How do health insurance companies and Medicare determine “reasonable” amounts for health care services? Where can I go to get information about this?

The phrase “usual, customary, and reasonable” (UCR) refers to the amount third-party payers (including insurance carriers and Medicare) use to determine how much will be paid on behalf of an enrollee for services reimbursed under a policy or plan. Generally, payment for health care services is based on UCR rates, and most coverage is only a percentage of what is determined to be UCR.

For example, if a plan covers 80% of UCR charges and the enrollee is responsible for the remaining 20%, the plan will actually pay 80% or less of what is charged by the provider. As a result, the enrollee will be responsible for the remaining 20% and the difference between what is charged by the provider and what the plan considers UCR. UCR rates are usually determined from statistics about fees charged by medical providers in a particular geographic area.

For example, an insurer might pay fees falling below the 80th or 90th percentile of the fee range for a particular medical procedure. Medical service providers, of course, are free to charge whatever fee they want, but insurance only has to provide benefits up to the plan’s designated UCR amount. In the case of Medicare, for doctors who accept Medicare assignment, Medicare typically pays 80% of the approved charge (the amount Medicare approves for payment to a doctor), and the patient pays the remaining 20%.

Doctors who do not accept Medicare assignment may bill Medicare patients for an additional amount beyond the 20% co-payment, not to exceed 15% of the Medicare-approved charge. The best thing that you can do is to be assertive in asking a medical provider’s billing department and your health insurance company for UCR information.

In addition, thoroughly review the features of Medicare supplement plans to avoid reimbursement misunderstandings. For personal counseling on senior health insurance issues, including Medicare and Medigap coverage, contact your local State Health Insurance Assistance Program (SHIP) office. For information about SHIP and the location of SHIP offices, see

We would like your feedback on this Personal Finance Frequently Asked Question.