Health care providers can charge Medicare whatever they want to charge. That does not mean Medicare will pay the charges as Medicare will only pay a set amount for each procedure.
Despite Medicare's policy, a study conducted by UCLA and reported by Medical News Today in "UCLA study finds inflated charges, significant variation in Medicare payment patterns" found that providers are inflating the charges they send to Medicare.
This is problematic for several reasons.
The first is that the amount Medicare pays for a service often acts as a baseline for what health insurance companies will pay. The second is that the uninsured or the underinsured are required to pay the full amount of their care. If providers are inflating those charges, then poor people are paying more than they should for medical care. Another problem is that providers often advocate for increases to the amount Medicare should pay. If they are charging too much, then Medicare should not listen to those demands.
The study also found significant variations in the payments Medicare made by geographic region.
This is concerning as it could indicate that the quality of care varies by region. Normally, the higher the payments the worse the outcomes patients actually receive.
At a time when the country is attempting to come to terms with rising health care costs and how to pay for Medicare for the Baby Boomer generation, this study is not welcome news. It could mean previous estimates about how much Medicare will cost in the future need to be adjusted.
Reference: Medical News Today (March 3, 2016) "UCLA study finds inflated charges, significant variation in Medicare payment patterns"