Medicare Reimbursements: How They Work And How To Get Paid Right

The cash flow of all practices serving the seniors is determined by Medicare reimbursement. Two market facts explain why this topic matters today. CMS set a lower Physician Fee Schedule conversion factor for 2025, which means an average reduction of about 2.9 percent versus most of 2024. More than half of all eligible beneficiaries, about 34 million people, are in Medicare Advantage in 2025, which shifts many claims into plan contracts and prior authorization rules.

Dental and dental-adjacent providers feel the pinch even more. Traditional Medicare usually does not cover routine dental. It pays only when oral care is inextricably linked to the clinical success of a covered medical service. That single phrase drives many approvals and denials.
This blog explains the mechanics of Medicare reimbursement, shows where denials happen, and gives a clear process to protect revenue. If you want a quick consumer-level primer to share with patients, Medical News Today’s explainer is a helpful overview.

What is Medicare Reimbursement?

Medicare pays providers in two different ways.

• Traditional Medicare pays your claims under national rules set by CMS. Most professional services are priced on the Medicare Physician Fee Schedule using relative value units, locality adjustments, and an annual conversion factor.
• Medicare Advantage plans are paid by CMS on a capitated, risk-adjusted basis. The plan then pays you according to your executed contract. Prior authorization, network status, and plan medical policies control what gets approved and how fast you are paid.

Who Pays You and Who Is Covered?

Medicare caters to aged individuals who are aged 65 years old and young individuals as well, who are qualified based on some form of disability. Due to increasingly higher percentages of beneficiaries picking up their coverage under Medicare Advantage plans, over half of the beneficiaries would be covered by 2025. Such a mix of enrollment is significant because it skews your volume towards plan-specific rules.
For traditional Medicare, your Medicare Administrative Contractor pays based on the Physician Fee Schedule and program rules. For Medicare Advantage, the health plan pays based on your fee schedule or value agreement with that plan.

Where Does The Amount Come From?

Physician Fee Schedule math you can trust

Allowed amount equals RVUs for the code, adjusted for geography, multiplied by the annual conversion factor. CMS’s final rule for 2025 sets the conversion factor lower than 2024, which pulls many line items down unless offset by RVU or policy changes for specific services.
To price a code quickly, use the CMS PFS Look-Up Tool. You can query by a single code or a range and see national and locality values and the limiting charge for non-participating billing. This is the simplest way to build or validate a practice-level Medicare reimbursement calculator.

Contract math for Medicare Advantage

Your Medicare reimbursement rates under Medicare Advantage come from your signed contract. Some contracts pay a percentage of the Medicare fee schedule; others use a proprietary schedule, case rates, or value-based terms. Enrollment in Medicare Advantage continues to grow, so you should expect more claims driven by plan rules.

How a Claim Moves From Visit to Payment

Follow this five-step path for cleaner claims and faster payment.

• Verify eligibility and product type at scheduling and again on the day of service. Flag traditional Medicare versus Medicare Advantage and capture plan name, product, and network status.
• Check the need to authorize the use of a particular CPT or HCPCS code and the location where it was offered before filing a claim. Always have a current list of those services that each plan needs to be authorized to use to ensure you do not miss anything.
• Document medical necessity with policy language. For dental-linked services, quote the CMS language that the oral service is inextricably linked to the clinical success of the covered medical service.
• Enter the coding properly and fully. Identify an appropriate CPT/HCPCS code and accompany it with an equal and associated ICD-10 diagnosis code and consideration for an adjustment value. Be sure that the practice or provider toward which compensation would be made is entered properly, and that data for services payable with multiple components and TIN and NPI numbers are included. Most professional claims move as electronic 837P transactions. If a payer requests a specific Medicare reimbursement form or attachment, follow the Claims Processing Manual and the payer’s instructions.
• Post, reconcile, and appeal on a timeline. Compare the ERA or EOB to expected allowed amounts. If there is an underpayment or denial, appeal within the deadline and attach supporting policy citations and clinical notes.

What Changed in 2025 and Why It Matters

The Physician Fee Schedule decreased the conversion factor in 2025 relative to most of 2024, and this affects the amount that is paid to physicians. That means many services will be priced lower unless RVU changes offset the cut for those codes. Reprice your top codes and update internal cheat sheets and your Medicare reimbursement guidelines so front office quotes and estimates stay accurate.

By 2025, 54 percent, or 34.1 million people, will be enrolled in MA plans. Your workflows need to reflect plan-specific medical policies, prior authorization lists, and appeal windows.

The Core Tools You Should Use Every Week

The CMS PFS Look-Up Tool is the official reference for code-level prices, locality adjustments, and limiting charges. Use it as the backbone of your Medicare reimbursement calculator and to verify quoted estimates before treatment.

Your MAC website posts local coverage articles and claim tips. Your key MA plan websites publish prior authorization lists, fee schedules, and policy bulletins. Bookmark those pages and create a recurring monthly reminder to review those pages for updates.

If you need a simple web-based fee viewer, many Medicare Administrative Contractors (MACs) provide their own tools. These utilities reflect Centers for Medicare & Medicaid Services (CMS) data and allow you to compare multiple procedure codes at the same time.

Practical Tips For Fewer Denials

• Audit the top fifty CPT and HCPCS codes by revenue and place of service. Reprice them using the PFS Look-Up Tool and your 2025 contracts.
• Refresh prior authorization matrices for your five largest Medicare Advantage plans. Confirm start dates, renewal windows, and documentation checklists.
• Rewrite documentation templates to include policy phrases for dental-linked services that must show the inextricable link to a covered medical service.
• Train the front desk to collect product type and plan details and to verify network status for rendering providers and facilities.
• Hold a weekly denial huddle. Triage denials by root cause and fix at the source. Track time to first appeal and percentage overturned.

FAQs

How can I estimate payment before treatment?

Price the code in the CMS PFS Look-Up Tool and apply participation status and coinsurance for traditional Medicare. For Medicare Advantage, pull your contracted fee or value terms from the plan portal. This is the fastest reliable estimate.

Do Medicare reimbursement rates vary by state?

Yes. CMS modulates the RVUs by locality by using GPCIs, which is why a single code can permit varied quantities in various places under conventional Medicare. Medicare Advantage has its variation set by contracts.

Does Medicare pay for dental?

Routine dental care is not normally covered by traditional Medicare. It might include dental care, which is inseparably connected to the clinical success of covered medical care. Dental coverage is possible through Medicare Advantage, though policies and maximums differ according to the plan.

Final Takeaway

If you serve seniors, you are living in a hybrid world. Traditional Medicare pays you by rule. Medicare Advantage pays you by contract. The 2025 conversion factor cut makes clean claims and accurate pricing more important than ever. For dental and medical providers alike, wins will come from precise coverage checks, policy-aligned documentation, and constant repricing of your top services against current Medicare reimbursement rates.

Need help tightening your Medicare revenue cycle?

Talk to our experts at Capline Healthcare Management. We build clean claim workflows, train staff, and manage appeals so you get paid without friction. Call us today to connect with our experts.