Published February 2026 · 16 min read
The Bottom Line
Over the past decade, Medicare providers charged $3223.5B for their services. Medicare actually paid $854.8B. The difference — $2135.7B — was written off. That's a 66.3% writeoff rate, and it's getting worse.
Most people don't know this: the price a doctor charges Medicare is essentially fictional. Here's how the system actually works:
For every $1 Medicare pays, providers submitted $3.77 in charges.
A provider submits a charge — their listed price. Medicare looks at its fee schedule, determines the allowed amount (what it considers fair), and pays 80% of the allowed amount (the beneficiary or supplemental insurance covers the remaining 20%). The difference between the charge and the allowed amount — often 60-90% of the bill — simply evaporates.
This means providers can charge literally anything and it usually doesn't affect what they get paid. A blood test that Medicare reimburses at $11.76 might be submitted at $300. Medicare pays $11.76 regardless.
So why do providers charge so much? Several reasons: negotiating leverage with private insurers, out-of-network billing, and — in some cases — gaming the system when charges do affect payments.
Not all specialties play the markup game equally. Some charge relatively close to what they receive. Others operate in a completely different reality:
Pharmacy leads with an average markup of 22.4x — meaning pharmacies charge about $22 for every $1 Medicare pays. That's $630.1M in charges against $432.0M in payments.
Anesthesiology follows at 15.6x — anesthesiologists charge $8.2B and receive $787.8M. The 90% gap represents real institutional incentives that shape how care is delivered.
Compare these to specialties at the other end: podiatry, optometry, and chiropractic typically have markups under 2.5x. The range is enormous — and it matters because extreme markups can indicate billing strategies designed to maximize revenue from every possible payer, not just Medicare.
Another way to look at this: which specialties have the highest writeoff rates? These are the fields where the gap between fiction and reality is widest.
Percentage of submitted charges that Medicare writes off
Anesthesiology Assistant has a 89.7% writeoff rate — meaning for every $100 submitted, Medicare writes off $89.7. At a charge-to-paid ratio of 12.22x, these providers charge about $12.22 for every $1 they actually receive.
Geography matters too. Some states have dramatically higher average markups than others:
Wisconsin leads at 9.5x, followed by Alaska at 8.3x and Nevada at 7.3x. Texas, the largest state by Medicare volume, comes in at 7.1x.
Here's the most concerning finding: the markup gap is growing. Over the past decade, the average markup ratio has risen 21%:
In 2014, the average markup was 4.94x and the total writeoff gap was $193.5B. By 2023, the markup had risen to 5.97x and the gap had grown to $277.5B — an increase of $83.9B.
The year-over-year pattern also reveals the COVID effect: markups dipped slightly in 2020 (as procedure volumes fell), then surged to new highs in 2021 and 2022. The pandemic didn't just change testing — it changed pricing behavior across the board.
You might think: if Medicare ignores the charges anyway, who cares? The answer: you do, in at least three ways:
Out-of-Network Billing
When you see an out-of-network provider, you can be billed the full charge — not the Medicare-approved amount. Inflated charges become real bills.
Supplemental Insurance Costs
Medigap policies cost more when the underlying pricing system is inflated. Higher charges mean higher premiums for everyone.
System Complexity
The markup game makes healthcare pricing opaque. When a $3 test is billed at $300, trust in the system erodes — and fraud becomes harder to detect.
Every number in this article comes from publicly available Medicare data. You can explore it yourself:
Markup ratios are calculated as submitted charges divided by actual Medicare payments, aggregated across all HCPCS codes for each provider/specialty/state. The "allowed amount" represents Medicare's fee schedule price; actual payment is typically 80% of allowed (with the beneficiary responsible for the remaining 20%). All data is from CMS Medicare Part B Public Use Files, 2014-2023. Writeoff percentages represent the share of submitted charges that Medicare does not pay.
Note: All data is from publicly available Medicare records. OpenMedicare is an independent journalism project not affiliated with CMS.