What is a usual and customary charge in Medicaid billing?
A usual and customary charge is the price a provider normally charges the general public for a service. Programs such as Illinois Medicaid require it on transportation claims and pay the lower of that charge or the state's maximum rate. For a NEMT company with private-pay riders, that public price list sets the ceiling on what Medicaid will pay.
On this page
What the term means
Your usual and customary charge is what you normally charge the public for a service. South Dakota’s Medicaid claim manual defines it as “the individual provider’s normal charge to the general public for a specific service on the day the service was provided,” and expects that charge to fall within what similar providers bill and to fit prevailing local market rates.
For a transportation company that also carries private-pay riders, that means the public price list: the base rate for each vehicle type, the per-mile rate, and any extras such as waiting time. The number goes in the charge field of each claim line, whether on a paper CMS-1500 or an electronic claim.
How lesser-of payment works
Under a lesser-of rule, the program pays whichever is lower: your charge or its maximum rate. Illinois spells that rule out. South Dakota and New York show how the charge itself is regulated.
- Illinois requires transportation charges to be the provider’s usual and customary charges to the public, and pays the lower of that charge or the maximum rate the state sets. Its base rates also vary with the county each provider registered in.
- South Dakota requires community transportation claims to be submitted at the provider’s usual and customary charge. The rates the state pays are on its transportation fee schedule.
- New York caps the charge on a transportation claim at the provider’s usual charge. For a round trip, the one-way fee is doubled, and mileage is billed as the per-mile charge times the miles.
The remittance shows the difference between what you billed and what the payer allows as an adjustment. Reason code 45 is the code for a charge above the fee schedule or contracted amount. That is routine, not a denial. See claim adjustment reason codes.
Why your private-pay prices matter
Under a lesser-of rule, your public price sets a ceiling on your Medicaid pay. Two examples, using made-up numbers:
| Example | Usual charge billed | State maximum | Paid |
|---|---|---|---|
| Private-pay price above the state rate | $55.00 | $30.00 | $30.00 |
| Private-pay price set below the state rate | $25.00 | $30.00 | $25.00 |
In this example, the first company loses nothing by pricing high. The second, by pricing private-pay rides under the state rate, gives up $5 on every Medicaid base rate it bills.
The rule also works the other way. You cannot bill Medicaid more than you charge everyone else. New York says so directly on its transportation claim instructions. At the federal level, 42 U.S.C. 1320a-7(b)(6) lets HHS exclude a provider that bills Medicare or a state health program substantially more than its usual charges without good cause.
Three habits keep you on the right side of both rules:
- Keep one written private-pay price list and date every change.
- Bill that price on every Medicaid line where the program asks for your usual charge.
- Check your state’s rules before offering a standing discount, since it can change what you must bill Medicaid.
Whatever Medicaid pays after that, federal rules at 42 CFR 447.15 require you to accept it, plus any allowed cost sharing, as payment in full. Our guides on private-pay NEMT and pricing NEMT trips cover how to build the price list itself.
One price list per payer
HealthRide keeps a rate schedule for each payer, so your private-pay prices live alongside every broker and Medicaid rate and each trip is priced when it is booked. For private-pay work, riders and facilities can pay by card with a pay link or a saved card.
Frequently asked questions
- Should I bill Medicaid my own price or the fee schedule rate?
- Your own price, wherever the program asks for your usual and customary charge. South Dakota and Illinois both require it on transportation claims. The payer then reduces the line to its allowed rate. Billing the fee schedule amount instead can leave money on the table the day rates go up, because a lesser-of rule never pays more than you billed.
- Does my usual and customary charge matter on broker trips?
- Check the broker agreement first, because it sets how you bill and what you are paid. MTM Health, for example, pays Virginia trips from its Schedule A rate sheet. The usual-charge rules on this page come from state fee-for-service manuals in Illinois, New York, and South Dakota.
- Do discounts change my usual and customary charge?
- They can. South Dakota says that a non-pharmacy provider who accepts a discount medical plan and bills Medicaid must bill Medicaid at the discounted rate. Before offering any standing discount, check how your state treats it on Medicaid claims.
