Why would Medicare allow for an estimate that substantially exceeds actual costs?

Medicare allows for an estimate that substantially exceeds actual costs because it operates under the principle that if the actual costs are less than predicted, the beneficiary will not be harmed. This means that, in practical terms, Medicare is designed to ensure that beneficiaries are adequately covered for their costs, even if predicted expenses are higher than what ultimately is necessary.

This approach can lead to more comprehensive coverage, giving providers the ability to deliver the necessary services without concern for underestimating costs. Such flexibility helps maintain access to needed resources for patients, while the risk of overestimating costs does not negatively impact the beneficiaries. This is especially relevant in contexts where unforeseen circumstances may arise in healthcare provision, allowing for a safety net that protects beneficiaries overall.

The other options do not address the rationale behind allowing higher estimates effectively. They imply either a negative outcome for the beneficiary or a capricious methodology behind cost estimation, which are not aligned with Medicare's objectives of ensuring patient welfare and service quality.