deductibles, travel, prescriptions and child care as examples. It also states that the cash is paid in addition to your medical coverage, with no offset or coordination of benefits against it. The coverage is described there as tax-free, but tax treatment can vary by situation, so ask a tax professional about yours.

This flexibility is why critical illness appeals to people worried about the cost of life around a diagnosis, not just the bills. Think of the gas and lodging for treatment at a distant cancer center, a spouse who cuts back work hours to help, or home help while you recover.

Which one fits you?

Use these questions to decide. They are not a rule, just a way to put your own situation next to each benefit.

Hospital indemnity may fit if:

  • You worry most about the deductible and daily costs of an inpatient stay.
  • You have Original Medicare or a Medicare Advantage plan with hospital cost-sharing and want cash to offset it.
  • You want a benefit that can pay for several different reasons for admission, from surgery to an accident.

Critical illness may fit if:

  • Your family history makes cancer, heart disease or stroke a real concern.
  • You want a large single payment that could cover costs a hospital stay would never show, such as travel and lost income.
  • You are leaving an employer plan and want to replace the voluntary coverage you had at work.

Both may fit if you want the stay and the diagnosis covered. If a stroke puts you in the hospital, a hospital indemnity policy and a critical illness policy can each pay. The Arkansas page lets employees enroll in one, two or all three supplemental plans, and the same page confirms the benefits are paid in addition to your medical coverage.

Where each one sits next to Medicare

Neither policy is Medicare, and neither is a Medigap plan. Medicare Part A covers inpatient stays, including inpatient cancer treatment, skilled nursing facility care after a qualifying 3-day hospital stay, home health care and hospice. CMS says copayments, coinsurance or deductibles apply to each service. That cost-sharing is what supplemental cash can help with.

So your Medicare coverage choice comes first, and the supplemental policies come second. A Medicare Supplement plan and a Medicare Advantage plan handle the cost-sharing of your covered care in very different ways. Once you know which you have, you can see how big the gap is and whether extra cash makes sense.

Read these terms before you buy either policy

The policy booklet, not the sales page, decides whether a claim pays. Check these items in any hospital indemnity or critical illness plan:

  1. The trigger. For hospital indemnity, does an observation stay or an ER visit count? For critical illness, how does the policy define each condition?
  2. The benefit amounts. Look at the admission amount, the daily amount, the maximum number of days, and the ICU amounts. For critical illness, check the full-pay and partial-pay conditions.
  3. Waiting periods. Many policies pay nothing for a condition diagnosed before the effective date or before a waiting period ends.
  4. Exclusions. Critical illness policy documents commonly list items such as self-inflicted harm, intoxication or illegal drug use, and certain cosmetic procedures.
  5. Claim deadlines. Policies ask for proof of loss within a set window after the event.
  6. Pricing. Premiums usually depend on your age, tobacco status and the coverage level you choose.
  7. Renewability. Ask whether the premium can change and whether the carrier can cancel.

The free-look period is worth knowing too. One carrier manual describes a 30-day window to cancel after you receive the policy. Look for one in any policy you consider.

This part is where most people get stuck. Policies are written in dense language, and two plans with the same name can pay very differently.

Our view

We believe in education first. It is hard to make a good choice when you don’t understand your options, and supplemental coverage is a place where people often buy on fear and regret it later.

Our approach is to start with the foundation. We look at your Medicare coverage first, because that is where most of your protection comes from. Then we ask what you could not comfortably pay out of pocket: a hospital deductible, a long stay, or the extra costs of a serious diagnosis.

Because we are independent and work with 40+ carriers, we can compare plans side by side for you and match the benefit to the gap. We do not use pressure. If you are turning 65, leaving an employer plan or unhappy with what you have, a review of your coverage takes the guesswork out of the next step.

We also stay in touch after you enroll, with year-round support and an annual coverage checkup, so your supplemental benefits keep matching your life.

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Talk it through with an independent agent

Our team of independent agents, led by Paul Barrett, who has helped Medicare consumers since 2007, helps with hospital indemnity, critical illness, cancer insurance and hospital indemnity plans, alongside Medicare Supplement, Medicare Advantage and Part D. We compare options from multiple carriers and explain each step.

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Start with your core coverage on our Medicare Supplement page, or reach us through Paul B Insurance to review what you have today.

FAQ

Can I have both hospital indemnity and critical illness insurance?

Yes. Many benefit programs let you enroll in one, two or all three supplemental plans. Each policy pays under its own terms, in addition to your medical coverage. If you are hospitalized with a covered critical illness, both can pay.

Do these policies replace Medicare or a Medicare Supplement plan?

No. They pay cash on a trigger and do not pay your medical bills. Medicare and your Medicare Supplement or Medicare Advantage plan remain your main coverage. The cash can help with the costs they leave to you.

Which pays more, hospital indemnity or critical illness?

It depends on the plan you choose. Critical illness usually pays a larger single amount, such as $10,000 or $20,000 in published employer examples. Hospital indemnity pays smaller amounts per admission and per day, which add up over a long stay or repeated admissions.

Does the money go to the hospital?

No. Both types pay you directly, and you choose how to spend it. Examples include deductibles, travel, prescriptions and child care.

Sources

What Is Medicare Part B and What Does It Actually Cover?

The complete guide to Medicare’s medical insurance — every service it covers, exactly what it costs in 2026, how it works with group insurance and VA benefits, and the excess charges most people have never heard of until they get a surprise bill.

The Short Answer

Medicare Part B is medical insurance — it covers doctor visits, outpatient care, preventive services, durable medical equipment, and more. Unlike Part A, Part B is not premium-free for anyone: everyone pays a monthly premium (202.90in2026formostpeople),anannualdeductible(283), and 20% coinsurance on most covered services, with no yearly cap on that 20% under Original Medicare alone. Whether you need to enroll at 65, and whether delaying is safe, depends heavily on your employment status and your employer’s size — getting this wrong is one of the most consequential and permanent mistakes in all of Medicare.

Key Takeaways

  • Part B is never premium-free — everyone pays a monthly premium, and higher earners pay significantly more through IRMAA.
  • The 20% coinsurance under Original Medicare alone has no yearly cap — this is the single biggest financial risk in Medicare, and it’s the reason Medigap and Medicare Advantage exist.
  • Whether you can safely delay Part B without a penalty depends on your employer’s size: 20+ employees generally allows delay; fewer than 20 generally does not.
  • Missing your enrollment window triggers a permanent 10% penalty for every 12-month period you went without coverage.
  • Veterans can and generally should enroll in Part B even with VA benefits, since Medicare and VA coverage don’t coordinate — each only pays for care received within its own system.
  • “Excess charges” from non-participating providers can add up to 15% on top of what Medicare approves, and only some Medigap plans protect you from them.

What Part B Actually Covers

While Part A handles hospital room and board, Part B is the half of Original Medicare that covers medical care and most services delivered outside a hospital admission — doctor visits, outpatient procedures, and ongoing medical needs.

What’s covered

  • Doctor visits — primary care and specialists
  • Outpatient surgeries and procedures
  • Diagnostic lab work, X-rays, and MRIs
  • Emergency room visits
  • Ambulance services
  • Outpatient mental health care
  • Physical, occupational, and speech therapy
  • Chemotherapy and radiation received in an outpatient clinic
  • Durable Medical Equipment (DME) — wheelchairs, oxygen equipment, blood sugar monitors, walkers, and similar equipment
  • Ambulatory surgical center services

Preventive services: the part Medicare gets genuinely right

Most preventive services are covered at 100%, with no deductible and no copay, as long as your provider accepts Medicare assignment. This includes:

  • Your one-time “Welcome to Medicare” wellness visit, available within your first 12 months on Part B
  • Annual wellness visits after that
  • Flu shots and most other recommended vaccines
  • Mammograms
  • Colonoscopies and other cancer screenings
  • Diabetes and cardiovascular screenings
  • Many other screenings recommended by the U.S. Preventive Services Task Force

Paul’s Honest Take: This is one of the most underused parts of Medicare, full stop. I’ve had clients who paid for a private physical every year out of habit and never realized their annual wellness visit through Medicare was completely free. If you haven’t used your Welcome to Medicare visit or your annual wellness visit, that’s real value sitting on the table.

What’s NOT covered

  • Routine dental care — cleanings, fillings, dentures, extractions
  • Routine vision exams and eyeglasses
  • Hearing aids (though diagnostic hearing tests ordered by a doctor may be covered)
  • Long-term custodial nursing home care — help with daily living activities, as opposed to short-term skilled or medical care
  • Routine prescription drugs you pick up at a retail pharmacy — that’s Part D’s job, not Part B’s
  • Cosmetic surgery, unless medically necessary (such as reconstruction after an accident or mastectomy)
  • Most care received outside the United States, with very limited exceptions
  • Routine foot care, such as nail trimming, in the absence of a qualifying medical condition
  • Acupuncture, except for a narrow, specific chronic low back pain benefit
  • Concierge medicine fees and membership-style charges some practices add on top of standard care
  • Long-term care insurance-style services, including most home-based personal care that isn’t tied to a skilled medical need

Paul’s Honest Take: The dental and vision exclusions are the ones that surprise people most, especially since they’re such routine parts of healthcare for most adults. This is exactly why so many Medicare Advantage plans build dental, vision, and hearing benefits into their coverage — Original Medicare was simply never designed to include them, and that gap doesn’t go away on its own.

What Part B Costs in 2026

Part B has three separate cost components, and understanding all three matters:

Cost Component

2026 Amount

Standard monthly premium

$202.90

Annual deductible

$283

Coinsurance on most covered services

20%

The premium is deducted automatically from your Social Security check if you’re already collecting benefits. If you’re not yet collecting Social Security, you’ll receive a bill, typically every three months.

The deductible works differently than Part A’s — it’s a straightforward annual figure. You pay the first $283 of Medicare-approved outpatient costs each calendar year, and then Medicare’s cost-sharing kicks in.

The coinsurance is where the real risk lives. After your deductible is met, Medicare pays 80% of the Medicare-approved amount for most covered services, and you’re responsible for the remaining 20%. There is no yearly cap on this 20% under Original Medicare alone. If you have a $100,000 course of cancer treatment, your 20% share is $20,000 — unless you have a Medigap policy or Medicare Advantage plan absorbing that cost.

Paul’s Honest Take: I put this in bold because it’s genuinely the single most important number in this entire guide. That uncapped 20% is the whole reason Medigap and Medicare Advantage exist as products in the first place. Original Medicare by itself was never designed to protect you from a truly expensive year — it was designed to cover 80% of it and leave the rest to you.

IRMAA: What Higher Earners Actually Pay

If your income is above certain thresholds, you’ll pay more for Part B through the Income-Related Monthly Adjustment Amount (IRMAA) — based on your tax return from two years prior. For 2026, that means your 2024 income determines your premium tier.

2024 Income (Individual)

2024 Income (Married, Joint)

Total Part B / Month

$109,000 or less

$218,000 or less

$202.90

$109,001 – $137,000

$218,001 – $274,000

$284.10

$137,001 – $171,000

$274,001 – $342,000

$405.80

$171,001 – $205,000

$342,001 – $410,000

$527.50

$205,001 – $499,999

$410,001 – $749,999

$649.20

$500,000 and above

$750,000 and above

$689.90

At the top tier, you’re paying more than three times the standard premium. If your income has recently dropped — retirement, the loss of a spouse, or certain other life-changing events — you can appeal your IRMAA determination using Form SSA-44.

Do You Have to Enroll? And What Happens If You Don’t?

Technically, Part B is optional — Medicare won’t force you into it. But opting out without a valid alternative is genuinely risky, because of how the penalty structure works.

If you don’t sign up during your Initial Enrollment Period (the 7-month window around your 65th birthday) and you don’t have qualifying employer coverage, you’ll face a permanent 10% penalty added to your premium for every full 12-month period you went without Part B. That penalty doesn’t expire — you pay it for as long as you have Part B, which for most people means for the rest of your life.

Example: If you delayed enrollment by 24 full months without a valid exception, you’d pay an extra 20% on top of the standard $202.90 premium in 2026 — roughly $40.58 more, every month, permanently.

How Part B Works with Group Insurance

Just like Part A, whether you can safely delay Part B without penalty comes down to one specific number: how many employees your company has.

Companies with 20 or more employees: If you or your spouse are actively working and covered by a genuine group health plan, your workplace insurance is primary, and you can legally delay Part B without any penalty. When that employment or coverage eventually ends, you get an 8-month Special Enrollment Period to enroll in Part B penalty-free.

Companies with fewer than 20 employees: Medicare automatically becomes your primary insurer at 65, regardless of your employment status. You need to enroll in Part B right on schedule. If you don’t, your small employer’s plan can legally refuse to pay claims that Medicare should have covered first — potentially leaving you responsible for the full cost.

Paul’s Honest Take: I say this in nearly every guide I write, because it’s genuinely one of the costliest misunderstandings I encounter: “I have good coverage at work” and “I’m protected from Medicare’s enrollment deadlines” are two completely different statements, and whether the second one is true depends entirely on your employer’s size — not how generous the coverage feels. Confirm the actual employee count before you decide to delay anything.

Retiree Coverage Is Not the Same as Active Employer Coverage

This is a distinction that catches a genuinely large number of people off guard: the “20 or more employees” exception only applies to active employment. If you retire and your former employer offers you retiree health benefits — sometimes a genuinely good, comprehensive plan — that coverage does not create a Special Enrollment Period the way active group coverage does, and it does not exempt you from enrolling in Part B on time.

Paul’s Honest Take: I’ve seen this mistake more than once, and it’s an especially painful one because it happens to people who did everything right during their working years. Someone retires with a strong retiree health plan from a large employer, assumes it works the same way their active coverage did, and delays Part B — only to find out later that retiree coverage was never a valid reason to delay in the first place. The moment you stop actively working, that clock starts, regardless of how good your retiree plan looks on paper. If you’re retiring and keeping employer retiree benefits, treat enrolling in Part B as something to handle right on schedule, not something retiree coverage lets you postpone.

Why You Need Both Part A and Part B for Medigap or Medicare Advantage

Here’s a foundational requirement worth understanding clearly, since it shapes every other coverage decision in Medicare: you must be enrolled in both Part A and Part B before you can buy a Medigap policy or enroll in a Medicare Advantage plan. Neither product exists as a standalone substitute for Original Medicare — both are built specifically to work alongside it.

  • Medigap fills the cost-sharing gaps left by Original Medicare (Parts A and B) — it has nothing to fill in if you’re not enrolled in both parts to begin with.
  • Medicare Advantage legally must provide at least the same coverage as Parts A and B combined, which is only possible because you’re required to be enrolled in both before a Medicare Advantage carrier can enroll you.

Paul’s Honest Take: This surprises people who assume they can somehow “skip” Part B and go straight into a Medicare Advantage plan to avoid the extra premium. It doesn’t work that way — Part B enrollment, and its premium, is a prerequisite either way, whether you end up on Original Medicare with Medigap or on a Medicare Advantage plan. There’s no path through Medicare that avoids the Part B premium once you’re actually using the system.

Does Medicare Work If You’re a Veteran?

Yes — and if you have VA health benefits, understanding how the two systems relate is genuinely important, because they work differently than most people assume.

Medicare and VA benefits do not coordinate. These are two entirely separate systems that each pay only for care received within their own network. Medicare doesn’t pay for care you receive at a VA facility, and VA benefits don’t pay for care you receive from a non-VA doctor or hospital. You, the veteran, choose which system to use each time you seek care.

Here’s the critical point: having VA benefits does not exempt you from Medicare’s enrollment deadlines. VA coverage is not considered a qualifying reason to delay Part B without penalty. If you don’t enroll in Part B during your Initial Enrollment Period and you’re relying solely on VA benefits, you can still trigger the permanent late enrollment penalty.

Why the VA itself recommends enrolling in Medicare anyway:

  • It gives you access to civilian doctors and hospitals outside the VA system
  • VA healthcare funding depends on annual Congressional appropriations, which isn’t guaranteed to remain stable
  • If VA authorizes only part of your needed care at a non-VA facility, Medicare can help cover the rest
  • Having both gives you meaningfully more flexibility and security than relying on either system alone

Paul’s Honest Take: This is one of the most common misconceptions I run into with veterans specifically, and it’s an expensive one to get wrong. Good VA coverage feels like it should be enough, and it might genuinely handle most of your care — but it doesn’t protect you from the Part B enrollment clock the way employer coverage from a large company can. The VA itself actively encourages enrolling in Medicare Parts A and B for exactly this reason. If you have VA benefits and are approaching 65, this is worth a direct conversation before you assume you’re covered.

Veterans who enroll in Part B can also purchase a Medigap policy, which can be particularly valuable if you use non-VA providers regularly — though if you primarily rely on VA facilities for most of your care, the value of an added Medigap policy may be more limited, and worth weighing carefully.

How Long Does It Actually Take to Get Part B Approved?

This is one of the most practical, and most overlooked, pieces of planning — especially if you’re leaving a job after 65 and coordinating your Part B start date around the end of your employer coverage. Applying isn’t instant, and the timeline depends heavily on which enrollment window you’re using.

Enrollment Situation

Typical Processing Time

When Coverage Actually Starts

Initial Enrollment Period (around 65)

2–4 weeks, sometimes up to 6

1st of your birthday month (if applied in the 3 months before) or 1st of the month after you apply (if applied during or after your birthday month)

Special Enrollment Period (leaving employer coverage)

4–8 weeks, sometimes longer

1st of the month after your application is submitted

General Enrollment Period (Jan 1–Mar 31, missed window)

4–6 weeks

1st of the month after you apply

Why the Special Enrollment Period takes longer: applying after leaving employer coverage requires two forms, not one — Form CMS-40B (the actual Part B application) and Form CMS-L564 (Request for Employment Information), which your employer needs to complete to verify you had qualifying coverage. Social Security has to manually review both, which is exactly why this route consistently takes longer than a standard Initial Enrollment Period application.

Paul’s Honest Take: This timeline question comes up constantly with clients who are retiring or leaving a job after 65, and it deserves real attention — not just because of the penalty risk we’ve already covered, but because a slow approval can leave you with an actual gap in coverage if you time it too tightly. My standard advice: start this process at least 2 to 3 months before you need Part B to actually begin, not the week your employer coverage ends. If your former employer is slow to complete their portion of Form CMS-L564, that alone can hold up the entire application — so it’s worth following up with your HR or benefits department directly rather than assuming it’s been submitted.

Practical tips to avoid delays

  • Apply online through SSA.gov whenever possible. It’s consistently the fastest method — mailed or faxed forms are more prone to getting lost or delayed.
  • If you’re on a Special Enrollment Period, submit Form CMS-L564 alongside Form CMS-40B, not separately. They need to arrive together, and one incomplete form can stall the whole application.
  • Expect a short intake lag even with online applications. It can take several business days for an online submission to actually appear on a local Social Security agent’s screen — don’t panic if you call shortly after applying and they say they don’t see it yet.
  • Once approved, you don’t have to wait for your physical card. Your Medicare Beneficiary Identifier typically appears in your online Social Security or Medicare.gov account within a day or two of approval, and you can print a temporary card from there — the physical card generally arrives by mail within about 30 days.

Excess Charges: The Cost Almost Nobody Knows to Ask About

Here’s a detail that surprises even people who’ve been on Medicare for years: not every doctor who accepts Medicare agrees to accept Medicare’s approved amount as full payment.

Providers fall into three categories:

  • Participating providers accept Medicare assignment, meaning they agree to accept the Medicare-approved amount as payment in full. This covers the vast majority of providers — roughly 98% of doctors nationally.
  • Non-participating providers still accept Medicare patients but haven’t agreed to accept the standard rate. They can charge an excess charge of up to 15% above the Medicare-approved amount.
  • Opted-out providers have left the Medicare system entirely and can charge whatever they want under a private contract — Medicare pays nothing at all for care from these providers, except in emergencies.

How excess charges actually work: if the Medicare-approved amount for a service is $300 and you see a non-participating provider, they can legally charge up to an additional $45 (15%) on top, for a total bill of $345 — and that excess amount doesn’t count toward your Part B deductible.

Eight states currently prohibit or limit excess charges entirely: Connecticut, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, and Vermont. If you live in one of these states, you’re generally shielded from excess charges from providers within your state — though you could still face them if you receive care from a non-participating provider elsewhere.

Paul’s Honest Take: This is exactly why Medigap Plan G matters so much for people who want maximum flexibility. Plan G covers excess charges in full — Plan N does not. If you’re the kind of person who wants the freedom to see any doctor without worrying about billing surprises, that distinction is worth understanding clearly before you pick between the two. And regardless of which plan you choose, it’s always worth asking a new provider directly whether they accept Medicare assignment before your first appointment.

The HSA Rule: Part B Closes the Door Too

If you’re hoping to keep contributing to a Health Savings Account, know this clearly: enrolling in Part B — or any part of Medicare — ends your ability to make new HSA contributions. This isn’t unique to Part B; it applies the moment you enroll in Medicare in any form, including premium-free Part A.

If keeping your HSA active matters to you, the only way to legally delay both Part A and Part B is through qualifying employer coverage — which, as covered above, generally requires an employer with 20 or more employees. And because Part A enrollment can be backdated up to 6 months once you do enroll, it’s smart to stop HSA contributions 6 months before you plan to sign up for Medicare or file for Social Security, whichever comes first.

Frequently Asked Questions

Is there a cap on what I’ll pay for Part B services in a year? Not under Original Medicare alone — the 20% coinsurance has no yearly limit. A Medigap policy or Medicare Advantage plan is what actually caps your exposure.

What happens if I don’t sign up for Part B on time? You’ll generally face a permanent 10% penalty on your premium for every 12-month period you went without coverage, unless you qualify for a Special Enrollment Period through active employer coverage.

Do I need Part B if I have good coverage through a small employer? Almost certainly yes. If your employer has fewer than 20 employees, Medicare becomes your primary insurer at 65 regardless of your job coverage, and not enrolling can leave you exposed to unpaid claims and a lifelong penalty.

Do veterans need Medicare Part B if they have VA benefits? Generally, yes. Medicare and VA benefits don’t coordinate — each only pays for care within its own system — and VA coverage doesn’t exempt you from Medicare’s enrollment deadlines or penalties.

What is a Part B excess charge? An additional charge, up to 15% above the Medicare-approved amount, that a non-participating provider can legally bill you. It doesn’t count toward your deductible, and only Medigap Plan G (among current plans) covers it in full.

Can I keep contributing to my HSA if I enroll in Part B? No. Enrolling in any part of Medicare, including Part B, ends your HSA contribution eligibility going forward.

How long does it take to get approved for Part B? It depends on the enrollment window. Initial Enrollment Period applications typically process in 2–4 weeks. Special Enrollment Period applications, used when leaving employer coverage, generally take 4–8 weeks since Social Security must manually verify your prior coverage using Form CMS-L564. Start the process at least 2–3 months before you need coverage to begin, especially when coordinating around a job ending.

The Bottom Line

Part B is the half of Medicare that covers your everyday medical care — and it’s also where the real financial exposure of Original Medicare lives, thanks to that uncapped 20% coinsurance. Whether you should enroll at 65, whether you can safely delay, and how much of that exposure you’re carrying all depend on details specific to your situation: your employer’s size, your income, your VA status, and which doctors you actually see.

If you want help sorting out exactly how Part B applies to your specific circumstances — or want to understand how Medigap or Medicare Advantage could close that uncapped coinsurance gap — that’s exactly the conversation I have with clients every day, at no cost to you.

Call 631-358-5793 or visit paulbinsurance.com to set up a time to talk it through.

Paul Barrett, CMIP, is the founder of The Modern Medicare Agency, based in Melville, NY, and has spent 18+ years exclusively helping people navigate Medicare — never life insurance, never annuities, just Medicare. He’s licensed in 37 states, represents more than 40 carriers, and has personally helped over 5,000 clients choose coverage that actually fits their lives.

Figures current as of 2026 and sourced from CMS, Medicare.gov, and the Social Security Administration. Individual circumstances vary, especially around employer coverage, VA benefits, and income-based premiums — always verify your specific situation before making enrollment decisions.

Sources

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